Financial Daily from THE HINDU group of publications
Wednesday, Dec 22, 2004
Marketing - Retailing
ICICI Ventures hikes stake in retailer Subhiksha to 24 pc
Chennai , Dec. 21
WITH a second tranche of funding to the tune of Rs 25 crore, ICICI Ventures will be hiking its stake in the Chennai-based discount retail chain Subhiksha to 24 per cent. The venture capital firm had earlier pumped in Rs 15 crore into the retailer's equity in year 2000 to take a 10 per cent stake.
The fresh funding will see Subhiksha embark on an expansion programme, which will see it put up 136 new stores in Bangalore, Mysore and Gujarat by June 2006.
Meanwhile, Subhiksha, which was in the fray to take over the grocery stores put up by the online retailer Fabmall in Bangalore, has decided not to pursue the deal and stay focused on its discount retail business.
Mr R. Subramanian, Managing Director, Subhiksha Trading Services Ltd, told Business Line that there was a lot of potential to grow the business in the middle income market with its distinctive discount retail format itself and that it would look at organic growth as a preferred strategy.
Mr Subramanian said that after the expansion into Karnataka and Gujarat, Subhiksha would look at the Mumbai and Delhi market for which it would raise funds at a later stage. The foray into these two cities would need Rs 35 crore, he said.
Subhiksha had a turnover of Rs 220 crore in FY 04 and expects to finish FY 05 on a turnover of Rs 280 crore. Once the expansion is on and through its organic growth in Tamil Nadu, it expects to have a turnover of Rs 500 crore by FY 06.
The chain currently has 142 stores in Tamil Nadu and Pondicherry and expects to add 20 more soon.
Outlining his expansion plan, Mr Subramanian said that the chain is in the process of finalising its distribution centre in Bangalore. Subhiksha plans to set up 50 stores in Bangalore, six in Mysore and 80 stores in Gujarat. It expects to kick off 10 stores by April in Bangalore.
Asked why Subhiksha was targeting Gujarat at this stage, Mr Subramanian said that the State had highly literate and value conscious consumers. Besides its large middle-class population, the high level of urbanisation meant that several towns in the belt are within easy trucking distance and convenient for Subhiksha's hub and spoke model.
While ICICI Ventures will hold a 24 per cent stake, the rest of the stake in the Rs 24-crore equity base is held by Mr Subramanian and his associates.
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