After picking up a 10% stake in Subhiksha for Rs.230 crore, Wipro’s Aziz Premji may have created speculation that Subhiksha promoters are looking for an exit owing to its astronomical valuation of Rs.2300 crores.
An ET news states that Reliance Retail and Future Group are keen to buy out Subhiksha, however valuation seems to be a deterrent.
Subhiksha currently operates 1000 stores in 59 cities which puts valuation of each store according to latest deal at around Rs.23 million which is quite high and according to experts, the fair value should be on an average Rs.1 crore per store.
The business was running on depressed margins, forcing the promoters to look for exit options.
It makes sense for Subhiksha to sell out as it would be difficult for it to sustain owing to competition from bigger players like Future Group, Reliance Retail, Aditya Birla, Bharti and Spencer’s. Also margins are reducing and consumer spending is at a low.
Future Group may be willing to buy Subhiksha as it can integrate is its KB Fair Price stores with these stores as these are non-AC stores with very low operation costs situated in urban areas.
Aziz Premji may have picked the stake only as a financial investment rather than strategically as earlier also he has picked up stakes in other retail companies like Koutons Retail and Shoppers Stop.
Find this article at: http://www.labnol.org/india/corporate/aziz-premji-picks-stake-in-subhiksha-fuels-rumours-of-sell-out/4431/
Tags: future group, merger, reliance retail, Corporate, India
