03 March, 2009
?Anything well begun is half done? ? so goes a saying. But those behind Subhiksha apparently wanted to prove it wrong. Unfortunately, they have succeeded and are poorer for it. Mind you, a private equity player stayed on the sidelines all along!
SUBHIKSHA, THE ailing retailer, is mired in controversy. Bitter accusations and recriminations between ICICI Ventures on the one hand and Subhiksha’s promoter and managing director R Subramanian, on the other, are aggravating the situation. Who is right and who is wrong? Success has many takers and failure, none. And faults are thick when love is thin. Just take a look at what ICICI Ventures, a minority shareholder in Subhiksha with a 23 per cent stake, said of Subhiksha, not long ago: “Subhiksha is a retail chain built on a unique business model with no frill stores in the neighbourhood area offering 8-10 per cent discount on Maximum Retail Price (MRP) on all products sold throughout the year. Promoted by R Subramanian, an alumnus of the Indian Institute of Management Ahmedabad, Subhiksha has been the pioneer in the organised discount retail model in India. The company seeks to provide a one-stop shop for all daily shopping needs of a consumer and sells FMCG products, food and groceries, pharmacy products and mobiles. With strong backward linkages and carefully crafted supply chain arrangements, the business model is built such that consumers will benefit hugely from the constant everyday low prices, along with the convenience of neighbourhood shopping that they are used to. The Company started its operations in 2000 in Tamilnadu and has rapidly scaled up its presence in New Delhi, Mumbai, Karnataka, Gujarat and Andhra Pradesh. By 2007-08, Subhiksha plans to be a pan-India retailer with at least 1,000 stores operational.” To this day, this description of Subhiksha appears on the website of ICICI Ventures! What does ICICI Ventures say of Subhiksha now? It is now working on a plan to revive the ailing retailer. According to ICICI Ventures MD and CEO Renuka Ramnath, the firm is in talks with all lenders and investors to devise a solution. It did not know of Subhiksha’s liquidity problems until September 2008. At a press conference, Renuka said, “From what we see around, we know that the operations of the company are not sane and are not normal. All I have to say at this time is that I do not now what is really happening in the company because I do not have the audited accounts of the company. I do not know the extent of the liquidity crisis. I do not know the extent of statutory dues in the company. ICICI Venture is absolutely not in control of the company. No investor can be in control with a minority stake holding of 23 per cent when you have another promoter holding 59 per cent. Until the end of September 2008, there was no representation from the management that there were any challenges with respect to the operations of the company. We were continuously given information about how the rollout of the company was progressing and how the IPO plans of the company would take shape.” If this is what the two major stakeholders have to say on the state of affairs of Subhiksha, what does the statutory auditor have to say? The statutory auditor of Subhiksha is Deloitte, one of the ‘big four’. Has the Subhiksha boss Subramanian outsmarted Deloitte, the way Ramalinga Raju outsmarted PwC? If so, what is ‘big’ about the ‘big four’? What qualifies an auditor as a member of the ‘big four’? I think before long we may be in a position to define it easily –an auditor who has not been outsmarted by an Indian entrepreneur alone can qualify as a member of the ‘big four’. It is as simple as that. Deloitte has not been able to finalise the accounts of Subhiksha for the past 22 months. According to Renuka, Deloitte was not provided access to the books of accounts by the management of Subhiksha, read Subramanian....