DMart Ready gets fresh ₹500 crore funding as Avenue Supermarts backs online push; stock slips 2%

Avenue Supermarts, the parent company of supermarket chain DMart, has approved a fresh investment of up to ₹500 crore in its online grocery subsidiary Avenue E-Commerce, taking its total investment in the loss-making arm to nearly ₹2,000 crore.

The investment was approved at the company’s Annual General Meeting on Wednesday and includes ₹350 crore invested during FY26.

The Radhakishan Damani-led company continues to back DMart Ready despite widening losses at the online grocery business. Avenue E-Commerce reported a 17% year-on-year increase in revenue to ₹4,094 crore in FY26 from ₹3,502 crore a year earlier. However, its net loss widened to ₹307 crore from ₹247 crore in FY25.

The fresh capital commitment comes as DMart reshapes its online grocery business, narrowing its presence to 11 core cities and focusing on improving order density and unit economics rather than competing directly with quick-commerce players.

Stock down 2%

Reacting to the news, DMart shares declined as much as 2% to ₹3,880.15 on the BSE, dragging its market capitalisation to around ₹2.54 lakh crore. The retail stock is down 21% from its 52-week high of ₹4,916.30, touched on September 4, 2025, but remains 10% above its 52-week low of ₹3,528.65, hit on March 2, 2026.

HDFC Securities said DMart Ready remains in a “right-sizing mode”, with operations rationalised to 11 core cities from 25 in FY25.

The brokerage said DMart Ready has exited “tail markets” where order density was sub-optimal and is now focusing on product assortments for online stock-up buyers, six-hour slotted deliveries and higher digital engagement.

“DMart Ready remains in right-sizing mode,” HDFC Securities said, adding that the company does not intend to compete in the quick-commerce segment.

The strategy is focused on larger, planned monthly or fortnightly stock-up purchases, where DMart believes its value proposition is stronger.

Analysts divided on DMart outlook

Brokerages remain split on the outlook for Avenue Supermarts, with HDFC Securities maintaining an ‘ADD’ rating with a target price of ₹4,100.

On the other hand, Emkay Global retained its ‘SELL’ rating with a target of ₹3,700 post its Q1 results. Systematix Institutional Research also maintained a ‘HOLD’ rating with a target price of ₹4,331.

HDFC Securities said DMart’s growth and capital allocation remain measured. It expects the company to expand its store network by around 15% annually, with the availability of viable real estate continuing to be the key constraint.

The brokerage has cut its FY28 and FY29 earnings-per-share estimates by around 4%, factoring in lower same-store sales growth and fewer store additions. It now expects same-store sales growth of around 8.5%, compared with about 10% earlier.

It expects revenue and profit after tax to grow at compound annual growth rates of around 18% and 21%, respectively, over FY26-FY29.

Emkay Global remains more cautious, citing slower total addressable market expansion, narrowing differentiation in value and assortment versus quick commerce, declining return on invested capital and the stock’s expensive valuation.

The brokerage noted that DMart’s long-term store expansion target of around 15% annually is below the roughly 20% expansion seen in FY26.

A key positive, according to Emkay, is DMart’s target of around 8% like-for-like growth in FY27, compared with 5.5% in the first quarter. Growth is being driven mainly by non-metro markets, while metro stores are seeing flat same-store growth as mature outlets operate closer to peak throughput and face rising competition.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)