Reliance Retail Ventures Ltd. has signed definitive agreements to acquire 100 percent stake in METRO Cash & Carry India Pvt. Ltd. for a total cash consideration of Rs 2,850 crore.

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The acquisition will add multi-category large format stores to Reliance Retail's overall footprint and further strengthen its new commerce business.

The transaction is expected to be completed by March 2023, subject to other regulatory and customary closing conditions.

METRO India began operations in India in 2003 as the first company to introduce cash-and-carry business format in the country. It currently operates 31 large format stores across 21 cities and has over 3,500 employees. It has reach to over 3 million B2B customers in India, of which 1 million are frequent buyers through its store network and eB2B app.

For the financial year that ended in September 2022, METRO India had its best ever sales performance of Rs 7,700 crore.

Through this acquisition, Reliance Retail gets access to key METRO India stores across prime locations, across key cities, a large base of registered Kiranas and other institutional customers.

"We believe that METRO India’s healthy assets combined with our deep understanding of Indian merchant / kirana ecosystem will help offer a differentiated value proposition to small businesses in India," Isha Ambani, Director at Reliance Retail Ventures was quoted as saying.

Reliance Retail Ventures is the holding company of all retail businesses under the RIL group and a subsidiary of Reliance Industries Ltd. It operates over 16,500 own stores and partners with over 2 million merchants across various product categories. It reported a consolidated revenue of close to Rs 2 lakh crore and a net profit of Rs 7,055 crore for financial year 2022.

Shirish Pardeshi of Centrum told CNBC-TV18 that METRO's connect with small retailers is the biggest benefit that Reliance can get from this deal and that the cost synergies will support the company. However, he added that the scalability for METRO could be a challenge.

On the valuation front, Pardeshi said that though they are attractive, they need to factor in the challenges and synergies.

Deven Choksey of KRChoksey believes that Reliance's fundamentals are always intact and that each of its verticals, from petchem to refining and Jio to Retail have a great amount of growth to offer.

He further added that any technical correction can be used as a buying opportunity. "In my view point, the stock is ready to go to the levels of Rs 3,200-3,300 in a couple of quarters from now. So that is where I think one could keep an eye on from investing perspective," he said.

Brokerage firm JPMorgan, in a note on Reliance Industries on December 9 wrote that the market is not ascribing material value to Jio Financial Services yet, about which 2023 will mostly be about. It further wrote that the IPO of consumer businesses like Jio and Retail are still some time away and that it does not expect any further monetisation.

It maintained its overweight rating on Reliance Industries with a price target of Rs 3,065.

First Published:Dec 22, 2022 4:46 AM IST