SUBHIKSHA FOUNDER, R.SUBRAMANIAM(md)

February 9, 2009

Subhiksha is an Indian retail chain with more than 1400 outlets selling groceries, fruits, vegetables, medicines and mobile phones. It was started and is managed by R Subramaniam, an IIM Ahmedabad alumnus. R Subramaniam, Founder and Managing Director of Subhiksha plans on taking its chain across the country He also plans to invest Rs.500 crore to increase the number of outlets to 2000 across the country and touching Rs 5,000 crore by 2010.
The name Subhiksha means prosperity in Sanskrit. Subhiksha in Sanskrit also means “the giver of all good things in life”. It opened its first store in thiruvanmiyur , Chennai in March, 1997 with an investment of about Rs. 5 lakhs. The retail chain has seen a considerable growth by offering goods at cheaper rates and there by increasing its customer base. It is also dubbed as India's largest retail chain. Vision to deliver consistently better value to Indian consumers, has guided Subhiksha to deliver savings to all consumers on each and every item that they need in their daily lives, 365 days a year, without any compromise on quality of goods purchased. Subhiksha now has the pan Indian presence with stores across Delhi, UP, Punjab, Haryana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recently commenced operation in Kerala also. Today, it is a multi-locational, professionally managed and vibrant organization. Subhiksha now has even opened Specialized Mobile shops called Subhiksha Mobile where mobiles are sold at a discounted price.

When R Subramanian became an entrepreneur and started a retail chain called Subhiksha, there were not many entrepreneurs in India. In his family too, there were no entrepreneurs. There was no precedent in his family for him to dream of becoming an entrepreneur. His father used to work for the Reserve Bank of India and his brothers too were in government service. His cousins, after studying at various IITs, went abroad. That was how it was. After obtaining an engineering degree from the Indian Institute of Technology-Madras, he decided to join Indian Institute of Management-Ahmedabad as he was sure about one thing -- that he would not leave India to go abroad.

At IIT:
He was one of the few students who didn't go to the United States for higher studies. Going to the US never fascinated him. He didn’t know why. He had always been doing unconventional things, so it was kind of offbeat not to go to the US. He preferred doing something in front of my own people rather than going to a foreign land because this gives you more satisfaction and recognition. And the sense of achievement is far greater than doing the same thing in a far-off land.Even the US was not the same US in the mid-eighties. Being one among the many workers and researchers there did not fascinate him. “India is your country and you will get as much opportunity as anybody else. If you don't do well here, you have only yourself to blame”..he says.
At IIM-Ahmedabad:
An MBA seemed a logical corollary because hardcore engineering was not really his cup of tea. Even when in IIT, he did Economics, and took electives like Accounting and kept topping those subjects. He was always doing different things from what everybody wanted to do. So, he joined IIM-Ahmedabad. At that time, his intention was to get into a good company like Pond's in Chennai and probably work in its marketing department. After his summer training at Pond's, they offered him a job too. But he got interested in the investment bank department of Citi Corp and he was one among the three who were recruited by them from IIM-A. After working there for 3-4 weeks, he realized that that was not where he wanted to work. He felt was cut off from the world and living in a world of trading. He felt he was doing more and more of the same and earning more and more money. That was not what he wanted to do in life. The thought of doing something on his own came to his mind then.
Joined Enfield:
He called Mr Viswanathan of Enfield who had given him an offer when he was a student of IIM-A and asked, 'Is your offer still on?' He said, 'Yes.' He resigned from Citibank and came down to Chennai. His family in Chennai was shocked. Resigning from Citibank to join a sick company was unthinkable. What he saw was this: it was a manufacturing company which would have all spectrums of job. He was with Enfield for two years from 1989-91.
Starts his first company called Viswapriya:
He wanted to start a company of his own and told Mr Viswanathan about it. Mr Viswanathan asked him from where he was going to get the money from? .Subramanian had no idea. Subramanian told Mr Viswanathan he would figure it out. Mr Viswanathan then told him that he would give him money to set up the company and he (Subramanian) run it for him. Mr Viswanathan provided him with the money, and in 1991, he set up his first company called Viswapriya. He got a galaxy of very good people on board. He basically did three things. He bought debentures from thousands of people who had them in very small numbers and consolidated as 1 lakh (100,000) or 2 lakh (200,000) debentures and invested in mutual funds. And the investors got a monthly income. Every time the money went to lakhs of investors, it went from Viswapriya and that way his company's name became popular.It was a good business to start and they were the pioneers in it. After he started, all the big guys got into the business. So it was good fun.
Started asset securitisation:
Today, everybody is talking about 'asset securitisation,' but in 1992, it did not exist in India. When he released a project to do asset securitisation, it was a huge hit. Three months after he did it, the State Bank of India did it, and a month later, ICICI Ltd too started. As he was the first guy, it was noticed; some small company in Chennai starting something like this for the first time in the country. It was making money, it was making Viswapriya survive and also, it made people notice it.
The big breakthrough:
The big breakthrough nationally came in 1994 when he started a new product IPO financing, which he called Prime Advancing. He created the first loan anywhere in the world for a guy who applied for shares without collateral, without guarantee. This industry and him, both, boomed. Customers were making tons of money, and he was also making tons of money. So it was a win-win situation for everybody. In 1994-95, he lent Rs 200 crore (Rs 2 billion). In 1995-96, he lent Rs 1,200 crore (Rs 12 billion). His net profit zoomed to around Rs 25 crore (Rs 250 million). Of course, competition came soon. And then in 1996, the stock market collapsed.
Entering the retail market:
There was no great logic behind entering the retail market in 1997. He made a study of two areas: software and retail. Between software and retail, he thought he was a bit late for software as Satyam, Infosys, Wipro, TCS, etc had already established by then. He didn’t want to be a small and late entrant. In retail, He thought he would be one of the early entran

ts, so he could have the learning curve much to our advantage. He allocated a Rs 5 crore (Rs 50 million) corpus to it and entered the retail business. There was a lot of thought process behind it. He wanted to attract not the top end customer but the aam aadmi. From his research of three months, he found that consumers prefer buying groceries from closer home. So, he decided to set up 1,000 sq ft shops all across the city and not a 10,000 sq ft big store at one location in Chennai. The next question was why would the customer come to his store abandoning the existing store? It had to be the price, because ultimately there is no difference between the branded products like say Boost or Surf or such things. So, he decided to sell branded products at a lower price.
Started Subhiksha:
He looked at all sorts of names; and finally he chose the Sanskrit word Subhiksha (prosperity) because it reflected the Indian ethos and it is a word that could be understood all over India. What he was trying to do was different from the western model; his model was truly Indian. His theme was, “why pay more when you can get it for less at Subhiksha?” In March, 1997, he opened the first store in Thiruvanmyur in Chennai with an investment of around Rs 4-5 lakh (Rs 400,000-500,000). He opened it with the clear idea that it was a part of a larger system. He thought the day he opened, there would be a stampede because the prices were low and he would sell goods of Rs 30-40 lakh (Rs 3-4 million) by the month end. But there was nothing of that sort! He sold goods of only Rs 5-6 lakh (Rs 500,000-600,000) in the first month.The consumers were very surprised, and they gingerly looked at the products and asked, are they seconds or old stock or defective products? In the first year, he opened ten stores in Chennai. He also started selling medicines at a discount. On the third day of the opening the pharmacy, there were about 100 people outside the store in the morning. He thought all of them were waiting to buy from our store. What he was expecting on day one happened on day three, he thought happily. But he soon found that they were not there to buy anything; they were chemists from the neighborhood who had come to do a dharna (protest) saying we could not sell medicines at a discount. Finally he had to go to court, and it was only in 1999 that the Supreme Court gave a ruling that he could sell medicines at a discount. He was doing quite well on the pharma front and he enjoyed all the attention he got. Another thing is the medicines that he was selling at a discount were bought mainly by the elderly who have no fixed income and they welcomed any discount. He was quite happy to be able to help them in some way. “Medicine retailing is more of a service than business for us. Of course, it is good business for us too. But our main motto is service”, he says.
Merchandise Mix:
Subhiksha had a wide range of products in its store—rice, dhal, sugar, oil, butter,
toiletries (like Lifebuoy, Tide, Surf, Colgate, etc.), jam, sauce, tea, coffee and
cosmetics (like Ponds Dream Flower

Buying Procedure:
The customer chose products from the display on the PC and paid at the cash
counter against a composite bill, which did not contain item details. The stocking
department processed the order, keyed in the details, and a shop assistant
collected the items and delivered it at the delivery counter. The detailed bill was
printed only if the data entered by the stocking department matched the
composite bill. The bill also showed the market rates and the savings made.
Subhiksha’s strategy did not allow the customers the pleasure of feeling the
goods before purchasing as in supermarkets. But Subramanian argued that
Subhiksha did not sell fashion, it sold food and grocery items which did not
require touch and feel by the customer. The closest that the store got to touchand-
feel was a store in Tambaram, where there were wall to wall displays of
samples of the products sold in the store.
Brand Image and Identity:
The brand image that Subhiksha aimed at portraying was of a trustworthy,
reliable store that cared for the customer and ensured the best deals or lowest
prices for them. It aimed at being perceived as a trusted source of household
needs, easily accessible and one that offered great prices and savings.
Brand Positioning:
Discount retail chains like Subhiksha needed to position themselves against the
neighbourhood stores, which were their major competition. The latter offered
personalized service and had small scale operations. However, they were not
technology savvy and did not have economies of scale. They were seen as
profiteers rather than relationship builders. The unique position of Subhiksha
stemmed from the relentless focus on value delivery.

Brand Strategy:
By opting for smaller outlets, Subhiksha increased its presence. The aim was
that no one should be further than 2 km away from a Subhiksha outlet. The target
obviously was the masses. To succeed, the discount chain needed to integrate
backwards into the supply chain, cut out middlemen and offer better prices to
consumers. Organized discount retailing was still relatively unexploited in India,
and Subhiksha was cashing in on this opportunity.
Subhiksha worked on the premise that it would do business with the customer for
the next 30-40 years. Therefore, the focus was on building a lifetime relationship
with the customer than merely a transactional one. In this respect, the company
attempted to know the customers—where they lived and what exactly their needs
were.
Branding through Advertising:
Subhiksha had initially used only print advertisements and mailers to promote its
services. It began advertising on television before the Diwali firecracker sale and
also to position itself as a retail store brand which gave a value offering to
customers that contributed to better savings and hence an improved lifestyle.

Expansion plans:
By March 1999, he started expanding rapidly. From 14 stores, we expanded to 50 stores by June 2000. In the next two years, we had 120-130 stores across Tamil Nadu. Another big thing was, in 2000, ICICI Venture invested in his company. He saw to it that the moment He got into a city, He started as many stores as possible there. Only that made business sense. Then, till 2004, he made sure that he consolidated before he expanded, though there was a lot of pressure on him to expand nationally. He decided to look at every part of India which is significantly literate and is a significant consumption market. He wanted to be everywhere. He looked at the telecom companies as our role model. They employed capable regional managers and expanded. His business is also extremely local. He couldn’t sit in Chennai and run a store in Chandigarh. He decided to have very good quality people to run the region, area, town and the store.In 2004-05, he decided to have 420 stores in places like Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006. In 2005, he started recruiting people in various regions. Today, he has 500 plus stores in all the places that he had planned. He became India's largest retail chain store with 500-plus stores. “India is a large country and there are still opportunities to avail of. Though now, the thought of opening stores outside India is not tempting because there are enough opportunities in India. We may look at overseas markets too. . . Maybe later, after we open 2,000 or 2,500 or 3,000 stores in India”, he says.
Financial crisis:
In early September, there were allegations that the firm was not paying its suppliers, and reports said that the firm had sold a 10% stake to billionaire Azim Premji for Rs230 crore. Then, the company said that after its merger with Blue Green Constructions and the subsequent renaming of the firm as Subhiksha India, the merged entity would seek a listing (Blue Green is already listed on the exchanges). Employees at some Subhiksha stores in New Delhi and its environs report that the retailer had not paid them salaries for August.
“As an organization, we have 5,500 or so (employees) across the country and every single employee has been paid whatever salary is due and payable for the month of August in the month of September. There is not a single employee that has not been paid by us” says Subramanian..
As of January 2009, Subhiksha has been facing severe financial crises pertaining to liquidity. This has lead to shutting down of a large number of stores across the Nation.Cash-strapped retail chain Subhiksha Trading Services on Monday, February 09, 2009 ruled out declaring bankruptcy and said it may consider selling stake to raise funds as it struggles to arrange Rs300 crore to meet immediate operational requirements. The company is currently undergoing a corporate debt restructuring (CDR) exercise with lenders reviewing its books.
“No, not at all, as that (declaring bankruptcy) is not a solution. We have a viable business which is cash-starved and CDR will help us revive this,” Subhiksha Trading Services managing director said. He said the company, which has a total debt of around Rs750 crore, may have to look to the equity route to raise money in order to find cash for preventing the company from stopping its operations. “If there is no money, we can’t run operations but if there is no debt, we have to look at options like equity,” he said. The company’s lenders, including 12 foreign and Indian private sectors banks, have sought a review of its balance sheet to speed up fund raising process.“As part of CDR, the banks would need to get a current balance sheet rather than a 31 March 2008 balance sheet and they also want to ensure that events of the kind that happened in the last three-four months do not recur,” he said.
The company would be able to raise Rs300 crore, required for meeting operational expenses, only after completion of the CDR process, managing director R. Subramanian said.
“We are coordinating this review as this helps us as well...We are wholly part and parcel of this review and the idea is to ensure that the revival plan (for the company) is well crafted with learnings from the review,” he said. The company’s accounts are audited till 31 March 2008, and a review would take into account the period after it. On the issue of payment of employees and property owners, he said the company was “trying for emergency cash”. Subhiksha’s operations have come to a standstill for the past few weeks due to non-payment of employees salaries, huge debt burden and arrears to suppliers, and the company is seeking liquidity infusion to the tune of Rs300 crore to revive its operations.
In many parts of the country, the company’s stores and warehouses have been subjected to vandalisation and ransacking by unidentified elements for the past one week. Subhiksha had expressed helplessness in the matter saying non-payment of dues to security agencies have left its assets unguarded and vulnerable. Subramanian said the company is taking steps to protect its stores and assets but it has been crippled due to shortage of staff.
Work life:
He works hard. He usually works from 8 in the morning till about 10 in the night. He relaxes at home reading or listening to music. He reads a lot, mainly online. He leads a reasonably balanced life. Working 12-13 hours a day six days a week, is his working pattern. He doesn’t work on Sundays. He keeps Sunday evenings and afternoons only for family. But he travels 12-15 days a month visiting all the Subhiksha regions.