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On January 3, 2007, Aditya Birla Retail (AB Retail), an unlisted subsidiary of the Aditya Birla Group, acquired a majority stake in Trinethra Super Retail Limited (Trinethra), marking the Group's entry into the Indian retail sector.
AB Retail acquired 90% of the shareholding in Trinethra. The other 10% remained with India Value Limited, a private equity investment fund that had been the majority shareholder in Trinethra before the acquisition.
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The financial aspects of the deal were not disclosed, but analysts estimated the cost of the acquisition to be around Rs. 3.4 billion (approximately $76.7 million).1 The Aditya Birla Group, founded in the early 1840s by Seth Shiv Narayan Birla, was one of India's biggest business houses.
It was initially set up for cotton trading in Rajasthan, but diversified into several other businesses over the years.
By the early 2000s, the Group was one of Asia's most diversified business groups, manufacturing aluminum, cement, copper, carbon black, viscose staple fiber, palm oil, insulators and garments.
It also had interests in financial services, telecom, software, and BPO operations. In 2006, the Group had revenue of $9.7 billion and a market capitalization of $15 billion.2
The Aditya Birla Group had set up AB Retail in early 2007 to capitalize on the rapidly growing retail sector in India. Trinethra was started as a partnership firm in 1986.
It was converted into a private limited company in 1990, and later into a public limited company in 1998 as Trinethra Super Market Limited. In 2003, the name of the company was changed to Trinethra Super Retail Limited.
As of January 2007, Trinethra operated more than 170 stores in Andhra Pradesh, Karnataka, Tamil Nadu and Kerala.3 The stores operated under the 'Trinethra' name in Andhra Pradesh and Tamil Nadu and under the 'Fabmall' name in Kerala and Karnataka.
The company had a total turnover of Rs 2.4 billion (approximately $54.4 million) in 2006.4 Trinethra was one of the fastest growing retail chains in South India. The stores, (averaging 2,500 square feet in size) mainly sold food and grocery items, although some of them had pharmacies attached.
Some of the larger stores offered value added services like forex remittances and bill payment services. Most of the stores were located in prime residential areas, and reportedly enjoyed a loyal client base.
In 2006, Trinethra had launched a separate store format where it sold only fresh fruits and vegetables. The company tied up with local farmers to source the produce for these stores.
Trinethra also had a private label brand called 'Quality First', under which it sold staples like rice, wheat and pulses. In addition to this, it had processing and sorting factories and central warehouses in all the four states of South India.
At the time of the acquisition, Trinethra had already embarked on its plan of expanding aggressively into Tier-II cities in South India, like Coimbatore, Tirupur and Mysore.
AB Retail acquired Trinethra as a part of its larger plan to enter multi-format retailing in India. The company reportedly favored inorganic growth (as against setting up its own stores), as the acquisition gave it ready access to the retail market and conferred several other advantages.
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1] Namrata Singh, "Birla makes his first retail take over," www.timesofindia.indiatimes.com, January 3, 2007.
2] www.adityabirla.com (accessed on February 2, 2007)
3] Vinay Kamath, Kripa Raman, "Aditya Birla group to take over Trinethra,"
www.thehindubusinessline.com January 3, 2007.
4] "Trinethra super retail to invest Rs. 1 billion in expansion,"
www.imagesretail.com (accessed on February 2, 2007)
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