Decoding the mystery of MNCs pulling out of India

Several multinational giants have either exited or downsized their operations in India, citing factors like heightened local competition.

Holcim. Ford. Cairn. Daiichi Sankyo. And now Metro. These are some of the big names that have either moved out of India or have downsized their operations in the last decade. Heightened local competition, shifting global market priorities, new business models, accumulated losses, among other factors are some of the reasons why some MNCs pulled out from India, according to a news report on various news websites.

German wholesaler Metro, which had entered India 19 years ago with big hopes, and is now selling its local business to , said: “The Indian market has been undergoing an intensive transformation for several years, characterised by consolidation in trade and increasing digitalisation in wholesale as well. In order to keep pace with this dynamic development and to further drive the company’s growth, significant investments would be necessary.”

“We have chosen an alternative that opens a new chapter for Metro India. Metro is divesting Metro India to a strong partner who will be able to give the Indian business longterm economic and technological prospects,” said its global CEO Steffen Greubel in a communique to employees.

Eight years ago, France’s Carrefour closed down its wholesale outlets in India. The B2B segment (cash and carry) is a low-margin business and that’s a key reason why even other MNCs like Carrefour have exited from India, said analysts.

“Retail in India is increasingly getting consolidated in favour of much larger players like Reliance,” said Abneesh Roy of Nuvama Group. He added that kiranas, too, are facing tough competition and losing share to quick commerce, e-commerce and modern trade players.

The dynamics in India’s various sectors are changing with homegrown players having a dominant presence and MNCs’ having a reduced play. For example: the consumer mobile services business and cement industry. After Swiss major Holcim sold its India cement units to Adani, the top players in the sector are domestic companies.

J Sagar Associates partner Lalit Kumar said: “The exit of large MNCs is part of their business and commercial reasons and not regulatory and legal requirements in India.” Holcim had said that its India exit was to focus on green business. According to industry experts, some reasons behind decisions taken by a few MNCs to exit India, include the business model not aligning with the parent’s globally; poor margins; and, to top it, the brick-and-mortar business got deeply disrupted by online channels in a big way.

“Carrefour, Walmart and now Metro have exited India for different reasons, but it’s a fact that countries like India are outliers. While Walmart suddenly went in for a pregnant pause in expansions, and that led to a bit of stagnation, Carrefour wanted to be a pure retailer but it began in cash-and-carry, which did not fit in with the global plan and, therefore, it didn’t work out for them either. So their models in India did not conform with the global model, and that’s a key reason why some MNCs have exited,” said an industry expert.