Metro plans to exit the Indian market for $1.5-1.75 billion after 19 years.

  • May 20, 2022, 12:19 p.m.

The company, which runs the DMart chain, Tata Group, Lulu Group, and PE fund Samara Capital, are among those that have been approached to buy the Indian cash-and-carry operations of German retailer Metro AG for around $1.5-1.75 billion, said multiple people aware of the development.

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 forced the Dusseldorf-headquartered multinational to first undergo a detailed business review and then choose to give up the sell mandate.

After Bain & Co submitted a detailed strategy report, JP Morgan and Goldman Sachs have been appointed to find a buyer for the business.

"Selling below cost and free delivery of goods are the issues. "Most competitors are operating at negative 20-25% EBITDA," said an industry veteran, asking not to be named. "Metro wants to grow profitably, which is not possible in the near term."

"At Metro, we regularly assess our international portfolio, 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," said Gerd Koslowski, the company’s global director of corporate communications. "We will not further comment on rumours and speculation."

An India spokesperson further added, "We are bullish on our India business and will continue to expand our store and eCommerce footprint." Our eCom business in FY 21 grew by 5.7X compared to the previous year, and we successfully opened three new stores in India. "Metro is the only profitable player in India’s B2B space, which is seeing fierce competition with several large players who are losing hundreds of millions of dollars every year to gain market share."


A NSE 2.93% Retail spokesperson said the company evaluates various opportunities on an ongoing basis, but as a matter of policy it does not comment on media speculation and rumours.

Focus on Global Operations

Amazon and Samara declined to comment. CP Group, DMart, Lulu Group, and Tata Sons did not elicit a response till the time of going to press.

In its January 17 edition, ET first reported that Metro AG was reviewing its cash-and-carry business in India.

While Indian rules bar foreign retailers from setting up outlets to sell direct 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 discussions with potential buyers are still preliminary in nature. Information memorandums are being sent and non-disclosure agreements (NDAs) are being signed. Sources in the know say Metro’s leadership is expecting a valuation of $1.5-1.75 billion for the India business. Depending on the final negotiations, Metro may choose to retain a small stake for future upside but will be relinquishing control, added a company executive.

The retailer clocked $898 million in revenues in FY21 (Oct-Sept) and is likely to close the current fiscal with a billion-dollar-plus revenues with an EBITDA growth of 30–40%. Last fiscal year it was 50%. But the parent is unwilling to pump in up to $300 million (Rs 2,310 crore) in the short term required to fight competitors such as Reliance and Udaan, said executives aware of the ongoing developments.

Metro is focusing on making profits from its global operations and market leadership in food and grocery wholesale. It exited Japan and Myanmar last year. It has also withdrawn from Russia following the war with Ukraine. The company’s wholesale and food retail is spread across 34 countries. In the financial year 2019–20, Metro generated sales of 25.6 billion euros.

"With no FDI restrictions, even PE players that have retail exposure will be keen to explore this (Metro buyout) opportunity, but this is a dog-eat-dog market," said a retail CEO on condition of anonymity.

Since 2018, to compete with local competition, Metro has been fine-tuning its strategy to also do business with local kirana (mom and pop) retailers to widen its reach. From digitising, remodelling and modernising kiranas to helping them with efficient utilisation of inventory, planogram, data analytics, easy credit and targeted promotions, the wholesale B2B retailer, under Arvind Mediratta, who joined Metro in February 2016, has been tapping kiranas across the country to deepen and widen its omni-channel play. This has been the 4th pillar of the company that traditionally has been focused on three broad customer buckets—traders, HORECA (hotels, restaurants, and cafes), and companies and offices.

An estimated 13 million kiranas in India present a massive untapped opportunity as most of them look to upgrade and get a modern makeover from deep-pocketed players like Reliance, Amazon, and Udaan. By 2025, the Indian retail market will increase to $1,297 billion in value, of which organized online retailers would be just 8 percent, as per estimates by consulting firm Redseer. While 14 percent would remain with organised offline players, a staggering 77 percent would still be unorganised.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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