Subhiksha: An Indian Retailer in Trouble


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : BSTR333 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

International Business / Globalization
Case Length : 15 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note : Not Available
Organization : Subhiksha Trading Services Limited
Industry : Retail
Countries : USA

Abstract:

The case examines the financial and business related problems faced by Subhiksha Trading Services Limited (Subhiksha), one of the leading retailers in India. Subhiksha, which was started as a discount store in 1997, was based in Chennai, India. Since September 2008, Subhiksha faced difficulties in operating its stores. The company had reportedly defaulted on its vendor payments which resulted in empty shelves on its stores. The employees of the retailer were not paid salaries since September 2008.

On January 31, 2009, Subhiksha admitted in media that it was facing a major financial crisis.

On February 11, 2009, following an attack on its stores and warehouses, Subhiksha announced that it was closing down all its 1600 outlets till May 2009. Although, the management of Subhiksha claimed that the financial problem was due to its inability to raise enough equity capital, analysts opined that the fact that the retailer rapidly expanded during the last three years and its poor supply chain management practices had contributed to its financial woes. The case details the events that led to the financial problems at Subhiksha. It also describes the Corporate Debt Restructuring (CDR) plan proposed by the bankers of Subhiksha to come out of the financial mess. The case ends with a discussion on the challenges that Subhiksha faces in the near future.

The case details the events that led to the financial crisis at Subhiksha and the reason behind it. It also attempts to analyze the Corporate Debt Restructuring (CDR) of Subhiksha. The case ends with a discussion on Challenges that Subhiksha could face in the future.

Issues:


» Study the financial and business related problems faced by Subhiksha.

» Analyze the reasons for Subhiksha's financial and operational problems.

» Examine how rapid expansion funded by high debt can be risky business strategy.

» Analyze the CDR plan proposed by the bankers of Subhiksha and debate whether it will be effective enough for bringing the company out of crisis.

Contents:

  Page No.
Introduction 1
The Indian Retail Industry 2
The Subhiksha Story 4
Subhiksha on Expansion Spree 5
The Trouble Begins 6
What Went Wrong? 9
The Restructuring 10
Exhibits 12

Keywords:

Subhiksha Trading Services Limited, R. Subramanian, Business Model, Financial Crisis, Corporate Debt Restructuring, Loan Defaults, High Leverage, Expansion Strategies, Indian Retail Industry, Supply Chain Problems, Asset Liability Mismatch, Operational Loss, Grocery Retailing, Organized Retailing, Private Label Brands, Initial Public Offering, Default on Vendor Payments, Liquidation, Bankruptcy

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