IndiaRetailBiz

“If you have to stand out in the crowd and draw customers, you need to give value to the customer. At Subhiksha, we provide value to the shopper,” R. Subramanian, Promoter, Subhiksha.

Subhiksha, the Chennai-based, no-frills, deep discount, supermarkets, retail chain, which now occupies about a million sq.ft. of space and is spread across five states, has achieved the distinction of setting up its 1,000th store in October, 2007. Subhiksha is currently operating within fruits & vegetables, grocery, pharmaceuticals and telecom space.

This feat, first among all retail chains in the country, has taken 10 years of sweat and toil for banker turned retailer R. Subramanian, who founded his first Subhiksha store at Thiruvanmiyur in Chennai in March, 1997.

Having crossed the magic number of 1,000 stores, Subhiksha has now set its eyes on tripling the number of its stores to 3,000 in the next 30 months, or by early 2010, says a Business Standard report. Meanwhile, Subhiksha wants the tally of its stores to go up to 1,500 by June, 2008. This would entail at an investment of Rs. 300 crore.

The magic number of 1,000 stores holds special significance for the retail chain’s promoters as they had decided to consider going to public for raising further capital resources only after crossing this milestone.

Apart from promoters, Subhiksha is partly (24%) owned by ICICI Venture Capital Limited. Subhiksha has planned to go to public for raising capital through IPO by March, 2008. Subhiksha, which requires about Rs. 900 crore for its expansion (3,000 stores), is expected to dilute 10% of its business valuation estimated at around Rs. 3,500 crore, through public offering of its shares at premium. This will bring down promotors’ holding in the company to 60%.

Currently, there is a great appetite for public issues in the retail sector. This, among others, was reflected during recent IPOs of Vishal Retail and Koutons. Notwithstanding the lukewarm, and many times hostile, attitude of policy makers for this sector, listed companies with retailing theme like Pantaloons, Shoppers’ Stop, Trent, and even Reliance where retail is only a small part of the total business, are commanding high earning multiples from savvy investors.

While, most retail chains are competing to set up largest, and glitziest retail formats, Subhiksha has remained steadfast in its philosophy of creating a chain of plain, simple, non-glossy, functional and small, stores. It goes to the credit of Subhiksha that many big retailers like the Future group have also begun looking at no-frills, non air-conditioned chains as one one of the formats for their retail expansion strategy.

Subhiksha has made good use of its ‘Every Day Low Prices (ELBS) strategy, which has already caught the imagination of its customers.

Since the very beginning, Subhiksha has focussed on city-centric cluster strategy. It would rather like to focus on a city with larger number of stores than on spreading its efforts too thin across a large territory.

“As Subhiksha already has the largest reach across the country, most of the stores will come up in the existing segments of the market. Some outlets may be opened in newer markets but the aim will be to increase presence in all the current markets,” said Subramanian, while speaking about his strategy for future expansion.