New Delhi/Bangalore: Retailer Indiabulls Retail Services Ltd is facing complaints of non-payment of dues from vendors in several cities across India with claims ranging from Rs6-45 lakh.
A senior Indiabulls executive dubbed it as “legacy issues”from the late 2007 acquisition of Piramyd Retail Ltd, which Indiabulls bought from the Ashok Piramal group for Rs208 crore.
Piramyd has since been renamed Indiabulls Retail Services. While Indiabulls did buy Piramyd and all its liabilities, it is now claiming that a lot of claims were fraudulent and hence, payments are on hold.
“Some liabilities are recorded and certain liabilities are not recorded. What do you do with the unrecorded liabilities?” asks Anil Lepps, the newly appointed chief executive officer of Indiabulls Retail. However, he concedes that some claims might be genuine and that it will take Indiabulls some time to clean the “mess”.
Indiabulls Retail Services is the retail arm of Indiabulls Financial Services Ltd, which has interests across infrastructure, real estate, financial services, multiplex and power sectors.
Indiabulls Retail’s vendors, however, are increasingly becoming impatient and while some have stopped supplies. A Mumbai-based retailer, who claims that he has not been paid Rs45 lakh, said Indiabulls employees told him the company was cash-strapped and was not in a position to pay. “I stopped supplying to them three months ago, but now they are forcing me to resume supplies failing which they say they will withhold my payment,” he said requesting anonymity.
Several vendors across New Delhi, Mumbai and Bangalore have also made similar allegations. Most of these vendors are agitated because the payments have ruptured their cash cycle. “I took a loan to supply a big order I got from Piramyd in 2007,” said one of the vendors. “My payment was due in January, but despite several reminders and a reconciliation meeting with some senior executives, I haven’t got my payment, yet.” She didn’t want to be identified for fear of more delays with her payment.
Some vendors continue to supply so old payments are not jeopardized. “They owe me around Rs9 lakh... I continue to supply to them because if I don’t, they may just hold back my old payment,” said a Mumbai-based garment supplier. He claimed that he, in turn, has not been able to pay his own suppliers.
Indiabulls Retail’s Lepps also said some retailers have not been paid because their supplies have not got sold for reasons such as inferior quality of products or designs. A Delhi-based vendor Agril Apparels Pvt. Ltd, for instance, has not been paid Rs8 lakh because the company says its inventory hasn’t moved from the shelves in past many months. The vendor, however, claims to the contrary. “We checked with some of the employees of Indiabulls and found that all our supplies have been sold,” said Rahul Jain of Agrim. “Yet, the company refuses to make payments. It’s my hard-earned money.”
In a telephone interview with Mint a month ago, Gagan Banga, chief executive and director of Indiabulls Financial Services had said: “If vendors have proper documents, they could directly approach me. When we acquired Piramyd, we also agreed to take on the company’s liabilities and we have been evaluating them. If they are not established, we will not deal with them.”
When bought, Piramyd had nearly 42 stores in two formats. In January, they were rebranded—as Indiabulls Mart and Indiabulls Megastore. By September, Indiabulls Retail had shut four of nine Megastores.
Meanwhile, according to a person close to the situation, the advertising agency Hindustan Thompson Associates Ltd (known by brand name JWT), has filed a court case against Indiabulls to recover Rs50 lakh for the advertising work it did for Piramyd. Indiabulls, however, claims that advertising had been done for other Piramal Group companies and not Piramyd. Lepps denied knowledge?of?a?legal?complaint.
Lepps also said while some claims might be genuine but because of lack of records, it was taking the company a lot of time to sift out the fraudulent cases. “I won’t...say they are all wrong...whatever is genuine is getting reconciled. We are not a fly-by-night operator and we will not keep anybody’s money. Every genuine case will be taken care of,” he said.
A Gurgaon-based analyst said retail sales across the country were down by around 10-20% and this has put a pressure on cash flows of retailers. “In such a situation, the retailers want to hold on to their cash and the first step they resort to is stopping the payments to suppliers,” said Zahir Abbas, associate director-retail and consumer business, Technopak Advisors Pvt. Ltd, a management consulting firm. “A lot of players who had money, got into retail business in the past two years with the sole intention of adding retail into their portfolio. But it is a very difficult business as it needs constant supply of cash, hard work, good locations, strong management and high volumes, whereas the margins in the business are as low as 3% to 4%.”
Meanwhile, Lepps said he hoped “everything will be sorted out in the next couple of months”.