Avenue Supermarts is the closest that comes to the Costco model: Ramdeo Agrawal
During a discussion, Agrawal spoke about learning the importance of return on equity and the franchise model from Charlie Munger.
Ramdeo Agrawal, co-founder and chairman of Motilal Oswal Financial Services, believes Avenue Supermarts comes closest to the Costco Model as a company. Avenue is the parent company of the popular retail chain DMart.
Costco's model depends heavily on retaining shoppers who buy memberships and thus retain brand loyalty. Costco company boasts a membership renewal rate of 93% in the US and Canada and 90% worldwide. The model is named after a US multinational corporation that boasts over 800 warehouses and a "treasure hunt" shopping experience.
During a discussion, Agrawal spoke about learning the importance of return on equity and the franchise model from Charlie Munger. "We have to think through whether a business model can compound after 20-25 years today. That’s a big lesson I learnt from Munger," he said.
Earlier, in an exclusive conversation with CNBC-TV18, he asked investors to forget the market cap obsession.
"The biggest small (cap) is about ₹18,000-20,000 crore and the smallest mid is ₹18,000-20,000 crore. So you have now enough size, so let us not discuss this SEBI classification for investing.”
As per him, a market is a bull run in full swing where the right idea trumps investment in indexes. "It's all about snagging the right investment idea at a fair price. Whether it's a big bank at an attractive price to earnings growth (PEG) or a smaller bank with even more allure, the art lies in the pick, not the size."
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