RIL gains as investors cheer synergy benefits from Metro India acquisition

The acquisition is in line with the company’s strategy of expanding its retail footprint

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Share price of Reliance Industries opened higher on December 22 after the company announced the acquisition of 100 percent equity stake in Metro Cash and Carry India Pvt Ltd (Metro India) for a cash consideration of Rs 2,850 crore.

RIL started trading at Rs 2598 on the NSE, higher than the previous close of Rs 2584. The stock, with an 11 percent weightage in the Nifty 50, has gained over 7 percent in 2022 so far.

Metro India, a wholly owned subsidiary of Metro AG, started operations in India in 2003 and now runs 31 large format stores across 21 cities with about 3,500 employees. It reaches over 30 lakh B2B customers in India and 10 lakh of them are frequent buyers through its store network and eB2B app.

“There are many synergy benefits with this acquisition as RIL will now get access to the logistics back-end of Metro India and its supply chain infrastructure. It also gets 30 lakh new merchants along with wholesale customers in the HORECA (HOtel, REstaurant, CAfé) segment,” said Deven Choksey, founder of KR Choksey.

Metro India generated sales of Rs 7,700 crore for the FY ended September 2022, its best sales performance since its market entry into India.

The revenue contribution to RIL’s topline of over Rs 7 lakh crore might be fractional but the acquisition is in line with the company’s strategy of expanding its retail footprint.

“RIL’s retail business and Metro’s wholesale business can now tie-up together. Reliance also gets access to Metro’s real estate across India and its global supply terms,” said Deepak Jasani of HDFC Securities.

“Initially, Metro was looking at a valuation of $700-800 million. At Rs 2850 crore, which is less than $350 million, RIL has gotten itself a great deal,” he added.

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