Icra arm to help revive Subhiksha

Icra arm to help revive Subhiksha

New Delhi: A consortium of banks that are owed money by defunct retailer Subhiksha Trading Services Ltd has hired a division of rating agency Icra Ltd to carry out a feasibility study to revive the firm after a similar attempt involving an audit and consulting firm failed due to Subhiksha’s alleged non- cooperation.

A senior Icra executive who asked not to be identified said the agency’s wing Icra Management Consulting Services Ltd has got the “mandate" for a viability study of Subhiksha from a “consortium of clients".

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“It’s a case of a company in distress and, therefore, it’s a feasibility study," said the senior Icra executive. “It’s currently work-in-progress."

The group of 13 banks including ICICI Bank Ltd, HDFC Bank Ltd and Yes Bank Ltd, that is collectively owed around Rs750 crore by Subhiksha, had earlier engaged Ernst and Young to carry out a study on how to revive the retailer. However, the banks alleged that Subhiksha did not allow E&Y auditors to examine its books and the study was never completed.

As a result, a proposed corporate debt restructuring proposal could not be filed by the July-end deadline.

The Icra study could result in another attempt at corporate debt restructuring, according to Subhiksha’s lawyer Prakash Goklaney.

R. Subramanian, managing director of Subhiksha, did not respond to a detailed questionnaire and text messages seeking comment.

The seemingly last-ditch attempt by the consortium of banks comes even as the retailer is fighting a battle for its continued corporate existence. On Tuesday, the Supreme Court directed the Madras high court to decide whether a proposed merger between Subhiksha and Blue Green Constructions and Investment Ltd is financially viable and, based on this, decide on what is to be done.

Blue Green Constructions, a Madras Stock Exchange-listed firm, was acquired in June last year by Cash and Carry Wholesale Traders Pvt. Ltd, which is promoted by RS Associates and SSS Trust, the same entity that is also promoter of Subhiksha. But its merger with Subhiksha was opposed by various parties including the Azim Premji-promoted fund Zash Investment and Trading, that holds around 10% stake in Subhiksha and Kotak Mahindra Bank, which is owed around Rs40 crore by the retailer.

“If the scheme of amalgamation (merger) is found financially viable, the court has asked Madras high court to consider the scheme of arrangement (or settlement)," said Subhiksha’s lawyer Goklaney talking about the retailer’s petition in the Madras court which aims to reach a settlement with lenders. “If it (the merger) is not found financially viable then it (Subhiksha) goes to winding up straight away," he added.

Goklaney’s reference is to the two winding up petitions by Kotak Mahindra Bank and HCL Infosystems Ltd that the Madras high court admitted in August.

Subhiksha grew about 10-fold in a matter of three years. The company, which has a equity base of Rs32 crore grew on the back of debt. With tough economic conditions hampering its ability to raise money, Subhiksha closed operations nationwide in January when the firm said it had run out of cash. In February, banks owed money by the firm chose to go for a corporate debt restructuring exercise in an attempt to revive the retailer.