India’s largest chain of discount supermarkets, Subhiksha Trading Services Ltd, plans to offload a 10% stake in an initial public offering this fiscal year to fund its expansion programme as organized retail takes off in the country.
The promoters, who currently hold 65% of the stake in the company, will dilute their stake to 58%; investment firm ICICI Venture will pare its share to 29% from 32%; and the employees’ share will come down to 2.5% from 3%, according to R. Subramanian, managing director of Chennai-based Subhiksha, which currently operates some 700 stores that sell everything from mango to medicines.
Subramanian declined to say what he valued the company at or how much money the company plans to raise by off-loading the 10% stake. A spokesperson for ICICI Venture wasn’t immediately available for comment.
The company has been on a rapid expansion mode this year opening hundreds of stores in various parts of the country. Earlier this year, Subhiksha raised around Rs500 crore as part of the expansion plans to take the number of its stores to 1,000 by the end of the year. The company, which started out in 1997 as a single store, generated Rs803 crore revenue in the year ended March and is targeting Rs2,200 crore in sales this fiscal year.
Subramanian said the promoters and ICICI Venture forked out Rs150 crore of the expansion budget and the rest came through bank debt. He said the company has already invested about Rs325 crore so far this year on new stores from Maharashtra to Kerala. The discount retailer, almost 80% of whose customers are “loyalty cardholders” who get points and other benefits for repeat shopping, says it will put the country’s eastern part on its map by rolling out stores in West Bengal and other states later this year.
Subhiksha’s expansion coincides with the unprecedented growth of India’s organized retail sector that is currently just 3% of India’s $300 billion annual retail business but growing by annually up to 35%. India’s economy jumped more than 9% last year and is expected to grow by 8.5% in the current fiscal year ending March 2008.