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German retailer Metro AG announced evaluating its Indian Cash and Carry Operations for around $1.5-1.75 billion. It was then approached by Thailand's largest conglomerate Charoen Pokphand (CP) Group, Reliance Retail, Tata Group, the family-owned PE Firm PremjiInvest, and the largest food and grocery delivery company Swiggy for the buy-out opportunity.
Earlier, World's largest retailers Amazon and Avenue Supermarts were also interested in this deal.
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Goldman Sachs and JP Morgan are the advisors for the Metro AG to identify potential buyers. While Bain & Co. will be submitting a detailed strategy report.
As per the external sources, Metro's decision to close down its Indian operations is based on its policy to be a sustainable and profitable business. Since most of the competitors in this industry are selling goods below cost with a free delivery mechanism with a negative EBITDA of 20-25% in order to gain market share. This won't suffice Metro's goal in the near term.
“At Metro, we regularly assess our international portfolios, such as our market position in the respective country, the life cycle of our operations, and the growth potential of our business. This is a general approach and normal business applied to all countries, including India,” the company's global director of corporate communications, Gerd Koslowski said.
How is Metro's buyout a Perfect opportunity for its contenders?
Metro offers an opportunity to consolidate the wholesale, retail, and e-commerce market. Swiggy is eyeing Metro's nationwide outreach to expand beyond its core restaurant delivery as well as fastening Instamart's growth. For Reliance or Tata, the buyout will be a backward integration.
About Metro
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. It exited from Japan and Myanmar last year in 2021.
-by Gautam
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