Subhiksha Trading plans Rs 300 crore expansion

To double retail network to 1,200 stores in FY08

Chennai-based discount retail chain, Subhiksha Trading Services Ltd, is getting ready to launch its second phase of expansion in the country. It plans to expand its retail network to over 1,200 outlets during the year 2007-08 across the country involving an investment of Rs 300 crore.

Said R Subramanian, managing director, Subhiksha, "We have been working for over a year now to achieve the present status. We want to be the major player in the country's organised retail industry. We are looking at all key markets in major cities for expansion."

He said the company would finalise the detailed expansion plan in the next one month. The company's first phase expansion, which also involves an investment of Rs 300 crore, will be completed by the end of the current fiscal.

The company, which claims to be the largest player in the organised retail industry in India, currently has 520 stores and will end the present fiscal with 600 stores.

In its second phase expansion, the company aims to enter into new states like West Bengal, Kerala and further consolidate position in Delhi, Maharashtra, Gujarat, Andhra Pradesh and Karnataka.

Its Mumbai store would be opened next month, which would be followed by a store in Pune, he said.

Subhiksha aims to raise fresh capital required for the expansion. At present, it has equity funding from ICICI Venture, which has a 24 per cent stake in the company. The average size of its stores will be about 2,000 sft and needs an investment of about Rs 50 lakh per store.

"In addition to our existing investors, who are interested to invest further in the company, we are also looking at new investors to raise funds for our expansion," Subramanian told Business Standard.

Subramanian said the company also plans to sell telecom products like mobile handsets, accessories and services in these stores, in addition to its current product range of groceries, fruits, vegetables and fast moving consumer goods (FMCG) and medicines. It offers 10 per cent discount on all the products.

On a trial basis, it has just started selling telecom products in Delhi and will introduce across the country in a phased manner.

In Karnataka, Subhiksha is investing Rs 55 crore to open 60 stores by end of this year. It has till now opened 35 in Bangalore and will touch 60 this year. It also plans to open six stores in Mysore. During the second phase, it plans to open outlets in other major cities in Karnataka like Hubli, Mangalore and Belgaum.

Subhiksha, which reported a turnover of Rs 334 crore in 2005-06 with a net profit of Rs 6 crore, is aiming at a topline growth of over 130 per cent at Rs 750-800 crore and Rs 15-18 crore net profit during the current fiscal. During 2007-08, it aims to double its turnover, Subramanian added.