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Metro Cash and Carry eyes acquisitions to aid digitization plan
May, 01st 2018

German wholesaler Metro Group is looking for acquisitions that will aid its ongoing digitization of retail outlets in India, a top company executive said.

However, unlike peer Walmart Inc., the world’s largest retailer pursuing the acquisition of online retailer Flipkart, the Indian arm of Metro will look at opportunities that will aid its B2B journey here.

“Most retailers are focused on the B2C and e-commerce opportunity in India. However, we are focused on the B2B opportunity and will look to drive acquisitions and mergers that create shareholder value in this space,” Arvind Mediratta, managing director and chief executive officer, Metro Cash and Carry Pvt. Ltd said in an interview.

Mediratta, however, did not specify on timelines or the size and capex plans for the proposed acquisitions and maintained that this is a part of the company’s global plan to drive acquisitions and mergers in key markets including Europe, China and India.

Over the last 6-8 months, Metro has worked with close to 100 retailers in Bengaluru, Hyderabad and Delhi to digitize their businesses by giving them free hardware and software worth Rs32,000 each. “Retailers enrolled reported a growth in both bottom line and revenues,” said Mediratta, who now plans to roll out this programme at its national network of kirana stores.

However, retailers will be required to pay for the solution provided by retail technology provider Snapbizz. Metro has tied up Capital Float for working capital loans. The wholesaler has also tied up with Kotak Mahindra Bank for credit cards that will enable retailers to avail of a 15-day credit for their businesses.

The company is looking for more such partnerships and even acquisitions in the technology space to develop low-cost solutions, said Mediratta.

The company, which has been in India since 2003, is also looking at exclusive distribution tie-ups with fast moving consumer goods (FMCG) manufacturers for new product launches or for developing exclusive packs for distribution in its channel. Over the last year, it has formed close to a dozen such partnerships with manufacturers like Mondelez India Foods Pvt. Ltd and Mars International India Pvt. Ltd, the local arm of American chocolate maker Mars Inc.

Meanwhile, rival Walmart is looking at driving partnerships with retailers in the UK and India, even as it scales back in some markets like Brazil. On 28 April, Walmart announced that the company has agreed to its wholly-owned subsidiary Asda Group Ltd combining with J Sainsbury plc to create one of the UK’s leading grocery, general merchandise and clothing retail groups, with combined revenues of £51 billion for 2017.

In India, foreign direct investment (FDI) rules allow overseas investors to hold a maximum of 51% in multi-brand retail. However, in 2016, the government allowed 100% FDI in online retail of goods and services under the so-called ‘marketplace model’. Walmart which in the past had burnt its fingers in a joint venture with Bharti Enterprises runs its own cash and carry operation in India. The retailer is now in a race with Amazon Inc for the acquisition of online retailer Flipkart for $10-12 billion, which will give it access to the Indian consumer.

The frenzy is understandable. Indian organised retail is in a sweet spot, especially after demonetisation and implementation of the Goods and Service Tax (GST) with the market turning favourable for organised retailers which accounts for just about 7% of total retail trade. “We envisage more consolidation and M&A activities in the sector, particularly between online and offline players, benefitting large players in the industry,” said equity analysts Tanmay Sharma and Varun Lohchab of Jefferies Ratings in an April report.

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