Shares of Avenue Supermarts, owner of DMart chain of stores in India, jumped as much as 5% in early trade on Thursday after the company on Wednesday launched its qualified institutional placement (QIP) offer in order to raise funds to the tune of Rs 4,000 crore.
In a filing to stock exchanges, the company said it will sell as many as 2 crore shares of the company at a floor price of Rs 1,999.04 apiece, which is nearly at 11% lower than Wednesday’s closing price of Rs 2,249.30.
On Thursday, DMart shares were trading at Rs 2,319.90, up 3.2%, at 10:30 am after hitting a high of Rs 2,360 in early trade. The stock has jumped by a massive 30% in the last one month in the run-up to the QIP announcement.
Radhakishan Damani-led Avenue Supermarts said the company will use the funds to expand its store network, invest in supply chain and repay loans.
“Our company proposes to utilize the net proceeds to augment long-term resources for financing our expansion plans, which include funding expenditure towards implementation of our strategy on expanding our store network and increasing the efficiency of our supply chain network, including warehousing facilities and related acquisition of land,” Avenue Supermarts said in a prospectus filed with the stock exchanges.
The reports of stake sale by promoters were circulating in the market for quite some time due to Sebi’s minimum public shareholding norms that require listed companies to reduce their promoter shareholding to 75% within three years from listing. Currently, promoters hold 79.73% stake in the company, which went public on 21 March 2017.
At present, DMart operates a retail business area of 5.9 million square feet and has 176 stores across 11 states and 1 union territory, according to its 2018 annual report.
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