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Tatas buy out Croma’s foreign-owned backend partner Woolworths for $38M

27 September, 2012

Tata Group’s privately held company Infiniti Retail, which runs electronics retail chain under the brand Croma, has acquired Australian partner Woolworths’ wholesale retail arm in India for Rs 204 crore ($38 million). Woolworths Wholesale (India) Private Limited, a wholly owned subsidiary of Woolworths Limited Australia, is a ‘cash and carry’ wholesaler supplying merchandise to Infiniti Retail.

Since foreign investment in multi-brand retail was not allowed until recently in India, Tatas had struck a deal where Woolworth came in as a backend supplier for its Indian owned front end business. Interestingly, this is the first deal after the government allowed FDI in multi-brand retail in India (barring e-commerce) which is expected to lead to Indian retailers selling stake to foreign partners or new strategic investors.

In the case of Woolworths, the deal is pursuant to its strategy to exit electronics retail business. In a simultaneous deal, it has also sold Dick Smith electronics retail chain comprising some 325 outlets across Australia and New Zealand to private equity firm Anchorage Capital Partners for $20 million. It had been looking to exit its electronics retail arm since early this year. Woolworths retail presence spans across food & grocery, liquor, petrol, general merchandise among others outside India.

Ajit Joshi, managing director and CEO of Infiniti Retail, told VCCircle that the firm is not looking at bringing in a new partner: “We are not looking for any strategic investor or partner at this stage. We will fulfil all our distribution needs through Woolworths and already have expertise in front end.”

At the same time, he feels, this deal is not a roadblock for Infiniti to get further foreign investments in the future.

Tata Sons, the group holding firm of the multi-billion dollar conglomerate, owns 100 per cent stake in Infiniti Retail and has pumped in a further Rs 220 crore into the private retail arm to fund the acquisition. Bulk of the money will be used for the stake acquisition with the rest (Rs 16 crore) to be used for further development and expansion of Croma stores, Joshi said.

“This year, we are looking at expanding only in the 15 cities that we are present in and next financial year we will look at expanding into other cities,” he said.

With the latest infusion, the total investment by Tata Sons in Infiniti Retail is now Rs 700.

Joshi referred to the deal as ‘one team one dream’ where Woolsworths’ team will be handling the back end and distribution centre for Infiniti and the front end will continue to function as it is.

Ankur Bisen, associate vice president at consultancy firm Technopak Advisors said, “Woolworths was primarily handling the back-end support and technology for Infiniti Retail. Infiniti had may be grown beyond Woolsworths in options and had more choices to partner with.” Analysts also opine that this deal has not come as a surprise to them as both the parties were looking for more options.

According to its website, Woolworths Wholesale (India) has warehouses in Mumbai, Ahmedabad, Gurgaon (NCR) and Bangalore.

Through Croma, Infiniti Retail runs one of the largest electronics retail chain in India. For the year ended March 2012, Infiniti Retail clocked sales worth Rs 1,972 crore, up from Rs 1,500 crore in FY11.

(Edited by Prem Udayabhanu)


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Tatas buy out Croma’s foreign-owned backend partner Woolworths for $38M

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