The acquisition of Trinethra Super Retail would put the Aditya Birla group ahead of competition, including Reliance, analysts tracking the development said.
Trinethra is an Indian Value Fund supermarket chain based in Hyderabad.
They believe the buyout will help the group to consolidate its position before its actual foray into the retail sector.
"The Birla group can leverage the acquisition of Trinethra, a well established player, in its expansion in south India. The buyout will give the group a headstart among all the new entrants including Reliance that has already started its operations," retail analyst Susil Dungarwal said.
The group bought 90 per cent in Trinethra through Aditya Birla Retail - its unlisted retail arm - for an undisclosed sum, while the remaining 10 per cent will stay with India Value Fund.
Dungarwal believes the acquisition is just a part of the group's larger retail strategy.
"Trinethra may not fit perfectly into their (the Birlas') basket and not a match to the group. But given Kumar Birla's passion for quality, the supermarket may get a completely different look and styling," he said.
However, the group was not forthcoming on its plans. "We may enter larger formats also and have a pan-India presence. We are not eyeing any other acquisition for the moment," a group official said.
Despite the entry into the retail bandwagon of Reliance, Bharti, the Tatas and now the Birlas, smaller retail players are confident of their existence.
"Many new entrants are opting for inorganic growth. Smaller retailers confident of doing well and sustaining profits will not sell off. Only those who think they cannot compete with big players will move out," said Dippankar S Halder, CEO, Spinach - a food and grocery retail chain.
On smaller retail chains becoming the targets of the biggies, he said, "It depends on how big is your appetite. If you are satisfied with your wealth creation, you can sell off. Otherwise, you can stay afloat.
Analysts said the group would be able to leverage the retail experience gained through group companies - Birla Sun Life Insurance and Idea Cellular.
Birla group sources said Trinethra CEO Pranab Barua and MD George Thomas would continue to look after the affairs of the retail chain. The chain would maintain its southern focus for the time being, they added.
However, Aditya Birla Retail will have group finance officer Sumant Sinha as the CEO. The group has recently hired executives from Pantaloon's Food Bazaar and other retail ventures.
Trinethra is believed to have posted a turnover of around Rs 240 crore (Rs 2.4 billion) in 2005-06. It has 83 outlets in Andhra Pradesh, 26 in Bangalore and 15 in Chennai.
Some of its stores are coming up in Kerala, and it plans to enter several tier-II cities in the south.
The chain operates its stores under the Trinethra brand in Andhra Pradesh and Tamil Nadu and under Fabmall in Karnataka. It also has a format called 'Quality First' for commodities such as rice, wheat and pulses.
