Subiksha's Journey from zero to hero and hero to zero

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Information about Subiksha's Journey from zero to hero and hero to zero
Business & Mgmt

Published on November 30, 2013

Author: MastermindIndia2010



Success Story of one of the largest Indian Retail Company and the causes of failure for the same

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Objective: To share key learning insights of Subhiksha Journey from Zero to Hero and vice versa

Giver of all good things…

Author’s Curiosity: Subhiksha use to be at every street corner News: 100 new stores being opened News: Rejected buy offers by reliance “Yeh kaun hai jo haste haste reliance ko na bolta hai…”

Mr. R. Subramaniam Down to earth personality Father was in Government Service IIT & IIM Alumnus Resign Citibank ? “Citibank was Golden Cage” Background • • • •

R. Subramaniam Before Subhiskha 1989-90 1991 1994-95    1996  Enfield – Mr. Vishwanathan Vishwapriya Financial Service Vishwapriya Growed & Boomed Golden Pot they’ve lend nearer to 1500. cr. Market Crashed - Unused Money & Staff Invested in Land – It fetched returns – But meaningless work What NOW? Software or Retail?

1997 Subhiskha Started Organized Retail Store Concept Model – The Indian Store

Subhiskha Journey 1998-99 2000 2002 2003 2005  Subhiskha struggled a lot with 10 store 50 store- ICICI VC 10% stake at 15. cr. (Expand to 120)  Nightmare -Organization & System were keeping pace  Streamlining all the Business Process Expansion plans for Guj., AP, Karnataka, Mumbai & Delhi

2007 1,000 Stores… By end of 07 they arouse to 1381 Stores. With Sale Volume 2500 Cr. 2.5 % Profits Vision for next year 2000 Stores.

Key Challenges During Growth Phase: • Initially they hadn’t hire anyone more retail industry because they want to do they retail in their own style • First two years were tuff and struggle some. • During Expansion – Managing High qualified people was a challenge • Chaos – It’s Fun • Initial 50 store were tuff than next 1000 stores because their base was zero at beginning, they were learning new things each day – Progress Company

Expansion Magic After 7-8 years they’d 150 Store after 2 more years more 1000+ 1. Readiness of Market to absorb you 2. Readiness of Market to finance you

2008 It was announced that the company would be investing 500 cr. To increase number of outlet to 2000 across the country by 2009

Critics? Was the target too aggressive looking at the fact that the company could only start 150 store in initial 9 years in Business.

Invested 230cr. For 10% stake from ICICI

Subhiksha Collapsed ’2009

It was a chain of 1600 Stores that collapsed To raised money they’ve made: • Fake bills • Fake inventory • And fake company to which money was transferred

The Satyam of Indian Retail Industry

What actually happened with Subhiskha? • Rapid Expansion without consolidation and focus • Correct format & wrong strategy or correct strategy & wrong format (Store aren’t supermarket) • Dangerous intention to become conglomerate as fast as possible(Like of Satyam) • Economic Slowdown • Slow response to crisis( Lack of Crisis Handling Skills)

What actually happened with Subhiskha? • Debt-Equity ratio was wrong since expansion began. • Accelerator of company depends on the debt and on working capital. • Company kept hiring more and more against which condition was such that it wasn’t able to pay existing employee.

What they might have done? • • • • Efficient Inventory Management Scaling Supply Logistic Management (Empty Selves) Calibrated expansion plans Mr. R. Subramaniam didn’t diluted his stake and kept raising secured and unsecured debts • Expansion should have been delayed once they had started facing such issues • Monitoring process that have altered them for draining working capital • Expansion should not be made at the working capital

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