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ICICI Venture talking to Premji, lenders for reviving Subhiksha

MUMBAI: Leading private equity player ICICI Venture is holding talks with lenders and investors like Azim Premji for revival of crisis-ridden retail chain Subhiksha.

Speaking to reporters here on Monday, ICICI Venture Managing Director Renuka Ramnath said, “We are minority shareholders and do not have management control. We are talking to lenders and investors like Azim Premji to find a solution. We will support any revival package for the company.” Subhiksha with a chain of 1,300 stores across the country ran into serious liquidity crisis around September last but the management had kept the lenders and investors in the dark about the financial position of the company.

ICICI Venture has written to the Registrar of Companies to order investigation into the affairs of the company for the period after April 2007 and also to appoint auditor to find out the financial position of the company, a press note said. Audited accounts of the company as on April 2007 are only available as per which it had a turnover of Rs. 840 crore and profit before tax of Rs. 18 crore. The company had inventories of Rs. 279 crore and secured loans of Rs. 245 crore.

Ms. Ramnath said she did not have the exact financial status of the company. The management had always maintained that it was doing well and pursuing aggressive growth path. “There was no whiff of liquidity crisis facing the company till September,” she said.

The management led by R. Subramanian, who has 59 per cent equity in the company, approached ICICI Venture by the end of September to help Subhiksha with a Rs. 50-crore loan to meet short-term liquidity issues. However, the liquidity problem faced by the company was far more severe than the Managing Director had represented. The company had started getting legal notices for outstanding payments and field visits found that the inventories were very low in various stores.

According to Ms. Ramnath, it was only at a board meet in November last the management admitted that there was severe liquidity crunch with mounting debt and unpaid employees and suppliers. The board then appointed KPMG to carry out independent review of the company and directed the management to conclude audit of account for the period ended June 2008. But the management failed to implement the decisions and KPMG informed that it was not able to conduct review due to non-cooperation of the management. It was then that independent and nominee directors of Subhiksha stepped down from the board, she said.

She said “we would have been more engaging, more understanding if the management had told us about the problems.” She maintained that the business model followed by the company was sound, which was based on controlling costs and it could work if implemented properly. While she did criticise the management for keeping lenders and investors in the dark, she refrained from making allegations like fudging of accounts. “There is no bad blood between investors and the management,” she said. She also pointed out that the management had not gone for real estate purchases and all stores were taken on lease. — PTI

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