monika.16a
Monika Sharma
hi
i m submiting project on brand failure on crystal of pepsi
thanks & regards,
monika sharma.
i m submiting project on brand failure on crystal of pepsi
thanks & regards,
monika sharma.
brand failure of crystal of pepsi
- Thread starter monika.16a
- Start date
Subikhshah
Subhiksha comes clean, admits to “cash crunch”; says “in pain, but not shutting down”
January 30th, 2009 • 5 Comments
Subhiksha, the Chennai-based small format, neighbourhood, discount retailer, which in the past couple of years had grown at a breakneck speed, after long last has admitted to be facing severe cash crunch.
In a lengthy e-mail sent to ET, the retailer has tried to come clean admitting that; “We mucked up ourselves. We have no reason to blame demand or consumers or markets (the product markets).”
Accepting that while the situation is painful, Subhiksha has assured that it will continue to operate, ”We are in pain but we are not shutting down.”
The food and and grocery retail chain, founded 11 years ago by R Subramanian — a first generation highly educated (IIT and IIMA) and talented banker (Citibank) turned retailing entrepreuner– until a few months ago was riding high on its growth story and was a subject matter of management discussions across the country. Not only the retail chain grew its retail network to 1,600-odd stores (most of which happened in the past two years), it also increased its sales turnover from Rs 330 crore in 2005-06 to Rs 2,305 crore in 2007-08.
However, as it happens with many growth stories, the retailer could not keep pace with its growth and got into liquidity trap as in the hope increasing its valuations, it kept postponing infusion of equity funds.
The retailer for quite some time has been putting up brave front and trying to cover up problems of delayed or non-payment of salaries, rents, and accounts payables by offering difficult to swallow explanations couched in complex management jargons.
The retailer has in the past not only blamed extraneous circumstances like global economic turmoil for its difficulties, but among others has also blamed audit querries, etc, to explain delayed or non-payment of salaries to staff; deployment of new software package (SAP) and new inventory management algorithm for depleting stocks on store shelves; and core vs non-core activity for closure or near closure of fresh food (fruits and vegetables) and pharmaceutical verticals. It is obvious even to a layman that all these problems were mainly an outcome of paucity of funds.
The retailer in the past has also tried to explain fast closure of its stores to renegotiation of rentals with landlords, though, one failed to understand as to why one had to close down the store to renegotiate the terms of lease agreements.In fact, based on reports emanating from various centres, it was obvious that the retailer was failing to make payment of overdue lease rents.
As has been pointed out in these columns earlier, Subramanyam was failing in managing the growth. Not because, he did not understand the importance of cash in growth, but he kept postponing his much talked about IPO, hoping against hope, that he would be able to operate with ever increasing supplier credits and loans from banks and private financiers. He thought that in the meanwhile he would be able to keep on increasing valuations of his company, based both on its size (no of stores) and reach (geographical) of his retail network.
The only visible external funding for the business came a few years ago in the form of equity capital issued to I-Venture (ICICI Venture Capital Limited), the venture capital arm of the country’s largest private bank. ICICI took 24 per cent stake in the company’s equity, which helped Subhiksha to expand its operations at a fast pace beyond the South (predominantly Tamilnadu) to Gujarat, Maharashtra, etc. Rcent purchase of 10 per cent equity for Rs 230 crore by infotech giant Azim Premji was of no help because it was bought by him from I-Venture. Promoters are currently holding 59 per cent of the equity, while 14 per cent should be with I-Venture and 10 per cent with with Azim Premji’s private equity arm.
Accepting paucity of equity as main reason for liquidity crunch, Subhiksha has said, ”Expansion without support of equity was the pain, and not stopping expansion when bank money was getting delayed was also a problem.”
Accepting also that most of the company’s growth came from borrowed capital, the retailer has come clean saying, ”We had expanded rapidly. Most of the growth was debt-led. We had built on a tiny equity base of just Rs 32 crore, and even including share premiums, the company had raised only a total of Rs 180 crore as shareholder funds.”
For the first time, perhaps, the retailer has also admitted that delay in payment of salaries has been on account of shortage of funds. It was otherwise trying to explain away the delays to pending audit objections against its employees. According to Subhiksha, “There are arrears on these (payment to employees), not because we do not want to pay, but because we can’t pay.”
We fervently hope that Subhiksha would soon be able to come out of its difficulties and will restart operations, albeit on a smaller scale, as there is nothing wrong with its business model.
Subhiksha has developed a good base of loyal customers, who should be willing to flock back to its stores once it brings its its operations on a normal level. Although, many of its 15,000-odd financially stressed employees would have found alternative employment, it should not find it difficult to retain some of them to manage its pruned operations, once their pending claims are settled.
About Subhiksha
Discount Stores – The Next Retailing Revolution In India (Part-II) A study on Subhiksha's supply chain strategy
Subhiksha's strategy revolved around maintaining low real estate costs, fixing furniture vendors, quick inventory turns and customer education. This article focuses on inventory management and customer education practices at Subhiksha.
Inventory
Subhiksha has a centralised purchasing system. This eliminates multiplicity of billings, which would occur if the stores were to make independent purchases. It buys directly from distributors who sell at only a small margin above the mill prices and from 150 odd manufacturing companies.
Subhiksha has 3 separate godowns for stocking Pharmacy products, unbranded groceries and branded FMCGs. It has a fleet of 10 tempos, which supplies its stores once a day. As the discount format requires holding costs to be at a minimum all the stores are connected in an intranet to facilitate inventory planning.
Subhiksha makes spot payments against delivery, which enables it to get cash discounts. The supplier helps in inventory –control and in return gets an improved cash flow.
Customer Education
Subhiksha helps the consumer make informed buying decisions. Smaller packs of products in established brands are usually less economical. However, promotional offers by leading brands usually price smaller packs at lower prices to induce buying. For example the gingely oil brand Idhayam was priced at Rs 14 for a 200 ml pack which works out at Rs 70 per litre while the 500ml was priced at Rs 36 which works out at Rs 72 per litre. Here, Subhiksha would inform buyers to purchase multiple packs of smaller quantities to save money. On products like tea, which have a nil tax on small packs and an 8 % tax on larger packs, the customers are encouraged to buy multiple units of smaller packs, which help them save money.
Thus, Subhiksha's strategy of having low real estate costs, quick inventory turns and informed customer buying has helped its meteoric growth. With a goal of having at least 40 stores in every city, Subhiksha hopes to become a Rs 1500 crore discount store chain by 2003.
Margin Free – The franchise model discount chain
Margin Free was registered as cooperative society in 1993 in Kerala and entered the supermarket business in 1994. Today, it has emerged as India's number one super market chain with 150 stores and a turnover of Rs 450 crores.
Margin Free purchases directly from manufactures at ex- factory price and sells at lower prices than the MRP, as it eliminates the margin accrued in the traditional manufacturer-stockist-wholesaler-retailer network. Margin Free has a consumer base of 6 lakhs and it sells them consumer cards at Rs 40 per year. Customers who buy this card get discounts on bulk purchases and also government subsidised products like Rs 2 per kg rice.
Margin Free uses its customer base as a bargaining power to strike discount deals. Any dealer who wants to set up a Margin Free store has to buy at least rupees one lakh worth of share of the main Margin holding company. This is however a small price to pay, as he is assured of a viable business and large discounts on purchases. Margin Free also gets an average credit of 20-22 days from suppliers, which it sells, on an average of 10 days thereby even earning a notional interest on its sales also. Its strategy has made it flush with funds which can further expansion.
Price Control
Margin Free takes extreme care while pricing the products through all its stores. It has employed software, which evaluates the price by minimising profits. Every store is computerised and utilises the software to determine the pricing. This helps in ensuring that the products are rationally priced.
Margin Free has found exceptional success in its scalable franchised model. It is now looking to upgrade to a central warehouse concept, which will help it manage growth further.
The success of Subhiksha and Margin Free indicate that the discount war will hot up in the coming months but it will be the customer who will emerge as the final winner.
R.Subramanian
'Subhiksha kept us in the dark'
BS Reporter / Mumbai February 24, 2009, 0:51 IST
ICICI Venture, which owns a 23 per cent stake in the beleaguered Subhiksha Trading Services, said its hands "are tied’’ as the majority owner and founder of the retail chain, R Subramanian, kept all investors in the dark on the troubles of the company and failed to submit audited financial details.
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ICICI Venture sold 10 per cent of the stake to PremjiInvest for Rs 300 crore in March 2008 even as Subramanain failed to submit financial details of the company. The ICICI Bank arm has a total exposure of Rs 106 crore to the retailer, whose operations are at a standstill. Subramanain owns 59 per cent of the retailer.
ICICI Venture refuted Subramanian’s claim that it had a golden share agreement or veto power. "We have only consent rights like any other investor,’’ Renuka Ramnath, Managing Director & CEO, ICICI Venture, told media persons today.
"As a responsible investor, despite being minority shareholders and not having management control, we are talking to all players concerned and trying to seek a possible solution which will be in the best interest of all, including the employees,” she said. However, the solution was contingent on "ICICI Ventures' understanding of the nature and extent of the problem, which a forensic audit would throw up," she said.
ICICI Venture has written to the Registrar of Companies seeking an inquiry into the operational, managerial and financial affairs of Subhiksha for the period commencing from April 1, 2007 till date. It is also seeking an independent audit and appointment of a credible firm to investigate the accounts of the retailer.
The board, comprising independent directors and representatives of ICICI Venture, before their resignation was presented with audited accounts till 2007. The retailer is yet to submit audited balance sheet for the period thereafter. Subramanian, however, in a statement claimed that the company's financials up to March 2008 have been audited based on which it paid tax.
The retailer for the year ended March 31, 2007 had shown a turnover of Rs 839.56 crore and a profit before tax of Rs 18.36 crore. The inventories for the period were Rs 279.32 crore and secured loans of Rs 245 crore. ICICI Venture alleged that Subhiksha through its presentations said that it was doing well and was aggressively pursuing a growth strategy which involved almost doubling the number of stores in two years from April 2007. It had said there were 1,300 stores at the end of March 2008 with a target to reach 2,200 stores by March 2009 and it had already crossed 1,620 stores by August 2008.
The retailer also acquired a Chennai-based non-banking finance company and planned to reverse merge Subhiksha with it in a bid to list and widen the investor base after the near collapse of the global and local stock markets.
But ICICI Venture was taken by surprise when Subramanian approached the company for Rs 50 crore liquidity support to stock up the stores, against pledge of shares. In October, ICICI Venture received legal notices with respect to outstanding payments and some of those were also marked to independent and nominee directors of Subhiksha.
This prompted ICICI Venture to conduct a field inquiry which revealed a different picture including low inventories and a much more severe problem than made out by Subramanian.
"We didn’t know what to trust and what was the real intention of the merger,’’ Ramnath said. At the board meeting held on November 22, 2008 the management was questioned on the financial aspects, including the inventory positions of Subhiksha. In this meeting the management admitted for the first time the seriousness of the problems.
The board then asked Subhiksha managing director to appoint KMPG to carry out an independent review of accounts, appointment of a CFO by Subhiksha, and complete the audit of accounts before December 31, 2008.
The management failed to implement any of the decisions, Ramnath said.
Subhiksha comes clean, admits to “cash crunch”; says “in pain, but not shutting down”
January 30th, 2009 • 5 Comments
Subhiksha, the Chennai-based small format, neighbourhood, discount retailer, which in the past couple of years had grown at a breakneck speed, after long last has admitted to be facing severe cash crunch.
In a lengthy e-mail sent to ET, the retailer has tried to come clean admitting that; “We mucked up ourselves. We have no reason to blame demand or consumers or markets (the product markets).”
Accepting that while the situation is painful, Subhiksha has assured that it will continue to operate, ”We are in pain but we are not shutting down.”
The food and and grocery retail chain, founded 11 years ago by R Subramanian — a first generation highly educated (IIT and IIMA) and talented banker (Citibank) turned retailing entrepreuner– until a few months ago was riding high on its growth story and was a subject matter of management discussions across the country. Not only the retail chain grew its retail network to 1,600-odd stores (most of which happened in the past two years), it also increased its sales turnover from Rs 330 crore in 2005-06 to Rs 2,305 crore in 2007-08.
However, as it happens with many growth stories, the retailer could not keep pace with its growth and got into liquidity trap as in the hope increasing its valuations, it kept postponing infusion of equity funds.
The retailer for quite some time has been putting up brave front and trying to cover up problems of delayed or non-payment of salaries, rents, and accounts payables by offering difficult to swallow explanations couched in complex management jargons.
The retailer has in the past not only blamed extraneous circumstances like global economic turmoil for its difficulties, but among others has also blamed audit querries, etc, to explain delayed or non-payment of salaries to staff; deployment of new software package (SAP) and new inventory management algorithm for depleting stocks on store shelves; and core vs non-core activity for closure or near closure of fresh food (fruits and vegetables) and pharmaceutical verticals. It is obvious even to a layman that all these problems were mainly an outcome of paucity of funds.
The retailer in the past has also tried to explain fast closure of its stores to renegotiation of rentals with landlords, though, one failed to understand as to why one had to close down the store to renegotiate the terms of lease agreements.In fact, based on reports emanating from various centres, it was obvious that the retailer was failing to make payment of overdue lease rents.
As has been pointed out in these columns earlier, Subramanyam was failing in managing the growth. Not because, he did not understand the importance of cash in growth, but he kept postponing his much talked about IPO, hoping against hope, that he would be able to operate with ever increasing supplier credits and loans from banks and private financiers. He thought that in the meanwhile he would be able to keep on increasing valuations of his company, based both on its size (no of stores) and reach (geographical) of his retail network.
The only visible external funding for the business came a few years ago in the form of equity capital issued to I-Venture (ICICI Venture Capital Limited), the venture capital arm of the country’s largest private bank. ICICI took 24 per cent stake in the company’s equity, which helped Subhiksha to expand its operations at a fast pace beyond the South (predominantly Tamilnadu) to Gujarat, Maharashtra, etc. Rcent purchase of 10 per cent equity for Rs 230 crore by infotech giant Azim Premji was of no help because it was bought by him from I-Venture. Promoters are currently holding 59 per cent of the equity, while 14 per cent should be with I-Venture and 10 per cent with with Azim Premji’s private equity arm.
Accepting paucity of equity as main reason for liquidity crunch, Subhiksha has said, ”Expansion without support of equity was the pain, and not stopping expansion when bank money was getting delayed was also a problem.”
Accepting also that most of the company’s growth came from borrowed capital, the retailer has come clean saying, ”We had expanded rapidly. Most of the growth was debt-led. We had built on a tiny equity base of just Rs 32 crore, and even including share premiums, the company had raised only a total of Rs 180 crore as shareholder funds.”
For the first time, perhaps, the retailer has also admitted that delay in payment of salaries has been on account of shortage of funds. It was otherwise trying to explain away the delays to pending audit objections against its employees. According to Subhiksha, “There are arrears on these (payment to employees), not because we do not want to pay, but because we can’t pay.”
We fervently hope that Subhiksha would soon be able to come out of its difficulties and will restart operations, albeit on a smaller scale, as there is nothing wrong with its business model.
Subhiksha has developed a good base of loyal customers, who should be willing to flock back to its stores once it brings its its operations on a normal level. Although, many of its 15,000-odd financially stressed employees would have found alternative employment, it should not find it difficult to retain some of them to manage its pruned operations, once their pending claims are settled.
About Subhiksha
Discount Stores – The Next Retailing Revolution In India (Part-II) A study on Subhiksha's supply chain strategy
Subhiksha's strategy revolved around maintaining low real estate costs, fixing furniture vendors, quick inventory turns and customer education. This article focuses on inventory management and customer education practices at Subhiksha.
Inventory
Subhiksha has a centralised purchasing system. This eliminates multiplicity of billings, which would occur if the stores were to make independent purchases. It buys directly from distributors who sell at only a small margin above the mill prices and from 150 odd manufacturing companies.
Subhiksha has 3 separate godowns for stocking Pharmacy products, unbranded groceries and branded FMCGs. It has a fleet of 10 tempos, which supplies its stores once a day. As the discount format requires holding costs to be at a minimum all the stores are connected in an intranet to facilitate inventory planning.
Subhiksha makes spot payments against delivery, which enables it to get cash discounts. The supplier helps in inventory –control and in return gets an improved cash flow.
Customer Education
Subhiksha helps the consumer make informed buying decisions. Smaller packs of products in established brands are usually less economical. However, promotional offers by leading brands usually price smaller packs at lower prices to induce buying. For example the gingely oil brand Idhayam was priced at Rs 14 for a 200 ml pack which works out at Rs 70 per litre while the 500ml was priced at Rs 36 which works out at Rs 72 per litre. Here, Subhiksha would inform buyers to purchase multiple packs of smaller quantities to save money. On products like tea, which have a nil tax on small packs and an 8 % tax on larger packs, the customers are encouraged to buy multiple units of smaller packs, which help them save money.
Thus, Subhiksha's strategy of having low real estate costs, quick inventory turns and informed customer buying has helped its meteoric growth. With a goal of having at least 40 stores in every city, Subhiksha hopes to become a Rs 1500 crore discount store chain by 2003.
Margin Free – The franchise model discount chain
Margin Free was registered as cooperative society in 1993 in Kerala and entered the supermarket business in 1994. Today, it has emerged as India's number one super market chain with 150 stores and a turnover of Rs 450 crores.
Margin Free purchases directly from manufactures at ex- factory price and sells at lower prices than the MRP, as it eliminates the margin accrued in the traditional manufacturer-stockist-wholesaler-retailer network. Margin Free has a consumer base of 6 lakhs and it sells them consumer cards at Rs 40 per year. Customers who buy this card get discounts on bulk purchases and also government subsidised products like Rs 2 per kg rice.
Margin Free uses its customer base as a bargaining power to strike discount deals. Any dealer who wants to set up a Margin Free store has to buy at least rupees one lakh worth of share of the main Margin holding company. This is however a small price to pay, as he is assured of a viable business and large discounts on purchases. Margin Free also gets an average credit of 20-22 days from suppliers, which it sells, on an average of 10 days thereby even earning a notional interest on its sales also. Its strategy has made it flush with funds which can further expansion.
Price Control
Margin Free takes extreme care while pricing the products through all its stores. It has employed software, which evaluates the price by minimising profits. Every store is computerised and utilises the software to determine the pricing. This helps in ensuring that the products are rationally priced.
Margin Free has found exceptional success in its scalable franchised model. It is now looking to upgrade to a central warehouse concept, which will help it manage growth further.
The success of Subhiksha and Margin Free indicate that the discount war will hot up in the coming months but it will be the customer who will emerge as the final winner.
R.Subramanian
'Subhiksha kept us in the dark'
BS Reporter / Mumbai February 24, 2009, 0:51 IST
ICICI Venture, which owns a 23 per cent stake in the beleaguered Subhiksha Trading Services, said its hands "are tied’’ as the majority owner and founder of the retail chain, R Subramanian, kept all investors in the dark on the troubles of the company and failed to submit audited financial details.
Also Read
News Now
Paper
Specials
- Markets end on a positive note
- Wkly Tech Analysis: Trend may remain down till March-end
- McNally Bharat bags Rs 57-cr orders from Hindalco
- Indian envoy to meet Victorian Premier this week
- Obama appoints Jhumpa Lahiri to arts committee
More
Also Read
News Now
Paper
Specials
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- Sena blinks, will not oppose Khan
- Modi raises the heat at meet
- SBI launches hard drive on software
- Yash Birla in talks to buy two ayurveda companies
- Tata Motors may reopen Nano bookings before December
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Paper
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- Q3 FY09 Results: Earnings Season
- Saving Satyam: Govt gets into action
- India-Pakistan Tensions: Fallout of Mumbai Terror Attack
- Your Money: Where to invest
- Market Crash: Global worries weigh
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ICICI Venture sold 10 per cent of the stake to PremjiInvest for Rs 300 crore in March 2008 even as Subramanain failed to submit financial details of the company. The ICICI Bank arm has a total exposure of Rs 106 crore to the retailer, whose operations are at a standstill. Subramanain owns 59 per cent of the retailer.
ICICI Venture refuted Subramanian’s claim that it had a golden share agreement or veto power. "We have only consent rights like any other investor,’’ Renuka Ramnath, Managing Director & CEO, ICICI Venture, told media persons today.
"As a responsible investor, despite being minority shareholders and not having management control, we are talking to all players concerned and trying to seek a possible solution which will be in the best interest of all, including the employees,” she said. However, the solution was contingent on "ICICI Ventures' understanding of the nature and extent of the problem, which a forensic audit would throw up," she said.
ICICI Venture has written to the Registrar of Companies seeking an inquiry into the operational, managerial and financial affairs of Subhiksha for the period commencing from April 1, 2007 till date. It is also seeking an independent audit and appointment of a credible firm to investigate the accounts of the retailer.
The board, comprising independent directors and representatives of ICICI Venture, before their resignation was presented with audited accounts till 2007. The retailer is yet to submit audited balance sheet for the period thereafter. Subramanian, however, in a statement claimed that the company's financials up to March 2008 have been audited based on which it paid tax.
The retailer for the year ended March 31, 2007 had shown a turnover of Rs 839.56 crore and a profit before tax of Rs 18.36 crore. The inventories for the period were Rs 279.32 crore and secured loans of Rs 245 crore. ICICI Venture alleged that Subhiksha through its presentations said that it was doing well and was aggressively pursuing a growth strategy which involved almost doubling the number of stores in two years from April 2007. It had said there were 1,300 stores at the end of March 2008 with a target to reach 2,200 stores by March 2009 and it had already crossed 1,620 stores by August 2008.
The retailer also acquired a Chennai-based non-banking finance company and planned to reverse merge Subhiksha with it in a bid to list and widen the investor base after the near collapse of the global and local stock markets.
But ICICI Venture was taken by surprise when Subramanian approached the company for Rs 50 crore liquidity support to stock up the stores, against pledge of shares. In October, ICICI Venture received legal notices with respect to outstanding payments and some of those were also marked to independent and nominee directors of Subhiksha.
This prompted ICICI Venture to conduct a field inquiry which revealed a different picture including low inventories and a much more severe problem than made out by Subramanian.
"We didn’t know what to trust and what was the real intention of the merger,’’ Ramnath said. At the board meeting held on November 22, 2008 the management was questioned on the financial aspects, including the inventory positions of Subhiksha. In this meeting the management admitted for the first time the seriousness of the problems.
The board then asked Subhiksha managing director to appoint KMPG to carry out an independent review of accounts, appointment of a CFO by Subhiksha, and complete the audit of accounts before December 31, 2008.
The management failed to implement any of the decisions, Ramnath said.
rohitmakhija
New member
i was looking for this.. thanx
.. hope i get to download it now
.. hope i get to download it now