Avenue Supermarts LtdQ2 FY21Retailing

Avenue Supermarts Ltd

Q2 FY21 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

→E-commerce business is showing strong growth potential, having more than doubled revenues, especially in Mumbai and expanding to cities like Hyderabad, Bangalore, and Pune. (Pages 13-17)
→Offline retail continues to have "humongous potential" and both offline and online channels will coexist. (Page 8)
→Store expansion is ongoing with 22 new stores opened and plans to add more, aiming for around 59 stores combining last year and this year’s commitments. (Pages 4-8)
→Revenue recovery depends on removal of COVID restrictions; states with eased regulations are already outperforming 2019 levels for stores 2 years or older. (Pages 3, 9)
→Larger store sizes (~50,000 sq ft) preferred as they work better for sales efficiency. (Page 5)
→E-commerce is viewed as incremental to brick-and-mortar revenues, particularly in Mumbai, adding to overall topline rather than cannibalizing physical stores. (Page 16)
→Inflation-led price increases seen; focus on managing inventory and pricing strategies is key. (Pages 18)

Margin guidance

Category 3

→E-commerce business is growing rapidly with revenues more than doubling, showing promising future prospects, especially in Mumbai and select cities like Pune, Bangalore, and Hyderabad (Pages 13-17).
→Operating model for e-commerce is progressing well, with cautious but confident expansion plans focusing on profitable, replicable models before scaling aggressively (Pages 15-16).
→Offline/brick-and-mortar stores continue to have significant growth potential, with store additions and larger store sizes (~50,000 sq ft) supporting revenue expansion (Pages 5-8).
→Profitability (EBITDA) impacted by COVID but expected to normalize with store operation hours and non-essential sales recovery; higher top-line sales drive EBITDA improvement (Pages 9-11).
→Inflation seen as manageable with consumers displaying inelasticity in key categories, helping margin retention; vendor negotiations ongoing to balance margin pressures (Page 17).
→Overall, growth in both e-commerce and offline channels positioning Avenue Supermarts Ltd for steady future earnings and profit growth as COVID disruptions ease.

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Fundraise plans

→As of the latest update (July 22, 2021), Avenue Supermarts Limited has **no borrowings**; the INR 296 crores debt noted is related to lease liabilities under accounting standard AS116, not actual borrowings.
→The company has not indicated any plans for **new fundraising through debt**.
→There is no mention or indication of any **equity fundraising** planned currently or in the near future.
→The focus remains on organic growth, with an aggressive store addition plan and investment in e-commerce, financed internally without external debt.
→Overall, the company maintains a **debt-free status** and appears comfortable with its current capital structure.

Order book

The provided pages from Avenue Supermarts Limited's July 22, 2021 conference call do not contain any specific information or data regarding the current or expected order book or pending orders. The discussion mainly covers topics including: - E-commerce shopper profiles and strategies. - Inflation impact on FMCG and consumer behavior. - Store operations, expansion plans, and unit economics. - Inventory management and sales performance. - Competition and pricing strategy. - Fulfillment centers and e-commerce pilot projects. No explicit details on order book or pending orders are mentioned in these excerpts. If you need information on order books or pending orders, please provide pages or sections where such financial or operational data is discussed.

Capex plans

Yes

→Avenue Supermarts Limited maintains an aggressive store addition plan, evidenced by opening 22 new stores adding 1 million square feet in the recent year (Page 5).
→Store size typically around 50,000 square feet, with preference for larger stores, as larger formats work better for them (Page 5).
→They continue to open stores primarily in cities/states where they already exist, with a calibrated approach to new geographies (Page 4).
→Investment into e-commerce includes converting some stores into fulfillment centers (e.g., two stores converted in Kalyan and Mira Road) as experimental pilots to scale e-commerce (Page 4 and 11).
→They are expanding e-commerce presence cautiously, focusing on building a unit-economics proven model before rapid scale up (Page 15-16).
→No immediate plans mentioned for digital partnerships; currently managing e-commerce through a separate subsidiary (Page 15).
→Future store openings projected to catch up post-COVID disruptions; aiming for 59 stores combined over last two years (Page 8).

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