- 24 Mar 2023
CCI approves Reliance's acquisition of Metro Cash & Carry India for Rs 2,850 crore
Reliance Industries Ltd. announced on Tuesday, 14th March 2023, that the Competition Commission of India (CCI) had authorized the acquisition of the wholesale operations in India of German company Metro AG for Rs 2,850 crores.
A subsidiary of the oil-to-telecom conglomerate, Reliance Retail Ventures Ltd (RRVL), has signed agreements to buy a 100% equity stake in Metro Cash & Carry India Pvt Ltd for a total cash consideration of 2,850 crores. Mukesh Ambani, the conglomerate's billionaire owner, wants to strengthen his company's dominant position in India's enormous retail market. With over 16,600 outlets, RIL is the largest brick-and-mortar retailer in the nation. A strong wholesale unit is likely to enhance the company's activities in India.
It was revealed in December of last year that Reliance Retail Ventures had signed binding contracts to pay a total cash consideration of Rs 2,850 crores for a 100% equity stake in the company.
The sources claim that the acquisition comprises 31 METRO Cash & Carry-owned wholesale distribution centers, land banks, and other assets. Reliance Retail, the biggest retailer in the nation, would be able to increase its market presence in the B2B sector because of this deal.
The first company to introduce a cash-and-carry business model to India was Metro, which began operations there in 2003. At the moment, Metro employs over 3,500 people and runs 31 large format stores across 21 cities. These shops cater to corporate clients including hotels and restaurants as well as offices and companies, small retailers, and kirana stores by selling commodities like fruits and vegetables, general foodstuff, electronics, household goods, and clothing.
The southern region of the country contains half of the stores. Via its retail network and eB2B app, the multi-channel B2B cash and carry wholesaler has reached over 3 million B2B customers in India, of which 1 million are frequent purchasers, according to a previous company statement. The fiscal year that concluded in September 2022 saw Metro India post sales of Rs. 7,700 crores, the highest amount since the company first entered the Indian market.
The acquisition should be a bolt-on to RIL's objective to expand its last-mile reach by leveraging the partnership with Kirana stores, according to Morgan Stanley, who commented on the deal. RIL has a presence in eight of the ten major cities. With the recent launch of the FMCG consumer goods brand, "Independence," and the recent acquisition of Just Dial and Dunzo, it has taken steps to further integrate its retail offering, build on its 3 million kirana merchant partners, and increase its presence, particularly in metro areas and Tier 1 cities.
Reliance would get access to a sizable base of registered kiranas and other institutional customers as well as a robust supplier network as a result of the acquisition. Its retail division basically runs three sizable, distinct business models: a B2C business through its physical locations; a digital business (including Jio Mart and Ajio); and a B2B business. In the important markets of groceries, fashion and leisure, and consumer electronics, it is the highly organised retailer.
J.P. Morgan stated that Reliance has "over the years focused on the vast kirana store ecosystem in India" and that the acquisition of Metro's wholesale business was advantageous. The acquisition will result in a gain for Metro of around 150 million euros upon close, and the business expects greater earnings per share.
Isha Ambani, Director of RRVL, commented on the deal by saying, "The acquisition of Metro India aligns with our new commerce strategy of building a unique model of shared prosperity through active collaboration with small merchants and enterprises." In the Indian B2B sector, Metro India was a pioneer and a major player. It has established a powerful multi-channel platform that offers a positive customer experience.
In the Indian B2B sector, Metro India was a pioneer and a major player. It has developed a powerful multi-channel platform that offers a superior customer experience. The organization believes that Metro India's strong assets and their comprehensive knowledge of the Indian merchant and kirana ecosystem would enable them to provide small companies in India with a unique value proposition. With Metro India, they will be selling a growing and profitable wholesale business in a very dynamic market at the appropriate time - stated Steffen Greubel, CEO of METRO AG. He further mentioned that he is confident that Reliance, he has found a reliable business partner who is prepared to steer Metro India into the future in this competitive market. He further adds that this will help both the customers and workers, whose loyalty and performance they are very appreciative of, on the one hand, and allow METRO to concentrate on increasing growth in the remaining national portfolio, on the other hand.
With the acquisition of Metro India, Reliance Retail will expand its reach throughout the nation to serve all segments of Indian society, including households, kiranas and merchants, HoReCa (hotels, restaurants, and catering), small and medium-sized businesses, and institutions, the statement said. Reliance Retail will also take a step forward to become the partner of choice. Additionally, this will create win-win scenarios for manufacturers, brand owners, and international suppliers.