Mukesh Ambani's Reliance Retail to get a major boost with addition of Metro Cash & Carry

Reliance Retail, the Mumbai-based Reliance Group’s consumer arm, is set to get a major bump in its business operations as the Competition Commission of India (CCI) approved its acquisition bid for Metro Cash & Carry India. After a much-hyped battle with global and local investors, Reliance is set to add the German wholesale major’s India business.

The addition of Metro’s physical infrastructure and consumer base fits well with Reliance Retail (RRL) management’s vision. RRL is already the largest retail player in the country with over 17,000 physical outlets and a rapidly growing e-commerce venture - JioMart. However, apart from offering the backend support to these businesses, industry experts point towards the benefits the deal would bring in for its B2B segments. Apart from serving the consumers directly, serving the majority of the country's 10 million-odd kiranas and small traders as customers is one of the key agendas that Mukesh Ambani has aimed for.

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As per analysts at JP Morgan, Metro’s India assets can further strengthen RIL’s B2B offering. Metro was the first company in India to introduce cash and carry operations back in 2003. It currently has 31 large format stores across 21 cities and has 3,500 employees. The multi-channel B2B cash and carry wholesaler today reaches 3 million B2B customers, of which 1 million are frequent customers.

“Per RIL, for the financial year ended Sept 2022 , Metro India’s revenues stood at Rs 7,700 crore. Per RIL, the acquisition would give RIL access to a large base of registered Kiranas and other institutional customers, and strong supplier network among others. Over the years, RIL has focused on the large Kirana store ecosystem in India and the acquisition of METRO’s wholesale business is a positive,” JP Morgan analysts noted in a report.

According to analysts at Morgan Stanley, RIL's acquisition of Metro's B2B business should support its new commerce strategy and expand its presence in metros/Tier 1 cities with large format multi-category stores. "With $1 billion in bolt-on acquisitions in retail and the recent launch of its own brand, we expect RIL to remain aggressive in its retail strategy. With a presence in 8 of the 10 large cities, the acquisition should be a bolt-on to RIL's ambition to grow its last-mile reach by leveraging the relationship with Kirana stores," Morgan Stanley noted.

The enthusiasm amongst analysts is not without a rationale. As RRL leaps forward towards its ambitious goals that Ambani has set for it, industry experts are hopeful that RRL’s valuation can rise further as its revenue and penetration goes northward with the Metro deal.

Mukesh Ambani, Chairman of Reliance Industries, recently told its shareholders that while RRL is already a leading player in the modern retail and digital platforms, the company has set a target of increasing its reach into the hinterlands that remains under-served. “In this endeavour, our strategy is to integrate with millions of small merchants…the aim is to bring them to become an integral part of the widest distribution portfolio across the country so that they can provide the same choices to their customer that are available in big cities,” he had said.

Additionally, RRL is also working on strengthening its supply chain capabilities further so that it can serve across the vast Indian geography in the “most efficient manner”. This will not only help it reduce waste but will also allow the company to pass on the benefits to its customers - which effectively means, RRL will be able to offer products at competitive prices.