SUBHIKSHA-A saga of ups and downs

LOVELY PROFESSIONAL UNIVERSITY

TOPIC-SUBHIKSHA –a Sage of ups and downs
subject-discussion on current affairs
name-aditya keitan
programme name-bba 1st sem
programme code-128
reg.no.-10903275
roll no.-rt1909b37

submitted to- jaspreet kaur

Content –subhiksha –a saga of ups
and down
1. WHAT IS SUBHIKSHA?
2. Entering into the retail scenario 10
year ago
3. First store- Establish in chennai
4. The Expansion of the stores
5. Cut Price Strategy
6. The Triumphant Journey Of Subhiksha
7. Risk In Retailing And Expansion
8. Turn Down at Subhiksha
9. Raising new competitors
WHAT IS SUBHIKSHA?
A literal translation of the

Word subhiksha means ‘one that gives all good things in

life’ This vision was started in India about 10 year ago
by Mr. R. Subramaniam .The journey from a single small
store in chennai to about 760 stores in 10 years has
been phenomenal growth for the company in India . This
made subhiksha India’s largest chain of retail store (in
terms of number of stores)
 Entering into the retail scenario 10
year ago
 The history of subhiksha dates back to year 1997 , when Mr. R
Subramanian thought of idea of entering into retail industry in
India . Back then in Indian Retail industry was almost a nonexistent
one .India characterized based by small mon and pop retail stores
known as “KIRANA” stores .

 Subhiksha felt that as India was growing

and so was a middle class .They realize
that if they have to volumes then the top
end consumer will not be the target ,and
so they chose to focus on the growing
middle class income consumer s generally
referred to as the “aam admi”
The logo shown below of subhiksha portrays that it’s the right
of an average Indian to save money and it’s subhiksha that
helps him in achieving this

Subramanian wasn't thinking this big when he kicked

off Subhiksha-a retail value chain in 1996. In fact, he
wasn't even thinking retail when he passed out of IIM
Ahmadabad in 1989. After a two-week stint at his first
employer Citibank, Subramanian joined his mentor
(late) S. Vishwanathan, who then ran Enfield
Industries.
At Enfield, Subramanian helped professionalize a
hitherto family-run set-up and rope in Eicher as a
buyer. After working for two years at Eicher, he
started
his first company called Viswapriya, and made profits
up to 25 crores, until the share market collapsed in
1995.
First store- Establish in chennai
In the year ,1997 Subhiksha opened
its first store at thiruvanmiyoor in
Chinnai with an investment of
around Rs 4-5 lakh, with the theme,”
“why to pay more when you can
Get it for less at subhiksha.”
This was about a 1500 sq feet
big store . The size of the store
was relatively bigger then the
size of a local mom and pop
store in India But was smaller
than that of the major Org
-anize players in the retail
market like Big bazar etc
The Expansion of the stores:
 By march 1999, Subhiksha started expansion rapidly . From 14
stores , it was expanded . From 14 stores , it was expanded to 50
stores by june 2000 . In the next two year , it had 120-130 stores
Tamilnadu .They decided to look at every part of India which is
signicantly literate and is a significant consumption market .
Telecom companies are their role model. They employed capable
regional managers and expanded. In 2004-2005 , they decided to
have 420 stores in places like Gujarat , Mumbai , Andra , and
karnataka , by 2006.In 2005 , Subhiksha started recruiting people
in various regions .

Subhiksha till 2008-09 was oprat-

ing over 1.500 supermarket stores
across more than 100 cities selling
food , grocery ,drugs , and telecom
products across India.
Cut Price Strategy
 Opening a chain of no-frills stores-no air condition-ing, no
fancy lighting, and no touch and-feel experience (customers
have to ask for products at Subhiksha stores)-was a
deliberate strategy. Shops are located not on the main road,
but just off it, to take advantage of vastly lower rentals. The
catchment area of customers is rarely beyond a two-km
radius, since its customers usually come on two-wheelers or
on foot.
 The Triumphant Journey Of
Subhiksha:
Until little over three years ago,
Subhiksha was only a local player
with 150 stores (sep 2006)
operating mainly in tamilnadu . The
retailer begain growing rapidly out
side the state ,soon after infusion of
private equety capital by I-venture ,
the venture capital arm ICICI . I-
venture took 24% stake in the
company’s equity which until then
was primerily held by Subramanian
and his associates .
Riding on the back of rapid
expansion , Subhiksha tern over
grow from Rs330 crore to Rs4,300
crore in year 2000-2007
And looked for rising ots tern over
to Rs 4,300 from 2,300 stores
Risk In Retailing And Expansion
 R subramanian ,Founder , Promoter and Managing director of
Subhiksha Trading
We wService was very exited with the results and
ere not m
termines growth nooff ade risk t
t prprofit .
oducing m akers. We
research o vies . We are
before st do a lot o
area , and a rt ing busin f
we have ess in an
place . W b a ck-up pla
e work w ns in
and if som it h very go
ething go od people
es wrong ,
take corr ,we try to
ective ste
g e p
w s
e. h a v e is , w e are not
The big advanta a re no worries
d u c ts . S o th ere
creating pro cc e d o r not .
er it w o u ld su
about wheth
e rs a re sm a rt a n d they are all
Consum t to finish the
s a n d th ey w a n
priceconsciou ey d on ’t go to a
e y ca n .T h
work as fast as th fun.
provision store for
However, as it happens with many growth stories , the retailer
could not keep pace with them its growth and got into liquidity
trape as in the hope increasing its valuation ,it kept posting posting
infusion of equity funds. Same case is with Subhiksha
Now, we have the case of Subhiksha which is
battling for survival. Subhiksha which was
started with 1 store in 1999 has grown to
more than 1,500 stores by the end of 2008-9.
Its founder R Subramanian is a IIT Chennai
and IIM Ahmadabad alumnus. That the
best combination of pedigree from India there
can every be. Subhiksha has ICICI Ventures
and Wipro’s Aziz Premji as its investors.
Everything seems to be in the right place.
What could possible go wrong?
Turn Down at Subhiksha
The management has committed some eventual
mistakes which has led the company towards the
downward position. The first and big mistake
committed by the management of subhiksha is
expanding the number of stores rapidly without
sufficient funds in hand. They thought of raising
equality
during September -2008
but the things had gone too
far before they woke up .The
global markets were started
collapsing and there were no
possible chances of raising
Funds
Consequently , in the following month (October,2008) the
company ran out of enough funds to run the organization.
Thereafter ,Subhiksha has been continuously besieged by a set
of problems from all side .

1> Subhiksha Trading Services has come under fire from

television channels for not clearing advertising dues that run
around Rs 8 crore.

2> Subhiksha is belived to owe

Rs 35 crore against goods ,
RS 8 crore against wages , and
Rs20 crore against lease rents .
The company ,according to the
report ,is also carrying a debt of
Rs700 crore at an average interest
cost of 12 % annum
 Expansion of stores Maharashtra FDA ,the
without adequate state government’s
system control and IT
regulatory authority for
support . That’s why
there was a huge Audit food and drugs ,had
and adnormal losses in asked Subhiksha to
the system .And when suspend operation of its
they have started warehouses at Bhiwandi
implement ion of SAP (Mumbai)for 20 days as
the time has gone for well as had cancelled
survival of Subhiksha . licences of three of its
vender , charging that
they had failed to
maintenance health and
hygiene norms as
prescribed by the
regulator
Many wholesale suppliers in Azadpur subzi
mandi, or vegetables to subhiksha’s outlets in
the National Capital Region(NCR) surrounding
the national capital. This comes in the wake
of the company holding up payments for two
to six months against normal credit period of
one month
They were paying huge rentals for these
stores ,which was a huge drain on the
company’s finances .There are huge frauds
while entering in to rental agreement by their
own management people .There was no proper
check and control on this cost though this is a
very crucial part to defeat competitors and to
gain profitability in future .
This coupled with less
than –expected foot-
balls ,drove the
operational costs to
unsustainable levels.
The wrong assumption that telecom segment
is a sound ,and profit making segment .The
CEO never looked into system losses arise
from telecom .Subhiksha stores always sell
handsets at below DP while its benchmarking
is to match DP. No control on inventory of
mobile accessories and there stock value and
were unable to circulate the working capital.
Raising new competitors
Thus sinking into unrepaired conditions subhiksha has to
compete with high profile competition like RPG ,
Reliance retail , Future Group , etc.
Reliance set up 700 new retail shops with ,almost at the
rate of one store per day.
Future group open new no frills discount retail chain
called KB’s fair-just similar to Subhiksha.
Reliance fresh stores,
Reliance food on the other hand is high-end in terms of
display, ambiance and size.
Walmat entered into Indian market
Birla group new retail stores-more
Etc some small local retail stores
The raise of company thus gradually started sinking
down step and now stands on the stage of collapse.
The management frankly admits that their over
confidence and aggressiveness are the main
reasons for their loss.
They should have gone for
an JPO when the things
were well and good to
prevent such downfall.
If they had respond in right
time they wouldn’t have been
put though such bad condit-
-ion.