R Subramanian, managing director, Subhiksha Trading Services is unperturbed by the recent negative publicity his company has received. He dismisses them as ‘professional courtesies’ extended by those who cannot compete with his unique business model. Dismissing rumours about his selling out the company, he says Subhiksha is here to stay. In an interview with S Kalyana Ramananthan, Subramanian attempts to clear some of the confusions.
Do you plan to sell the 59 per cent promoters’ stake in Subhiksha?
No we will not sell. What Premji (of Wipro) bought was from ICICI Securities. We have not received anything in that.
Are you facing any cash crunch?
To the best of my knowledge we are the only retail chain that reports profit consistently. Last year on a turnover of Rs 2,305 crore we generated a net profit of Rs 41 crore. Attracting an investor like Premji, who is known for his thrift, only proves that our model is right and works in the long run. Indian retail is so competitive in trying to remain profitable that we would do well even outside India. In the next four to five years, you will find Indian retailers setting shops outside India.
There have been reports about creditors stopping supplies to you, particularly in the Delhi region. Your comments?
Until a couple of years back, more than 70 per cent of our purchases were being sourced from agents and the remaining portion directly from farmers. We have changed this model today where a majority of our purchase comes directly from farmers. This meant we had to close the books on several suppliers which led to differences during reconciliation of accounts. A couple of suppliers have decided to present their case to the media and they have been exaggerated. It is not affecting our operations.
You bought into Blue Green Investments with an intention of reverse merger to list Subhiksha. Why the elaborate process when the IPO route could have been considered?
We bought majority stake in this Madras Stock Exchange listed company for Rs 3 crore. Taking the IPO route would have proven more expensive. Cost of listing drove this decision and nothing else. A company with our track record will have no problem in getting SEBI clearance for listing.
Why are you planning to enter the consumer durable retail segment?
While margins are thinner in consumer durable market, we are confident because of the sheer size we are looking at. By June 2009 we will have 1500 outlets selling consumer durables spread over 2 million sq ft. We will buy from the existing multi-national brands like LG and Samsung and also look at Chinese and Korean products. Within three to four years, this business alone could be worth Rs 4,500 crore, assuming each outlet will bring in Rs 30 crore as revenues.
