MSH 1109 – ENTREPRENEURSHIP & SMALL

BUSINESS MANAGEMENT

PRESENTED BY :-

IMBE/4502/12 – NAVSHEEN

IMBE/4510/12 –ANUNAY ANAND.

Assign. On :-

The company was started by R. Subramaniam,

an IIM A & IIT Chennai alumnus in 1997

Subhiksha in Sanskrit means (prosperity)

“the giver of all good things in life”

Theme - Why pay more when you can get it

for less at Subhiksha?

Discount store at prices lower than other

retail outlets

500 outlets in early 2007

Set up 1,000 sq. ft. shops all across the city

Vision

“To emerge as the largest retailer in the food, grocery, pharmacy

segment in all the geographical regions we operate from.”

Mission

“To deliver consistently better value to Indian consumers , as guided

Subhiksha to deliver savings to all consumers on each & every item

that they need in their daily lives, 365 days a year without any

compromise on the quality of goods purchased.”

Open store for every two

kilometer in Chennai.

550 store by 2009 in Delhi.

Plan to expand in other part

of India.

Focused on the lower & upper middle class

Offer a better ambience than typical general

store

Prices are 8% less than the MRP

Inform customers about promotional offers

Store keepers help buyers in purchase

decision.

Multiple Products

Residential Locations

Availing branded products

PRODUCTS

Fruits

Vegetables

GroceryMedicines

Mobiles

In March 1997 opening of the first retail store in Chennai, with $ 1 million

initial investment.

March 1999 ‐ 14 stores in Chennai.

June 2000 ‐ 50 stores in Chennai, ICICI ventures joins Subhiksha.

June 2002 ‐ 120 stores in whole of Tamil Nadu.

June 2006 ‐ 420 stores in other big states in India namely Gujarat, Delhi,

Mumbai, Andhra Pradesh and Karnataka.

Feb 2007 ‐ 500 stores across country

Dec 2007 ‐ 1000 stores across India

October 2008 ‐ 1600 stores across India

In 2000, ICICI Venture invested in Subhiksha with 10%

stake at Rs15 Cr. & raised stake to 23 % by 2004

Subhiksha also raised a 15 Cr. debt from the market

2003 - Azim Premji took 10% stake from ICICI for Rs230

cr.

2004 – 2007 equity of Rs160 Cr., debt of Rs. 345 Cr. &

bridge loan of Rs.125 Cr.

2008- raised debt capital of Rs.600 Cr. from Enam

Securities Ltd, ICICI Ltd & Kotak Mahindra Bank

Expanding middle & upper classes has played a big role in the expansion of existing modern format stores & entry of new ones

Attract not the top end customer but the aam aadmi

Target Market for different products:• Grocery & Vegetables – Common man & specifically

Housewives

• Mobile – Youth

• Medicines – Old Age People

TV Advertisements

Price Challenge

Campaign

Hoardings

Celebrities for promotion

EDLP approach

“Subhiksha” Card

EDLP – Everyday Low

Pricing Approach

Prices below the MRP

Product Subhiksha MRP

Rice 5 kg Rs.102 Rs.119

Britannia

Marigold 400

gm

Rs.21 Rs.24

Sugar 1 kg Rs.15 Rs.17

Brand Name Outlet Type Level of

Operation

Spencer’s Supermarkets National

Reliance Fresh Supermarkets National

Food Bazaar Supermarkets National

More Supermarkets National

Food World Supermarkets South India

Niligiri’s Supermarkets South India

Fabmall Supermarkets South India

Spar Supermarkets South India

0

100

200

300

400

500

600

700

800

900

1000

Subhiksha RelianceFresh

FoodBazaar

FoodWorld

Spencer'sDaily

2004 142 0 23 94 0

2005 150 0 37 46 0

2006 450 22 63 55 140

2007 1000 325 110 70 250

2004

2005

2006

2007

Failure of Subhiksha…..

Un-mindful expansion spree across the countryThe company was thinking of going for an IPO in

2007 but shelved it in view of “Uncertain Market Conditions”

No consolidation- Tried to be first in every townPoor inventory managementPrivate LabelsOperations came to a standstill due to non-

payment of salaries, huge debt burden & arrears to suppliers

Major competition by stores like Big Bazaar, Spencer’s etc

Spending the debt raised money

Lack of Transparency

Liquidity crisis

Poor Management

Government Intervention

Lack of HR policies & staff

Wrong Assumption that telecom sector is

sound to invest

Over Confidence & Aggressiveness

March 2009- Undergone a corporate debt restructuring

exercise, with lenders reviewing its books

Subhiksha’s subsidiary Cash and Carry proposed

scheme

50% waiver and amalgamation with Blue Green

Construction & Investments

Reopened as Subhiksha Rice Wholesaler

Madras high Court and creditors against the reopening

Petition filed by Kotak Mahindra & ICICI Ltd.

Debt burden

Tried to re open to fast to soon without clearing dues

Chose debt over equity for funding

Liquidity crunch

Strengths

Bulk purchase.

Lesser price than other

Targeted middle class people

Strong supply chain management

Weakness

Lake of adequate resources

Less attractive shop

Lack of employees

Threats

Wall mart is coming

Big bazaar expanding its outlets

Opportunity

Planning in semi metro city.

Aimed to open 550 new shop by2009

Specializations in products

Improved stores

• Better Store Design & Interiors

Better management with suppliers

Raise funds in a systematic manner

Shut stores with low sales

Focus on quality instead of quantity

Invest more in R&D

• Study target market well

Carry sales check on regular intervals

Improve quality & after Sales service

Choosing Equity over Debt to be risk free

New Store Format

Open stores in malls or shopping complexes to increase

footfall

Diversify in products which are profitable

• Products for which overall industry performance is

good

• Products which are related to the current product basket

Customer Relationship Management

Better working conditions for employees

Never be too aggressive with your expansion

and growth plans unless you have enough

finances.

Know your competitors inside out.

Understand your Strengths and Weaknesses

and use them efficiently to gain and learn.

Debt Capital is the most risky source of

finance.

“We are a golden egg laying duck, we are

in trouble. We need their (bankers and

lenders) support and upon getting it we

will restart operations and repay all debt. It

is not easy, but we have to make it

happen.”