Thursday, March 19, 2009

What went wrong with Subiksha?

Recently, Subiksha retail store was in news for wrong reasons - they went down, closed down all their shops (1500 or so) and facing a crisis for survival. It would take some time to ascertain whether Subiksha can bounced back - but it is to take some more time !


Subiksha was started way back in 1997. They had 50 stores by mid 2000. They have grown to 1500 odd shops in 2008 across India. Turnover of the company was approximated Rs.2300 crore in 2008.

Retail industry operates on wafer thin margin of around 6-9%. Hence, operational efficiency could be a real winner.

What went wrong?

Simply put, asset liability mismatch. Meaning of it...explanation as follows:

One needs to spend certain amount as fixed cost (like rent, electricity, salary), one needs to have working capital for buying goods, storage, distrubition etc.... this can come with certain period of credit say 30days or so., but due needs to be paid regularly to avail credit facility.

One needs capital for expansion plan i.e from 50 stores to 1600 stores !

Promoter keeps negotiating for further capital., and rotate the money of various vendors, partners - at one stage goes out of steam and fail to meet the financial commitments !


  1. Yup I would for store expansion plans (size wise) as well as experienced staff. that is probably the major areas that they’d need to concentrate what made its peers do better.

  2. I'd also also it could become an soft target for companies like Walmart to enter India.

  3. Hi Sapna., welcome. I dont think subiksha's market share would tempt walmart's ambitions !

  4. True, but then as I said it would be an easy entry for stores alike who want to do something like that...anyways they are already in tie up with Bharati, but then again the possibilities are up ahead and I wont be surprised is something like that happens. :)