The retail industry in India has experienced significant competition among some of the biggest companies in the world over the course of the past few years. Behemoths like Reliance, Amazon and Walmart have been jockeying for supremacy for the past few years as the industry continued to grow. As a result big ticket acquisitions are being made by companies in order to grow in size and go one up on their rivals. The latest deal to have made the headlines is that of the acquisition of German wholesales Metro Cash & Carry by Reliance Industries Limited. We are now going to look into some of the broad headlines from the deal and some of key takeaways from it.
- Reliance is making efforts to become the most dominant retail player in the country and they are doing so through effective acquisitions.
- Metro Cash & Carry is one of the biggest operators in the business to business retail space in the country and makes for a plum acquisition for Reliance.
- According to the reports in recent days, Reliance would complete the acquisition for a sum of Rs 4060 crores.
- It is also important to note that Reliance really wanted this deal. Companies like Swiggy, Udaan and arch rivals Amazon had also wanted to acquired Cash & Carry.
- Metro Cash & Carry had arrived in India back in 2003 and over the course of the following 19 years it had failed to become profitable. The deal is value in the range between 500 million and 550 million. Following this deal, Metro Cash & Carry will make a complete exit from the Indian market.
- Following the acquisition, Reliance will get control of as many as 31 distribution centers that belong to Metro Cash & Carry. The lands owned by the company and other related assets are also going to pass on to Reliance.
- Investors need to keep in mind that this particular acquisition is going to help Reliance make a move into the business to business retail segment. Metro Cash & Carry primarily worked with caterers, small businesses, hotels, businesses and other entities which buy in bulk.
- As per reports, the two companies had been involved in talks with regards to this sale over the course of the past few months. It was last week that they finally reached an agreement about the price.
- It is important to keep in mind that the business to business segment of retail is typically low in margins but high in scale. That had led to the exit of many international players from the Indian market. Metro Cash & Carry is the latest to do so.
- Metro had managed to create a foot print across the biggest cities in the country and that would help Reliance in getting hold of an established business in a unique category. It could end up being the anchor for the company’s business to business retail operations.
- Metro had been contemplating the sale for more than a month and had initially set the price in the range between 1.5 billion Euros and 1.7 Billion Euros. However, Reliance eventually manage to make the acquisition for a price which is less than half that.
- That represents a bargain for Reliance and it is now going to be interesting to see how the company can manage to leverage the latest acquisition into further retail dominance.
Founder of INVESMATE. I am a Certified Research Analyst, Value & Growth Investor, Trainer and Tech Entrepreneur. With 15 years of capital market experience, I have trained 10000+ students on INVESMATE. I have created several YouTube videos, mostly related to in-depth fundamental analysis.
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