Buyout front: Wadhawan Food Retail bags S-Mart

NEW DELHI: While big-shot retailers like Wal-Marts and Reliances have drawn up grandiose plans to take a bite of India’s retail pie, their smaller rivals are in no way idle. Slowly but surely, consolidation in the third front of the organised retail business is gathering momentum.

Mumbai-based Wadhawan Food Retail (WFRL), owner of Spinach retail stores, has bought out Bangalore food & grocery chain S-Mart, its fifth buy in a year. S-Mart operates 13 stores in the city’s prime residential areas.

WFRL’s shopping binge began with the acquisition of HLL’s home delivery retail business, Sangam Direct. This June, the company took over management control of Maratha Co-operative Stores in Mumbai. This was followed by the acquisition of food & grocery chain Sabka Bazaar, which has 35 stores in Delhi and Delhi-based lifestyle retail chain The Home Store, present across nine cities.

WFRL is not alone on the buyout front. Primus Retail, among the top small format retail chains in India, recently acquired Weekender from the Jagadish Hinduja family, the owners of Gokaldas Images. Others like Vishal Mega Mart too have been on the lookout for smaller chains.

The cornerstone of these companies’ growth strategy is buying out small retail chains. WFRL now has 89 stores under its fold across nine towns and cities including Mumbai, Delhi, and Bangalore. The company aims to set up 1,500 stores in 90 cities in the next 4 years.

“We have already acquired a 76% stake in S-Mart, and will very soon increase it to 96%,” WFRL CEO Gaurav Modwel said. Following the deal, the Wadhawan Group also plans to increase the presence of S-Mart stores in other parts of Bangalore by the end of next financial year.

“The acquisition of S-Mart will provide us with the local knowledge to operate there efficiently and we wish to leverage this learning by setting up another 50 stores in Bangalore by the end of next fiscal,” Mr Modwel said. The deal size is estimated to be around Rs 50 crore.

The S-Mart chain was started in September 2004, co-promoted by Bhaskar Rao, Umesh Sangurmath and Ravi Rao. For two years, just prior to starting S-Mart, the promoters had the franchise rights of Fab Mall and operated 2 stores in Bangalore.

In the last one year or so, many small and mid-sized retailers have offered to sell off their operations to large chains like Reliance & the Aditya Birla Group, mainly because of inability to cope up with increasing competition and real estate costs.

Some major deals include the Gujarat-based Adani’s selling their stores to Reliance Retail and the Bangalore-based Trinethra selling off to the Aditya Birla group. However, the more enterprising players are looking at various ways of consolidating their businesses, rather than opting for a sell-off.