Reliance Industries pays Rs 254 crore license fee to Metro to use its name

Metro AG clarified in its latest annual report that the payment is part of the transitional services and licences provided by Metro AG

Reliance Industries Ltd (RIL) has made a payment of Rs 254 crore to Metro AG during the financial year ending September 2023 for the use of the German retailer's brand name in India, according to a report in The Economic Times (ET). This payment comes after Reliance Retail Ventures, a subsidiary of RIL, acquired Metro Cash & Carry India in December last year for a total cash consideration of Rs 2,850 crore. The acquisition, inclusive of 31 wholesale stores and the entire real estate portfolio, concluded in May 2023.

Metro AG clarified in its latest annual report that the payment was part of the transitional services and licences provided by Metro AG to facilitate the new owner in operating the business. The brand license fee of Rs 254 crore was received in advance as part of the sale of Metro India and is recognised in the financial year.

The annual report further highlighted that considering the outgoing cash and the prepayment for the use of the Metro brand, the preliminary net cash inflow for the disposed assets and liabilities amounts to Rs 2,731 crore. Additionally, the positive earnings before interest, taxes, depreciation, and amortisation (Ebitda)-effective earnings from the disposal of the Indian business were Rs 1,363 crore, including transaction costs. Metro noted that due to increased market consolidation, accelerated digitisation, and intense competition, Metro India's business was no longer aligned with its core growth strategy, prompting the sale to Reliance Retail Ventures.

At the time of acquisitions, industry observers agreed with the acquisition, as earlier reported by Business Standard. Brokerage firm Morgan Stanley, at the time, had stated that RIL should support Metro's B2b business and expand its presence in metros and tier-1 cities. JP Morgan, also viewed the acquisitions as a positive sign for Reliance's retail growth across categories and formats.