The Indian organised retail sector has seen a dream run in the past 1.5 years, on the back of valuation re-rating led by Avenue Supermarts listing, operations improvement in business performance and consolidation.
We believe that Indian organised retail is in a sweet spot, especially post demonetisation and GST, given the under-penetration at 7 percent of total trade and favourable macro. On a micro level, retailers have become more agile and investable, considering increased focus on return ratios, debt reduction and exit from non-core assets. We believe that competition, both offline and online, would persist, but should mainly hurt commoditised players. We envisage more consolidation and M&A activities in the sector, particularly between online and offline players, benefitting large players in the industry.
