A Profit "Decline" That Isn't One
This filing covers the quarter ended September 30, 2023 - Q2 of Avenue Supermarts' FY2024. Revenue grew 18.67% year-on-year to Rs. 12,624.37 crore. Reported net income fell 9.09% to Rs. 623.35 crore - the first YoY profit decline anywhere in this site's coverage of DMart. It is not a real decline: Q2 FY2023 (the year-ago comparison quarter) carried a disclosed-but-unquantified one-off tax benefit that pushed its effective tax rate down to just 8.32%. This quarter's tax rate is a normal 26.84%, so the YoY tax-expense comparison shows an apparent +267% jump that is entirely a base effect, not new tax-cost growth. Profit Before Tax, the cleaner line, grew a healthy 13.90% to Rs. 851.94 crore.
Total expenses grew 18.98% to Rs. 11,809.35 crore, almost exactly in line with revenue's 18.67% - the narrowest gap in this margin-compression arc since it began five quarters ago, though because expenses are the dominant share of revenue, even that small gap still compounds into Operating Income growing more slowly (13.31%, reconstructed, to Rs. 867.53 crore) than revenue. The driver has shifted again: Employee Benefit Expense is this quarter's fastest-growing major cost line, up 19.14% to Rs. 224.73 crore, edging past Other Expenses (+17.87%) and D&A (+7.66%, the slowest of the three for a second straight quarter).
The Prescription
Three different cost lines have now led this margin-compression arc across three consecutive quarters - depreciation through Q3 FY2023, Other Expenses in Q4 FY2023 and Q1 FY2024, and now Employee Benefit Expense. That rotation itself is a signal: it looks less like one persistent structural problem and more like a retailer whose total cost base is simply growing in step with (or slightly ahead of) its expanding store footprint, with the specific line that shows it varying quarter to quarter. What the filings should do, and still don't: report headcount or store-count alongside the P&L so a reader can tell whether 19% employee-cost growth means wage inflation, more stores, or both. On the reported "profit decline": this is exactly the kind of headline number that punishes a reader who doesn't check the prior year's own footnotes - the company's own investor presentation should flag the comparison distortion explicitly rather than leaving it to be reconstructed quarter-over-quarter.
Key Financial Metrics
Quarter ended September 30, 2023 (consolidated), compared against Q2 FY2023 (quarter ended September 30, 2022)
FX: INR 83.19 = USD 1 (September 28, 2023 month-end close).
| Metric | Q2 FY2024 (INR) | Q2 FY2024 (USD) | YoY Change | Note |
|---|---|---|---|---|
| Net Revenue (revenue from operations) | Rs. 12,624.37 crore | ~$1,517.5M | ⚠️ +18.67% | |
| Total Income (incl. other income) | Rs. 12,661.29 crore | ~$1,522.0M | ⚠️ +18.62% | |
| Total Expenses | Rs. 11,809.35 crore | ~$1,419.6M | ⚠️ +18.98% | Narrowest gap over revenue growth in this five-quarter arc |
| Operating Income (EBIT, reconstructed) | Rs. 867.53 crore | ~$104.3M | ⚠️ +13.31% | 6.87% margin, down slightly from 7.20% a year ago |
| Adjusted EBITDA» (reconstructed) | Rs. 1,041.89 crore | ~$125.2M | ✅ +12.32% | 8.25% margin, down slightly from 8.72% |
| Finance Costs | Rs. 15.59 crore | ~$1.9M | ⚠️ -11.82% | |
| Profit Before Tax | Rs. 851.94 crore | ~$102.4M | ✅ +13.90% | The clean read on operating performance |
| Tax Expense | Rs. 228.59 crore | ~$27.5M | ⚠️ +267.34% | Base effect - year-ago quarter had a one-off tax benefit; see Beyond the Usual |
| Net Income | Rs. 623.35 crore | ~$74.9M | 🔴 -9.09% | Reported decline is entirely the tax base effect, not operating weakness |
| Basic / Diluted EPS | Rs. 9.58 / Rs. 9.57 | ~$0.115 / ~$0.115 | 🔴 ~-9% (basic) |
Operating Income and Adjusted EBITDA are reconstructed as PBT + Finance Costs [+ D&A for EBITDA]. No balance sheet or cash flow statement is disclosed as a separable quarter figure in this filing type. Paid-up equity share capital held flat at Rs. 650.73 crore (~65.07 crore shares).
Beyond the Usual
The One-Off Tax Benefit From a Year Ago, Confirmed by This Quarter's Own Comparison
This filing's own tax-expense comparative line makes it possible to size the [Q2 FY2023 one-off tax benefit](/analysis/dmart/2022-09/#beyond-the-usual) that this site's coverage flagged at the time as disclosed-but-unquantified: the year-ago quarter's effective tax rate was 8.32% against this quarter's normal 26.84%. Applying this quarter's normal rate to last year's PBT (Rs. 747.95 crore) would have implied roughly Rs. 200.75 crore of tax - versus the Rs. 62.24 crore actually recorded - meaning the one-off benefit was worth in the ballpark of Rs. 138 crore, a rough reconstruction rather than a figure the company has itself disclosed precisely.
Target Valuation Range
DMart's stock closed this quarter at Rs. 3,675.60, down 5.50% from Q1 FY2024's Rs. 3,889.20 close - a modest pullback, plausibly the market reacting to the reported headline profit decline at face value before the tax base-effect explanation became clear from the filing itself.
DMart traded at roughly Rs. 2,39,182 crore (~$28.8B) market capitalization at this quarter's close (September 28, 2023) - a trailing-twelve-month P/E near 103x, down modestly from Q1 FY2024's ~106x as the price fell slightly faster than TTM earnings.
| Item | Value |
|---|---|
| Share price (September 28, 2023 close) | Rs. 3,675.60 |
| Shares outstanding | ~65.07 crore |
| Market capitalization | ~Rs. 2,39,182 crore (~$28.8B) |
| Total liabilities | Not disclosed (no balance sheet in this filing) |
| Less: cash and equivalents | Not disclosed |
| Enterprise value | Not computable without a balance sheet - market cap used as a proxy below |
No real DCF is possible without a balance sheet. Trailing-twelve-month net income through this quarter - Rs. 623.35 crore (this quarter) plus Q1 FY2024 (Rs. 658.71 crore), Q4 FY2023 (Rs. 460.10 crore), and Q3 FY2023 (Rs. 589.64 crore) - totals Rs. 2,331.80 crore, implying a trailing P/E near 102.6x.
| Metric | This quarter (Q2 FY2024) | Prior quarter (Q1 FY2024) |
|---|---|---|
| TTM Net Income | Rs. 2,331.80 crore | Rs. 2,394.16 crore |
| Trailing P/E | ~103x | ~106x |
| TTM Revenue | ~Rs. 46,652.97 crore | ~Rs. 44,666.93 crore |
| EV/Revenue (market cap as EV proxy) | ~5.1x | ~5.7x |
If a reader mistakenly took this quarter's reported -9.09% net-income headline at face value without the tax base-effect context above, they'd read this multiple as getting relatively richer against shrinking earnings; the more accurate read, using PBT growth as the operating proxy, is a multiple that's actually held roughly flat against genuinely still-growing underlying profitability.
| Scenario | Key assumption | Implied trailing P/E | Implied value |
|---|---|---|---|
| Current (period-end close) | Actual September 28, 2023 close | ~103x | Rs. 3,675.60/share (~Rs. 2,39,182 crore, ~$28.8B) |
| Bear | The market keeps pricing off the headline reported decline rather than the tax-adjusted read, and the multiple de-rates further | ~85x | ~Rs. 3,046/share (~Rs. 1,98,203 crore, ~$23.8B) |
| Base | Multiple holds near where it closed, consistent with the trailing P/E above | ~103x | ~Rs. 3,691/share (~Rs. 2,40,175 crore, ~$28.9B) |
| Bull | The market corrects for the base-effect misread and re-rates toward the PBT-growth-implied multiple | ~125x | ~Rs. 4,479/share (~Rs. 2,91,475 crore, ~$35.0B) |