Reliance Retail to Buy Metro India at Significant Discount
Metro India agreed to sell its network of 31 wholesale stores at a significant discount after failing to attract buyers amid shifting landscape and rising competition from online stores.
Reliance Retail agreed to acquire Metro Cash & Carry India at a significantly lower price than sought by the German retailer.
The ₹2,850 crore is expected to close in the first quarter of 2023.
Metro India had sought as much as ₹15,000 crore from a host of buyers and struggled to win attention from global and regional players.
Metro India is headquartered in India and employs about 3,500 and operates 31 stores in 11 cities including eight largest cities.
Established in 2003, Metro India in the last seven years accelerated its traction among small businesses, restaurants and kirana shop operators.
The wholesale chain operator claims to attract 30 lakh or 3 million business operators with 10 lakh or one million frequent buyers.
Revenue in the fiscal year 2022 was ₹7,700 crore and operating earnings were in "low double-digit euros" or mid-double-digit crore rupees according to the statement released by the company.
The parent company Metro AG is expected to book a gain of €150 million or approximately ₹1,300 crore.
Metro India sales accounted for about 3% of total Metro AG sales of €29.7 billion.
Metro India also declared its annual profit of 217.4 crore in fiscal 2019, the first profit since the inception of business after sixteen years.
However, the company swung to a loss of 23.33 crore on sale of 6,503 crore in fiscal 2021 as reported with the Registrar of Companies.
Despite the rising sales and growing store footprint, Metro has struggled in the changing retail landscape and rapid rise of e-commerce.
To accelerate growth and expand its store network Metro India will need sustained investment and improvement in its profitability in the face of rising competition from online retailers and other retail chains.
Thailand-based Charoen Pokphand Group and operator of Lotus Wholesale was also in the race but the company failed to make a firm bid.
Metro's discussion with Avenue Supermarts, Tata group and Amazon also failed to spark a bid.
The discussion with Udaan.com also went nowhere because of the online platform's weak financial performance.
The parent Metro AG is also heavily indebted and has struggled to generate consistent profit over the last several years.
RRVL is the holding company for all retail businesses of the Reliance Group of India.
Reliance Retail, a subsidiary of RRVL, is India's largest omnichannel retailer with a diversified product portfolio across Grocery, Fashion & Lifestyle, Pharma & Healthcare and Consumer Electronics.
Reliance Retail operates about 16,500 retail stores.