Subhiksha: An Indian Retailer in Trouble

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

Abstract

The case examines the financial and business related problems faced by Subhiksha Trading Services Limited (Subhiksha), one of the leading retailers in India. Subhiksha, which was started as a discount store in 1997, was based in Chennai, India. Since September 2008, Subhiksha faced difficulties in operating its stores. The company had reportedly defaulted on its vendor payments which resulted in empty shelves on its stores. The employees of the retailer were not paid salaries since September 2008.

On January 31, 2009, Subhiksha admitted in media that it was facing a major financial crisis.

On February 11, 2009, following an attack on its stores and warehouses, Subhiksha announced that it was closing down all its 1600 outlets till May 2009. Although, the management of Subhiksha claimed that the financial problem was due to its inability to raise enough equity capital, analysts opined that the fact that the retailer rapidly expanded during the last three years and its poor supply chain management practices had contributed to its financial woes. The case details the events that led to the financial problems at Subhiksha. It also describes the Corporate Debt Restructuring (CDR) plan proposed by the bankers of Subhiksha to come out of the financial mess. The case ends with a discussion on the challenges that Subhiksha faces in the near future.

The case details the events that led to the financial crisis at Subhiksha and the reason behind it. It also attempts to analyze the Corporate Debt Restructuring (CDR) of Subhiksha. The case ends with a discussion on Challenges that Subhiksha could face in the future.

Issues

The case is structured to achieve the following teaching objectives

• Study the financial and business related problems faced by Subhiksha
• Analyze the reasons for Subhiksha's financial and operational problems
• Examine how rapid expansion funded by high debt can be risky business strategy
• Analyze the CDR plan proposed by the bankers of Subhiksha and debate whether it will be effective enough for bringing the company out of crisis

Contents

Introduction
The Indian Retail Industry
The Subhiksha Story
Subhiksha on Expansion Spree
The Trouble Begins
What Went Wrong?
The Restructuring
Exhibits

Keywords

Subhiksha Trading Services Limited, R. Subramanian, Business Model, Financial Crisis, Corporate Debt Restructuring, Loan Defaults, High Leverage, Expansion Strategies, Indian Retail Industry, Supply Chain Problems, Asset Liability Mismatch, Operational Loss, Grocery Retailing, Organized Retailing, Private Label Brands, Initial Public Offering, Default on Vendor Payments, Liquidation, Bankruptcy

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