The Tata Group and private equity fund Bain Capital are evaluating the $1-1.5 billion buyout opportunity but are yet to firm up any plans, said the people mentioned above. The submission of non-binding offers is scheduled for this week. Flipkart-Walmart, DMart and Amazon have for the moment opted out of the race. Detailed due diligence will start after the non-binding offers are received with firm offers expected in two months.
ET was the first to report, on May 20,
Metro’s decision to exit India by selling its local operations and that at least 10 potential candidates including Reliance, CP Group, Flipkart, D-Mart had been approached.
On May 30, ET reported Swiggy, backed by Prosus Ventures (formerly Naspers), Qatar Investment Authority and
of Singapore among others, was evaluating the prospect.
Reliance Retail spokesperson said: “As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis.”
PremjiInvest, CP Group, Swiggy, Tata and Bain Capital didn’t respond to queries sent on Saturday.
Financial investors like PremjiInvest are likely to be open to partnering shortlisted candidates. Amazon and Walmart too might follow a similar strategy, although they are staying out of the competitive bidding as of now.
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JP Morgan and Goldman Sachs are the advisors to Metro.
Strategic intent
For contenders like CP Group, Reliance and Swiggy, Metro offers the opportunity to consolidate the wholesale retail, ecommerce play or an India entry. CP Group has reorganized and merged operating companies of its Lotus (formerly Tesco stores in Thailand) and Makro retail chains to create a stronger entity as the group eyes overseas markets. With roots in livestock, it has since expanded into mobile telecommunications and property development, but its presence in the country’s food supply chain has remained an important part of the conglomerate’s business.
Swiggy is looking at Metro’s national footprint to expand beyond core restaurant delivery as well as accelerating Instamart’s growth. For players like Reliance or Tata, this would be part of backward integration. As a fund, retail and new age consumer businesses have been key to PremjiInvest’s strategy, having backed Myntra, Tata group’s retail firm
, ethnic apparel and furniture firm FabIndia and apparel chain as well as Lenskart among others at various points.
Moving plan
Metro has been operating its nationwide chain of 31 cash-and-carry stores since 2003 but intense market competition and large investments to sustain operations have led to the exit plan following a business review by Bain and Co. While Indian rules ban foreign retailers from setting up outlets to sell directly to consumers, 100% foreign investment is allowed in cash-and-carry and wholesale operations. Registered business customers can visit and buy from these outlets.
The retailer clocked Rs 6,738.3 crore in turnover in FY21 and is hopeful of ending the current fiscal year with billion-dollar-plus revenue and ebitda growth of 30-40% against 50% in FY22. The parent is unwilling to pump in as much as $300 million (Rs 2,310 crore) needed in the short term to fight competitors such as Reliance and Udaan, said executives aware of ongoing developments.
Metro is focusing on making profits from its global operations and market leadership in the food and grocery wholesale business. It exited Japan in 2021 and Myanmar last year. It has also withdrawn from Russia following its war with Ukraine. The company’s wholesale and food retail is spread across 34 countries. In FY20, Metro generated sales of 25.6 billion euros.
Since 2018, to compete with local competition, Metro has been finetuning its strategy to also do business with small neighbourhood stores to widen its reach. Under Arvind Mediratta, who joined Metro in February 2016, the India unit has been tapping kiranas across the country to deepen and widen its omni-channel play.
