Poaching is the new game in retail sector
The Indian retail space has recently seen hectic action with Bharti’s Sunil Mittal joining hands with US-based world No 1 Wal-Mart. The $300-billion Indian retail sector is attracting foreign retail giants and local majors such as the Reliance group and the Tatas. With Wal-Mart coming to India with Bharatis as JV , Indian retail sector is hotting up with poaching exercise. As time and energy are involved in establishing new outlets, major players are looking for inorganic growth, by going out for acquisitions of companies with presence in multiple cities. These acquisitions will help these big players to come out with sufficent outlets before the Wal-Mart can make its presence felt in India.
1. Reliance Retail acquires Gujarat-based Adani Retail:-
In the first week of December, 2006, Reliance Retail started its first acquisition by buying out Gujarat-based Adani Retail lock, stock and barrel for Rs 100-110 crore. Sources confirming the news said the buy-out will give Reliance access to 54 retail locations (neighbourhood stores, supermarkets and hypermarkets) across nine cities in Gujarat in one shot, besides its infrastructure and sourcing facilities. As commercial real estate prices shoot up across India, the acquisition will help the company control costs substantially because 60% of Adani’s retail outlets are company-owned. The deal also works well for Adani as it will now focus on its core competencies like shipping and exports.
At present, Adani Retail operates a total of 54 supermarkets and hypermarkets and is likely to launch another outlet in Bharuch this week. The Rs 16,000-crore Adani group forayed into retail by acquiring a leading supermarket store V Ravjis in 2000. While in the first two years, the company did not expand into other cities, it moved faster in the last four years with presence in Ahmedabad, Vadodara, Jamnagar, Surat, Rajkot, Anand, Nadiad, Mundra, Gandhinagar and Navsari. Adani's neighbourhood stores are typically 1,500-3000 sq ft and sells food & grocery.
The supermarkets, around 3,500-4,000 sq ft each, sell plastic items, crockery, cosmetics, imported products and the hypermarkets, around 8,000-25,000 sq ft, have dedicated sections for grocery, fast food, fresh fruits and vegetables and apparel among others.
2. AV Birla Group acquires Hyderabad-based supermarket chain Trinethra Super retail.
In the new year, the AV Birla group has kicked off its retail plans by acquiring Hyderabad-based supermarket chain Trinethra Super Retail and its fast-growing online shopping outfit, Fabmall. Trinethra Super Retail was founded in 1986 and is southern India's fastest growing grocery retail chain. While the Trinethra brand is used in Tamil Nadu and Andhra Pradesh, in Kerala and Karnataka, it is known as Fabmall. Trinethra is scheduled to open stores in tier II cities such as Mysore, Coimbatore and Tirupur. The group also has warehouses in Hyderabad and in the states of Karnataka, Tamil Nadu and Kerala. Currently, the Trinethra supermarkets offer groceries, fresh fruits; vegetable and diary products; bakery, frozen foods and many have food counters / pharmacies attached to them.
Although the financial details of the Birlas’ retail business isn’t clear, it is said that the group would pump in Rs 5,000-Rs 6,000 crore at least in the initial phase, which could be subsequently ramped up once the business grows. Birla TMT Holdings, an unlisted company, is likely to part finance the investment, while some debt could also be raised. The Birla group, via Birla TMT, has raised close to $980 million through the sale of about 33% of its equity stake in telecom unit Idea Cellular, to about six private equity firms.
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