The Hindu Business Line : Discount retail chain Subhiksha plans IPO — Proposes to roll out stores across the country soon

Expanding horizon
Plans 80 stores in Hyderabad, 56 in Bangalore, 80 in Gujarat, 180 across Mumbai and Pune.
The NCR region to have 145 stores.
Subhiksha is also changing its format in the Tamil Nadu market

Chennai , Feb. 23

, Discount retail chain Subhiksha is planning an initial public offering to fund its frenetic pace of expansion. The size and timing of the issue is yet to be decided, indicated Mr R. Subramanian, Managing Director. "Not doing an IPO is not an option anymore and it's just a matter of time," he told Business Line.

The chain, in which ICICI Ventures has a 24 per cent stake, has set itself a punishing schedule to roll out Subhiksha stores in all regions. When asked, Ms Bala Deshpande, Director, Investments, ICICI Venture, said the retailer could look at an IPO sooner than later, perhaps in the "next six months."

Eighty stores are planned for Hyderabad, 56 in Bangalore, 80 in Gujarat across Ahmedabad, Vadodara, Surat and Rajkot, and 180 stores across Mumbai and Pune. It plans 145 stores in the NCR region, while Kerala is also on the radar with 74 stores being planned there. And 95 by year-end in Kolkata as well. The chain, said Mr Subramanian, expects to have a bulk of these stores up and running in the next few months.

All stores would have an average size of 1,800 sq ft. Subhiksha is also changing its format in the TN market where it began operations. It has planned a hybrid model where it is setting up display counters for self-service, apart from its existing service where customers feed in orders into a computer and products are supplied from a warehouse.

Subhiksha will operate each region as a separate business unit with its own business head of operations. The chain has roped in top draw talent from across industries to take over as regional heads. Mr Abhijeet Sanyal from Boots Piramal has joined as the Mumbai unit head, Mr Atul Joshi, ex-Asian Paints/ Airtel, as the Delhi head; Mr V. Nagaprasad, Coke's former Bangalore unit head will head Karnataka; Mr Sanjay Sachdeva, ex-Cadbury/ Frito Lay will head the Gujarat unit, Mr Vinod Karnam, ex-Berger Paints/ Marico as the Andhra head; Mr Ravi Ganesh, earlier with Titan and Coke, will take over as Pune unit head while Mr Pramit Bhargava, ex-HLL/ Motorola will spearhead the direct-to-home business in Mumbai. "The company has made sure there is the right balance of people to sustain current operations and its expansion," says Ms Deshpande.

Resources for the expansion were not a constraint at the moment, said Mr Subramanian. While ICICI Ventures has invested Rs 50 crore in the company in two tranches for its 24 per cent stake, the promoters, comprising Mr Subramanian and associates, recently pumped in Rs 35 crore equity for the expansion. Subhiksha has also availed of a term loan of Rs 70 crore.

The company, he said, currently had a net worth of Rs 105 crore and would end FY '06 on a turnover of Rs 330 crore, all of it from the TN operations. He expects the chain would end FY '07 with sales of Rs 1,000 crore when stores in other regions start up. It would also be a first full year of operations for the nationwide chain when it would have at least 1,000 stores in operation.