According to a reliable source, Reliance Retail is poised to transform METRO Cash & Carry India stores into their B2B outlets that will provide wholesale buyers and kirana store owners with the products they need.
Analysts have declared that Reliance Retail’s acquisition of Metro Cash & Carry will bolster RIL’s business-to-business existence by expanding its geographic coverage and patronage. Additionally, this strategic move is set to provide a big boost to RIL’s recently launched commerce initiative.
Analysts have noted that the deal price of `2,850 crore appears to be a reasonable amount considering Metro India’s track record of generating losses and slow growth in revenue and geographic expansion over recent years.
As per Motilal Oswal Research, the total revenue of Metro India for FY22 was Rs 7,000 crore. Additionally, their Earnings before Interest Tax Depreciation and Amortization (EBITDA) totaled to an impressive `130 crore while concluding at a net loss of Rs 50 crore.
With the deal finalized, the enterprise value to sales (EV/sales) has been set at 0.4x and 22x of Ebitda for enterprise value. Compared to previous acquisitions in grocery outlets that had an EV/sales valuation of 1x, this is a significantly improved rate!
The report predicted that this deal would significantly augment the B2B and grocery segment of RIL, which is already the leading organized retailer in such key areas as fashion & lifestyle, consumer electronics, and grocery. This could result in a 15% jump from current operations.
By acquiring Metro’s wholesale business, RIL will gain access to an expansive roster of registered kiranas and institutional customers. Furthermore, their strong supplier network is also set to benefit from this acquisition. This move builds on the work that RIL has already done in establishing a large kirana store ecosystem across India; according to Motilal Oswal Research – it’s certainly a positive one!
With the acquisition of more stores, Reliance now has an impressive 52 ‘Reliance Market’ outlets that serve kiranas and other institutional customers. This brings their total store count up to a whopping 83!
Metro, an esteemed Indian wholesaler, has 31 distribution points spanning 21 cities. The company employs 3,500 personnel and serves over three million customers through its network of stores or via their eB2B app. From small kiranas to large companies and institutions – Metro caters to them all!
Analysts are confident that the transaction will further strengthen RIL’s new commerce strategy. In August, Reliance Retail announced its entry into the FMCG industry and recently unveiled their ‘Independence’ consumer goods brand.
By purchasing Just Dial, Dunzo, and most recently Metro India, Reliance Industries Limited (RIL) has been able to optimize its retail presence in metros and tier 1 cities. As Morgan Stanley pointed out in a recent report, RIL can gain more ground than other competitors as penetration is still relatively low there.
RIL’s own private label brands, coupled with Metro’s Aro, Fine Food and Horeca Select will undoubtedly strengthen their FMCG business. Although Metro brought losses to the table, analysts believe that RIL can turn these around through access to improved systems of scale and operational synergies in regards to supply chain networks, tech capabilities and sourcing resources.
By September, Reliance Industries Ltd. had surpassed 50 million square feet in total physical retail space and 16,617 stores overall throughout India with the capacity to add even more locations quarterly. With a gross revenue of `64,900 crore during the same month and 400,000 employees employed by the company’s retail business sector- things were looking up!
Analysts anticipate that Reliance Industries Limited (RIL) will stay proactive in its retail strategy, especially with the company’s entrance into the fast-moving consumer goods sector and its recent acquisitions.
By converting Metro Cash & Carry stores into B2B outlets, RIL can further expand their scope of retail and FMCG markets. With any luck, we may see a major shift in the grocery landscape of India soon!
Stay tuned for more news on this developing story.
Shivendra Tiwari is an Engineer and an MBA in Marketing. He is the Content head at Marketing91 and a thorough Online Marketing enthusiast. Shivendra loves to follow different brands and study their Business and Marketing tactics.