Godrej must have sold to focus on core competencies rather than burning cash in a highly competitive retail industry.
The week gone by was action packed as two business conglomerates —Tata Group and Godrej Industries— carried out their separate mergers and acquisitions.
On May 15, the Tata Group decided to demerge Tata Chemicals (TCL) and merge it with Tata Global Beverages (TGBL).
TGBL will be renamed as Tata Consumer Products. The consolidation of consumer products businesses will create a wider scope for businesses as TGB’s portfolio extends from beverages (coffee, tea and water) to food ingredients. This will also help in de-risking its portfolio from the vagaries of the individual beverage business cycle.
On May 17, Godrej Group sold its grocery chain, Nature’s Basket, for Rs 300 crore to Kolkata-based Spencer’s Retail, which is part of the RP Sanjiv Goenka Group. The acquisition will give Spencer’s access to the west of India through its 36 stores in Mumbai, Pune and Bengaluru.
The move comes in the wake of consolidation by other players in the FMCG industry. Last year, Future Group acquired Hypercity from Shopper’s Stop. It previously acquired Bharti Retail’s retailing operations in 2015.
According to analysts, Godrej gets most of their revenue from real estate and manufacturing packaged consumer goods such as locks, soaps etc., and it may have decided to take a strategic call to exit the retail business as Nature's basket was incurring losses. In FY18, Godrej Nature's Basket reported a loss of 62 crore.
Operating since 2005, Nature's Basket is a wholly-owned subsidiary of Godrej Industries. The neighbourhood convenience store format grocery retailer that sells products ranging from fresh fruits and vegetables, fish and meat, and others, had a turnover of Rs 338.28 crore for FY19.
A few analysts also said that Godrej must have sold to focus on core competencies rather than burning cash in a highly competitive retail industry.The Great Diwali Discount!
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