Aditya Birla Retail Acquires Jubilant’s Retail Business; 3rd Major Consolidation in Retail in a Fortnight

Aditya Birla Retail Limited, a retail subsidiary of $45 billion Aditya Birla Group has acquired Jubilant Industry’s retail business in all cash, slump sale deal. The exact amount of the deal hasn’t been disclosed.

Jubilant’s retail business runs four hypermarket stores in Bangalore under the brand ‘Total Superstore’, having combined retail footprint of 2.87 lakh sq ft. On the other hand, Aditya Birla Retail, which operates hypermarkets and supermarkets under the brand ‘More’, is already India’s 4^th largest retail chain after Future Group, Reliance Retail and D-Mart. They have 494 super markets and 16 hypermarkets across India, which are supported by 11,000 employees.

This marks 3^rd consolidation in the Indian retail market, within last two weeks.

Last week, Future Retail merged with Bharti Retail to form one of the biggest retail behemoth in India worth Rs 15 lakh crore. Earlier this month, Aditya Birla’s merged all their apparel businesses into one entity named Aditya Birla Fashion and Retail which is now worth Rs 5290 crore.

What is in stake?

As per reports, Aditya Birla Retail has bought all the four hypermarkets of Jubilant Group in Bangalore, along with all assets and liabilities.

Jubilant Group issued a statement stating Aditya Birla Group will acquire “four hypermarket stores in Bengaluru along with certain specified assets and liabilities, including dedicated employees, contracts, licences, permits, consents and approvals related to Jubilant Agri and Consumer Products, a wholly-owned subsidiary of Jubilant Industries”

Aditya Birla Retail also issued a statement announcing the deal: “In line with the approved transaction, ABRL will acquire in an all cash deal, the leasehold rights for four hypermarkets of Total Superstore Business in Bengaluru, along with movable and immovable assets”

Jubilant Retail: A Loss Making Business Reviving Swiftly

Jubilant Agri & Consumer Business, a division within Jubilant Group operates Total Superstore hypermarkets in Bangalore, reported a net profit of Rs 25.83 crore during financial year 2014, which is a complete turnaround from 2013 when it reported a loss of Rs 34.40 crore.

However, the total sales turnover reduced drastically in the same period as it went down from Rs 748.36 crore in 2013 to Rs 653 crore in 2014.

Retail experts are speculating that Aditya Birla Retail was brilliant in making this move at this particular time as Jubilant Retail was under enormous pressure to transform their business and were scouting for buyers. Aditya Birla Retail may convert the 4 hypermarkets of Jubilant Retail into More Store, thereby making their presence stronger in Bangalore.

Jubilant Food Works, another subsidiary of Jubilant Group is the master franchise of Domino’s Pizza in India, Sri Lanka, Nepal and Bangladesh; along with the only franchise of Dunkin Donuts in India.

Retail Business: The One With More Patience Wins

In 2013, total of $635.25 billion (Rs 38,115 crore) worth of retail shopping (organized + unorganized) was done by Indians, which increased to $717.83 billion (Rs 43,069.8 crore) in 2014. By the time 2015 ends, it is expected that $818.33 billion (Rs 49,099.80 crore) worth of retail shopping would be accomplished, which is an increase of 14% compared to last year.

Out of this, organized retail in India is worth $40 billion, which is expected to increase to $200 billion by 2020.

Despite such encouraging numbers and size, Indian retailers in organized sector are bleeding money. India’s biggest retail chain Reliance Retail posted their first profits last year, after a wait of 7 years and investment of $1 billion.

On one hand 70-80% of this retail business is being managed by kirana shop owners, which are not part of the organized retail. On the other hand, ecommerce retail portals have now started to make some serious dents in the business.

With FDI allowed in retail, several big shot global retailers are also opening their shops in India, thereby further deteriorating the income potential of Indian retailers.

In the coming days, we may witness even more consolidations in this market, which demands more patience and fewer expectations of profits for a long time.