Mumbai: Private equity firm ICICI Venture Funds Management Co. Ltd, which holds a 23% stake in Subhiksha Trading Services Ltd, is engaged in an effort to salvage the troubled discount retailer.
The firm is working together with the authorities and other stakeholders including Azim Premji Investments, to resolve the problems at Subhiksha, said Renuka Ramnath, chief executive officer and managing director of ICICI Venture.
“We would have our own limitations, because we are not promoters or managers,” Ramnath told reporters in Mumbai on Monday. “However, as minority shareholders, and responsible ex-board members, if there is a solution that can be meaningfully worked out for Subhiksha, we would try to work that out.”
Cash-strapped Subhiksha is struggling for survival and trying to work out a debt restructuring package with its lenders. The chain has been having trouble paying suppliers and employees as the economy slowed and funds became tougher to access.
“As we speak, our team is sitting in Bangalore and figuring out if there is a solution,” Ramnath said. “And if so, what would be the compromise that various stakeholders will have to make.”
ICICI Venture and R. Subramanian, promoter, managing director and single-largest shareholder of Subhiksha, have been engaged in a public spat over who is to blame for the state of affairs at Subhiksha.
Ramnath indicated that the Chennai-based retailer had misguided ICICI Venture and other board members.
Ramnath said she and other independent directors on Subhiksha’s board—Rajeev Bakshi, also of ICICI Venture, Rama Bijapurkar and Kannan Srinivasan—quit because they hadn’t been informed about the full extent of liquidity and operational issues the retailer faced.
The last audited accounts presented by Subhiksha to the board was for the year ending March 2007, in which it showed a turnover of Rs840 crore, net profits of Rs18.36 crore, inventories of Rs280 crore, and a secured loan of Rs245 crore, Ramnath said.
Until the end of September 2008, there was no communication to ICICI Venture or to the Subhiksha board on any difficulties faced by the retailer, she said. “We were continuously given information about the roll-out plans of the company, and how the IPO (initial public offering) plans of the company would take shape as things evolved.”
The first sign of trouble came towards the end of September 2008, when the company approached the private equity fund for a Rs50 crore loan. After that, the fund visited 200 outlets to size up the scale of the problems it faced.
ICICI Venture then demanded a board meeting, a certificate from Subramanian to the board that he was in “complete compliance” with the law, an independent review by KPMG on business operations and finances. It stepped off the board because of “complete indifference” to the demands, Ramnath said.