With the likes of Amazon scouting for partnerships with brick and mortar retailers and media speculation that some deals will be finalised soon, stocks of retailers have been on a roll.
Shares of Shoppers Shop soared 10.4% in intra-day trading on Monday, closing at Rs 662.20, up 5.93% over Friday’s close.
Ever since the listing of Avenue Supermarts on the Bombay Stock Exchange on March 21, 2017, shares of Shoppers Stop have rallied 100% while those of Future Retail have gone up by 126.2%, Trent by 46% and Avenue Supermarts by 149%.
According to media reports, Samara Capital and Amazon are likely to acquire Kumar Mangalam Birla’s Aditya Birla Retail at an enterprise value of around Rs 4,100-4,200 crore and the deal may get completed within the next couple of weeks.
While Walmart acquired Flipkart in a $16 billion transaction, Amazon is looking for partners on the ground.
Experts said the sector is likely to witness more consolidation with many retailers like Spencer’s Retail, Star Bazaar, Nature’s Basket, among others, struggling for several years to breakeven. With foreign giants like Amazon and Walmart getting aggressive to firm their foothold in the Indian market, it is not surprising that the retail sector is going through another level of transition.
According to Rajat Wahi, partner, Deloitte, “The sector is back in focus ever since the listing of Avenue Supermarts which runs the Dmart chain. Also bigger retail players are aggressively looking for acquisition and the overall sector is gaining a fresh level of interest.”
According to a Jefferies report, the Indian organised retail is in a sweet spot, especially post demonetisation and GST, given the under-penetration at 7% of total trade and favourable macro. On a micro level, retailers have become more agile and investable, considering increased focus on return ratios, debt reduction and exit from non-core assets. More consolidation and mergers and acquisition activities in the sector are likely, particularly between online and offline players, benefitting large players in the industry, the report said.
Trent shares closed at Rs 361.15, down 2.15% on Monday and Avenue Supermarts shares closed at Rs 1,601.55, down 0.26% from their previous close.