Aditya Birla Retail sold its More grocery chain to Samara Capital for Rs 4,300 crore
India's Aditya Birla Group stopped funding its money-losing supermarket chain More and sold it to Samara Capital, refocusing retail on apparel.
What was changed
Aditya Birla Retail's More chain — 493 supermarkets and 20 hypermarkets — was the Aditya Birla Group's bet on Indian food retail, built from the Trinethra and Fabmall acquisitions plus Jubilant's Total Super Store. FY17 sales rose 20% to Rs 4,194 crore, but the model never made money: net losses were still Rs 644 crore, the unit carried about Rs 6,573 crore of debt and Rs 471 crore of yearly financing cost at March 2017, and the group had put over Rs 3,000 crore into grocery in three years while Reliance, Future Group and D-Mart scaled around it.
On 30 June 2018 the Economic Times reported ABRL had agreed to sell More to Samara Capital at an enterprise value of Rs 4,300 crore, closing set for September. "We managed to break even after significant cost restructuring... but the group has decided that it is comfortable with offline apparel retailing and to halt investments in online as well as grocery retailing," a person with direct knowledge of the plan said. Nearly two months earlier, chairman Kumar Mangalam Birla and his family had converted bonds worth over Rs 2,800 crore into equity in the grocery business.
Grocery was the second retail format the group restructured its way out of. A few years earlier it had carved the Madura Fashion and Lifestyle division out of Aditya Birla Nuvo and merged it with listed Pantaloons Fashion and Retail, creating the country's largest branded apparel company by sales and number of stores. With More sold, the $41 billion conglomerate's retail presence would rest on apparel.
Why it worked
More carried about Rs 6,573 crore of debt and Rs 471 crore of annual financing cost at March 2017, the legacy of the Trinethra, Fabmall and Total acquisitions.
FY17 net losses were still Rs 644 crore even after sales grew 20% to Rs 4,194 crore — growth was not fixing the unit.
The group had put more than Rs 3,000 crore into grocery retail in three years and decided to halt investment in both grocery and online retailing.
Competing with Reliance Retail, Future Group and D-Mart required scale the group chose not to fund; apparel retail was where it said it was comfortable.
What can be applied
A group that will not fund the next round of scale in a retail format should sell at break-even rather than wait for losses to return; exit value is easier to win when the unit has stopped bleeding.
Aftermath
The agreement was signed at an enterprise value of Rs 4,300 crore with closing set for September 2018. The Economic Times had reported on 24 May 2018 that talks were under way and Samara had started due diligence. Aditya Birla Group declined to comment and Samara Capital did not respond to queries at announcement; the report does not describe how the chain fared under Samara's ownership.