The oil-to-telecom conglomerate Reliance Industry’s mega acquisition of the German retailer METRO AG’s Cash & Carry business in India, which is likely to be finalized in time for the group’s late founder Dhirubhai Ambani’s birthday later this month, will give the company the option to convert Metro’s 31 stores into multi-brand retail chains and compete with retailers such as D-Mart.
“As a result of the transaction, majority Indian ownership will be established, which will make it possible to even transform the operations into a business that caters to consumers. It will make shopping and comparing prices a more pleasant experience overall. Nevertheless, a decision must be made about it, “Times of India cited an anonymous source who was familiar with the transaction.
The rules that govern foreign investment in India prevent foreign companies from entering the multi-brand retail business. As a result, Indian companies like Metro are restricted to the cash-and-carry wholesale market and must sell their goods to hotels, offices, and Kirana stores. The revenue generated from sales to traders accounts for approximately one-half of Metro’s total revenue, with another one-third coming from offices, according to TOI.
Therefore, adjustments to the business model will need to be made to accommodate the B2C business that will be added to the wholesale stores. After Metro was crippled by the Covid-induced lockdowns and saw the impact that sanctions had on its Russian operations, the company made the decision to forego its original plan to expand its operations in India by investing more money there.
In a transaction that is rumored to be worth approximately 500 million euros (or Rs 4,060 crore), Reliance is rumored to be acquiring the India unit of Metro Cash & Carry, which includes 31 wholesale distribution centers, land banks, and other assets owned by METRO Cash & Carry in the country.
Because of this, Reliance Retail, the largest retailer in the country, will have an easier time expanding its presence in the B2B market.
Sources claim that Reliance has finished its due diligence on Metro’s India business, which turns a profit and generates revenues of approximately one billion dollars annually. According to reports from TOI, however, there are some concerns regarding employees and the status of stores that are currently being discussed, in addition to the completion of the legal aspects of the transaction.
There are some concerns among the 4,000 employees of Metro regarding the change in ownership as well as the new working environment, but it is likely that Reliance is eager to keep the people on staff. The majority of the 31 stores are considered to be successful from a financial standpoint.