Transcript

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 oprating 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 . Iventure 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 Tradingw We Service was very exited with the results and er termines growthot profitot made risk ta off e n . n produ kers. We cing mov are ies . We d research o a lot of before st arting bu area , and siness in we have an place . W back-up p e work w lans in ith very g and if som ood peop ething go le , es wrong ,we try to take corr ective ste are not pe ge ws. have is, we The big advanta no worries ducts. So there are creating pro o r not . er it would succed about wheth they are all ers are smart and Consum finish the s and they want to priceconsciou go to a ey can.They don’t 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

without adequate system control and IT support . That’s why there was a huge Audit and adnormal losses in the system .And when they have started implement ion of SAP the time has gone for survival of Subhiksha .

Maharashtra FDA ,the

state government’s regulatory authority for food and drugs ,had asked Subhiksha to suspend operation of its warehouses at Bhiwandi (Mumbai)for 20 days as well as had cancelled 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 footballs ,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.