Of D-Mart's IPO and the legend of Radhakishan Damani

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Reports say that whenever Rakesh Jhunjhunwala meets his mentor Radhakishan Damani, his favourite question is: “When are you listing your company?” As Avenue Supermarts, the company which operates the supermarket chain D-Mart, opens for IPO on March 8, Jhunjhunwala’s wait will come to an end.

It’s not only Jhunjhunwala who is looking forward to the listing of his friend’s company, many other market players too are keenly watching it. As a CEO of a leading fund house says: “After all, it is the best-run company in the retail space. And of course, there is Radhakishan Damani....”

There is a natural reverence amid market players for Damani. And for a good reason. For years, many fund managers and seasoned traders have followed the investments of “Mr White and White”, a nickname Damani earned due to his penchant for wearing white shirt and white trousers. Unlike the Bollywood director duo Abbas-Mustan, who are always spotted in similar attire at film functions or in media interviews, Damani has stayed away from the spotlight.

For the uninitiated, 61-year-old Damani is one of the biggest names in the Indian stock market and ranked 98th in the Forbes India Rich List 2015 with a net worth of $1.15 billion. Much before D-Mart happened, Damani was an ace stock market investor and mentor to 'Big Bull' Rakesh Jhunjhunwala.

Kisan R Choksey, an industry veteran since 1961 and chairman of KRChoksey group, said: “Damani is known to look at fundamentals first as an investor and he chooses companies after proper due diligence. Hence, he has many followers in the market.” His strategy has been to identify and invest substantially in stocks which become multi-baggers, and he has the patience to wait for five to ten years. Damani’s best investments include Gillette, VST Industries, Crisil and 3M India.

And of course, there are many stories that keep that legend intact. Two incidents specifically merit a mention: In the early nineties, when the original 'Big Bull', Harshad Mehta, kept taking the stock market to new heights on a daily basis, Damani had short positions in the market. Mehta and Damani kept on going in opposite directions till it was revealed that Mehta was siphoning money from the banks, and the markets crashed. Damani kept his nerves and came out on top.

Just a few years later, he locked horns with Mehta again. This time, Mehta in his new avatar as an advisor, helped push shares of select companies like BPL, Videocon and Sterlite. Damani was again in the way. He shorted these stocks till the prices came crashing down.    

However, he wasn’t happy just winning. As Deena Mehta, managing director of Asit C Mehta Investment Intermediates and an industry veteran since 1984, said: “Even during this crisis, Damani was very helpful to traders in trouble. Even though he was heavily short in these shares, he allowed exit to brokers and traders who were long on these shares and sought his help.”

Damani and Jhunjhunwala have taken many long-term bets together. Both have sizeable holdings in Aptech, Crisil and Delta Corp.

The investing community feels that Damani has built D-Mart's business with the same care and conviction that he bet on his stocks with Kris Securities' Arun Kejriwal, who is a seasoned investor, explained: “Initially, when there was only one D-Mart shop in Malad (a Mumbai suburb), I would regularly visit it to buy and compare latest brands and trends. Often, there would be some salesperson who would stand behind me while I was comparing. When I met Damani once, I told him that I felt a little stifled being watched like that. I have never seen anyone around me since then.”

Market players said that the company was looking to raise around Rs 1,800 crore for a stake sale of 10 per cent. According to these numbers, the valuation would be 40 times FY18 earnings, which seems rich, but the company has the numbers to justify the valuation. It had a return on capital employed of 24.2 per cent in FY16, while the next best company in the retail space, Trent, was only at 3.6 per cent. And it was the only company with a three-digit net profit figure of Rs 318.9 crore, which no other listed peer had last year.

Obviously, the grey market is already abuzz with expectations of hefty listing gains despite the steep expected valuation, the stock is already making waves. Given that the Damani family will own over 80 per cent stake in the company, Damani will rise several notches on the Forbes rich list soon.

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