Subhiksha: An Indian Retailer in Trouble
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Case Code: BSTR333 Case Length: 15 Pages Period: 2008-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Subhiksha Trading Services Limited Industry: Retail Countries: India Themes: Growth Strategy, Operations Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Subhiksha Story
The history of Subhiksha dates back to the late 1990s. In March 1997, Subhiksha was founded by Subramanian and its first retail store was started in Tiruvanmiyur, Chennai, a city in the southern state of Tamil Nadu, India. The word 'Subhiksha' was taken from the Sanskrit word, 'Subhiksham' which means 'Giver of all good things'. Subhiksha was started with its focus on value for money...
Subhiksha on Expansion Spree
From 2004 onward, Subhiksha changed its earlier strategy of consolidation and started expanding rapidly. Subhiksha, which till then, had been a Chennai-based retailer, wanted to capitalize on the rapid growth of the Indian economy. From early 2006 onward, Subhiksha also changed the service format in its stores. It started what it called a 'hybrid model' where it displayed products for self service in addition to its earlier model...
The Trouble Begins
Toward the end of September 2008, Subhiksha asked for a Rs. 500 million loan from I-venture. According to I-venture, the retailer said this loan was required to address a short-term liquidity problem. The management did not inform I-venture about the true financial condition of the company...
What Went Wrong?
Analysts blamed Subhiksha for its rapid store expansion strategy for which it had hired many sales personnel. This had resulted in huge cash outflows. Although the company was able to increase its turnover, its expansion was completely funded by debt...
The Restructuring
On February 24, 2009, I-venture announced that it was working together with all shareholders including Zash Investments Limited to revive Subhiksha. Ramnath said, "We would have our own limitations, because we are not promoters or managers...
Exhibits
Exhibit I: Key Players in India's Grocery Retail Sector (March 2007)
Exhibit II: Logo of Subhiksha
Exhibit III: Advertisement of Subhiksha
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