Discount retailer Subhiksha Trading Services Ltd has been in the news lately. In early September, there were allegations that the firm was not paying its suppliers (Mint, 5 September), and reports 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).
Last week, employees at some Subhiksha stores in New Delhi and its environs told Mint that the retailer had not paid them salaries for August.
R. Subramanian, managing director of Subhiksha, spoke to Mint over the telephone on Wednesday to specifically counter the allegations regarding salaries and also commented on the general perception that his firm is facing a cash crunch. Edited excerpts:
Some employees say they haven’t been paid August salaries. What has caused the delay?
There is no delay at all. I don’t know who you spoke to (and) whether they are our employees. I have no clue.
Let me be very clear: 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.
Also Read Subhiksha not paying some bills
Is your company going through a financial crisis?
I think that was the theme of the last story you wrote and this story that you are trying to write now. I think we clarified the same thing last time as well.
The reality is that we are on an extremely high growth path. We are doubling turnover from last year to this year and we are also sort of investing in new projects and are sort of well on our way to setting up 2 million sq. ft of space by June of next year. Basically, the point is, we are expanding.
So, obviously, we don’t have any financial crunch and if we are having a financial crunch then we won’t be allocating funds for the expansion. We are in the middle of the year and we have already completed a reasonable 40% of the expansion planned for the year and we are reasonably hopeful that the balance 60% of the expansion plans will be completed. So, whatever targets we set out for ourselves we are moving on that.
Selling strategy: Subhiksha managing director R. Subramanian. Harikrishna Katragadda /Mint
When a company is going through a rapid expansion...a company in any business will allocate its money. I am saying... as a newspaper you will decide you will pay your newsprint vendor 15 days late or...pay printing and vendors 10 days late. Those sort of things happen in a bad market when vendors desperately need money—every retailer will find ways to squeeze the various suppliers and sort of vendors for best possible deals whether it’s discounts or whether it’s in terms of trade margin or whether it is in terms of credit. I am saying we are not sort of (Mahatma) Gandhi and (Gautama) Buddha to say that we are sort of completely not enchanted by the profit from whoever we deal with.
We are tempted to get better deals from whoever we deal with and, therefore, we would push to get the best deal we can and we do it. The fact is that we pushed for the best deal does not mean we are facing a financial crisis. We are exploiting the weak market for getting the best deals for us.
If you visit any Subhiksha store in Delhi or the National Capital Region, many of them are partially empty—with empty racks. Any reason for this?
We constantly sort of look at our merchandising strategy and inventory turnover strategy. Our inventory is in line with what sales we want to achieve and whether stores will be larger or the stores might have more racks, we might be following a particular strategy in terms of what we want to do. Fundamentally, the key piece, as far as we are concerned, is we have sales target for the stores. Our stores will achieve 90% to 100% of our sales target. The inventory is in line with the sales target we look for. Just because we have racks doesn’t mean that we have to fill the racks and I don’t think that is a strategy a retailer would want to work on.
Of course, we can fill the racks if that will give an impression that we are not in a financial crunch. But that’s not the basis on which we operate. We operate our business on the basis of what stocks are required to sell, what we want to sell... We supply our stores every day and need only so much inventory to be able to manage whatever sales we want to manage.