Metro’s India biz: High price turns off investors – Times of India

Metro’s India biz: High price turns off investors - Times of India

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NEW DELHI: The high valuation being sought for German retailer Metro AG’s Indian wholesale business, which is under review, has turned off several potential strategic investors, including the Tata Group and Siam Makro’s Lots Wholesale.
Metro Cash & Carry India, which currently operates 30 wholesale stores in India, has been expanding rapidly and is looking to grow the business four times in the next five years. It, however, requires significant funds for such a massive scale of expansion and to fend off rising competition from the likes of Udaan, Reliance and the wholesale businesses of Amazon and Walmart-backed Flipkart, said three people in the know of the matter.
“Thirty to 32 stores are not enough for a market like India,” said a source. “The company needs to grow fast to keep the momentum going. ” Talks between the company and its Dusseldorf headquartered parent for fund infusion, however, have not yielded a positive resolution yet, which has prompted it to look for strategic partners.
“Trent looked at Metro after bankers presented them with the opportunity. But they were not interested in pursuing it because of two factors,” said a source. “Metro is a business-to-business (B2B) model, where margins are in low single digits compared to a business-to-consumer (B2C) model. Also, despite being a B2B model, it sought a valuation of a B2C/retail model/business. ”



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