Subhiksha plans major retail initiatives outside Tamil Nadu

Padmaja Shastri in Chennai

Chennai-based Subhiksha is now planning to venture beyond Tamil Nadu and enter four other states — Karnataka, Andhra Pradesh, Maharashtra and Gujarat — and open a total of 500 stores in the next three years. The grocery retail chain expects to become a Rs 1,500-crore company by the end of 2004, from the current turnover of Rs 150 crore. It is also planning to expand the number of outlets in Tamil Nadu to 135 by the end of this year from the current 104 across 23 cities and towns in the state — 60 of which are in Chennai itself.

The retail chain will open its first store in Bangalore in October this year and by March 2002 it will have a total of 35 stores across the city, according to Mr R Subramanian, managing director, Subhiksha. It plans to open 75 stores across major cities and towns of Karnataka — Bangalore, Mangalore, Mysore, Hubli, Dharwad etc — by the end of next year. In Andhra Pradesh, starting with Hyderabad in February-March 2002 the retail chain plans to have 125-130 stores in the next 18 months. The other cities and towns the company is looking at in Andhra include Visakhapatnam, Vijayawada and some parts of coastal AP. After that it will go to Maharashtra and Gujarat. The retail company has no immediate plans of entering Kerala. In Tamil Nadu, it plans to go to places like Tiruneveli and Tuticorin where it was not present before.

The retail company would also expand the number of its warehouses to 15 across the five states from the present two in one state and will employ around 8,000 people over three years. Its current staff-strength is around 1,500.

All the 500 stores would be company-owned. According to Mr Subramanian, this is necessary to maintain uniformity and consistency which franchising would not ensure. However, the cost of expansion would be one-fifth that of other supermarkets and FMCG outlets as the company only leases properties and does not buy them, he said. Also, the stores of the retail chain concentrate on functionality rather than ambience and frills.

The expansion requiring an investment of around Rs 100 crore would be funded from internal accruals, credit lines from its banks/suppliers, private equity participation and venture capital funds.

“We are looking at large investors like financial institutions or funds promoted by financial companies which are ready to take 20 to 25 per cent stake in the company”, said Mr Subramanian. The retail company will not go public before it achieves a turnover of Rs 1,000 crore, he said. Currently, only 10 per cent of the company’s equity is diluted to a leading domestic venture capital fund.