IndiaRetailBiz

The last-ditch attempt of cash starved Chennai-based discount food, grocery, and telecom retailer Subhiksha to revive operations of its value retail chain appears to be becoming more and more difficult with every passing day. According to reports, counsel of its main lender ICICI Bank has told the Madras High Court, where many legal cases against the beleaguered company are currently being tried, that CDR (Corporate Debt Restructuring) can not be considered for reviving the company. The court is expected to award its judgment in the matter within a fortnight or so.

The statement of ICICI Bank assumes significance as it has come subsequent to filing of a ’scheme of arrangements’ under Section 391 of the Companies Act. Subhiksha wants the consortium of all its 13 lending banks led by the ICICI Bank to take a 50% hit on the amounts the retailer owes to its lenders. Subhiksha, according to the scheme of arrangements, is said to be agreeable to put in Rs 250 crore in operations of the company.

If the Court accedes to the Bank’s lates submission, it may become extremely difficult to revamp the working of the retail chain. The lending banks have already provided for most of their dues against the company in their books.

The retailer, it may be recalled, for last over six months, has been pinning its hopes on receiving Rs 300 crore in financial assistance from the consortium of lending banks to partly revive its operations. ICICI Bank is apart from being a lead bank in the consortium of lenders is also part holder of equity (23 per cent) stake in the company through its private equity arm I-Venture.

The financially troubled retailer, it may be recalled, was forced to shut down operations of all its 1600-plus stores across the country from January, 2009. Much of the Rs 870 crore received in debt from a consortium of 13 banks is believed to have gone in funding expansion of the company during 2008.

Subhiksha Trading Services Limited, the company which owns the now defunct retail chain, was founded and promoted by R Subrahamanyam, a local banker turned retailer. Apart from banks, the retail chain is also owing large sums of money to vendors, service providers, property owners, and workers, among others.