Spencer's Retail to acquire Nature's Basket from Godrej Industries for Rs 300cr

Spencer's Retail on May 17 announced the acquisition of premium grocery and fresh fruits store Nature's Basket from Godrej Industries for Rs 300 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.

Spencer’s will acquire NBL's entire share capital comprising 445,830,000 fully paid-up equity shares of Rs 10 each.

Spencer's Retail, a part of RP Sanjiv Goenka Group Headquartered in Kolkata, has a presence in over 35 cities in India. The multi-format retailer provides a wide range of quality products across categories such as food, personal care, fashion, home essentials, electrical and electronics to its key consumers.

The Board has fixed May 22 as the cut-off date for the purpose of determining the eligibility of shareholders for voting via postal ballot.

Speaking on the benefits of the acquisitions, Shashwat Goenka, Sector Head – Retail & FMCG, RP Sanjiv Goenka Group, said Nature’s Basket will give Spencer’s access to the west of India through its 36 stores in Mumbai, Pune and Bengaluru. “These stores are located in prime residential locations, have a high sales throughput per square feet, and will add Rs 363 crore of topline to Spencer’s portfolio. It has a strong portfolio of private label brands, which has huge traction with its consumers. We believe this deal fits in well with Spencer’s omnichannel strategy,” he stated.

Spencer's stock ended May 17 up over four percent in a buoyant market. The Godrej Industries stock too was up close to two percent.

HOW DOES SPENCER'S BENEFIT?

-Premium offerings and brands would be available on shelves in the Spencer stores.
- In all likelihood, Spencers must have bought this business at a discount to fair value since GNB has not been able to break-even
- Promotes cross-selling (From now on, Spencer stores will have a blend of value and premium products pertaining to the same category. Godrej had only premium products, so value-conscious buyers wouldn't turn up, but now they will)
- Spencers private labels will get more visibility, which should boost margins
- Spencer's management believes that with discretionary incomes going up, consumers are likely to spend more on high-value products for gifting during festivities, health, etc.
- Should Spencers succeed in attracting more footfalls, the operating leverage could be high since realisations of products sold at Nature's Basket outlets are high.
- Rather than having dedicated stores and risking low footfalls, Spencers can include all those premium product lines in their existing stores. So, they might end up saving lease costs.

-It will help Spencer compete with local mom-and-pop stores in upscale localities n competitors (such as Future Consumer n Future Retail)

WHY GODREJ SOLD?

--Analysts said that Nature's basket was incurring losses which must have prompted Godrej Industries to scout for a buyer. In FY18, Godrej Nature's Basket reported a loss of 62 crore.

--To focus on core competencies rather than burning cash in a highly competitive retail industry