Hyderabad-based grocery chain engages a banker for a $100 mn pre-IPO fundraise

“Ratnadeep plans to raise about ₹500-600 crore ($60-75 million) in fresh capital and the promoters will also look to monetise some of their stake in the round,” said one of the people cited above. “The company also has ambitions to tap the public markets over the next 12-24 months and this is more like a pre-IPO round that they are discussing,” a second person said, adding that a deal has been in the works for over a year now.

“The capital will be used to increase store count, double down in existing areas and expand to new geographies,” the third person said, adding that the company has approached several funds. If the funding materialises, it will mark the company’s first external round.

DAM Capital declined to comment while Ratnadeep was yet to respond to Mint’semails at the time of publishing.

Established regional player

Ratnadeep has established a regional presence in the organised retail segment, operating about 170 stores under the brands Ratnadeep and NationalMart in Telangana (primarily Hyderabad), Karnataka, and Andhra Pradesh.

The company recently added two new store formats to its existing supermarket model – Ratnadeep Select and Ratnadeep Express. Select aims to become an experiential destination’ offering a collection of products from around the world, while Express is a neighbourhood supermarket that sells daily essentials.

As a premium retailer, the company caters mainly to the upper middle class with the Ratnadeep brand, while NationalMart targets value-focused customers with groceries, apparel and general merchandise. Historically, the company has funded new stores through a mix of debt and internal accruals.

Cost pressures and competition

However, its operating margins and profitability have been hit by higher employee costs, head office and warehouse expenses, and other fixed costs (such as rent) as newer stores have opened, according to a Crisil report published in September 2023. “The impact of new stores being added on achieving break-even along with their geographical diversification on the operating profitability of Ratnadeep will remain a key monitorable,” the credit rating agency said.

The company is also exposed to heightened competition from larger national players such as Spencer’s and Reliance Fresh, among others. Many of these major companies have set up stores with catchment areas overlapping those of their competitors, resulting in modest operating profit margins. The retail segment also faces a significant threat from quick commerce and inflationary expenses, which have led to softer sales, higher costs and narrower margins.

The company was founded in 1987 as a proprietorship firm by Sandeep Agarwal, Manish Bhartiya and Mitesh Bhartiya. In 2001 it was reconstituted as a private limited company with the current name. In FY23 it brought in ₹1,385.6 crore of revenue and ₹15.2 crore in profit, up from ₹1,192.3 crore of revenue and ₹12.9 crore of profit in FY22, according to data from market intelligence provider Tracxn.