Metro AG global CEO Steffen Greubel hints at exiting India

Metro AG global chief executive officer Steffen Greubel said the company is at a "very advanced" level of discussions on its India business, suggesting for the first time that it could be looking at an exit from the country soon.

"We are very advanced in the process regarding India and are at a certain maturity level in the process. It's too early to share any information, but we have discussed it greatly," Greubel told analysts when asked if he is looking at a possible withdrawal from India and the status of talks. "We are very deep in the (sale) process in India," he said last week while announcing annual earnings.

The German wholesaler grew its Indian business by 21% to $982 million during the year ended September, as per its latest annual report. Last month, ET reported that Reliance Industries Ltd had agreed in principle to buy Metro AG's cash-and-carry wholesale India business for ₹4,000-4,500 crore.

Thin Margins in B2B Segment
Its unit Reliance Retail is already the biggest grocery retailer in the country with over 2,400 stores across formats while Metro operates 31 wholesale stores in India with seven of them on company owned land in prime locations. The company hasn't publicly stated that it's looking to leave India. Metro would be the second big international wholesaler retailer to exit India, if this happens. French retailer Carrefour wound up its India business in 2014 after struggling with sales for four years.

Globally, Metro is the world's fourth-largest retailer by revenue. In India, it doesn't sell directly to consumers and is an organised wholesaler or cash-and-carry operator that sells merchandise to local kirana stores, hotels and catering firms.

It decided to put the India business on the block as part of a global decision to exit the country due to heightened competition, a tougher regulatory environment and the lack of a level playing field between local and foreign retail companies, industry executives said.

Experts said the difficult European and global economic environment, regulatory restrictions in India, tough competition from domestic Indian groups and thin margins in the B2B business in India may have led Metro to focus on growing its core markets in Europe.

"Though India is, indeed, a long-term strategic market for companies looking at global growth, whether retail or B2B, not every business model from other geographies can be successfully transplanted or rapidly scaled in India, and Metro's business footprint in India may be far smaller than they may have expected in the two decades of presence here," said Devangshu Dutta, founder of retail consulting firm Third Eyesight. The choice to be present in different countries is always a dynamic one for global retailers and entry or withdrawal is driven by individual strategies, rather than solely on the merit of the market itself, he said. "In September, the management board reported on the current status of the audit of strategic options for Metro India," according to the annual report.

Overseas investment in offline trade has been a tricky issue, despite India allowing 100% foreign direct investment (FDI) in wholesale trade on a cash-and-carry basis. Metro was one of the first companies to enter the segment in India in 2003. Lobby groups representing small Indian retailers have accused overseas retailers of violating FDI rules, which the foreign companies have consistently denied. Some trade lobbies have complained to the government that a few global wholesalers have been flouting FDI rules by selling to consumers directly, which is not allowed as per current regulations.