B&E ‘s savreen gadhoke writes on why Subhiksha and Vishal Retail may not meet the same finality, although their operational and financial fallibility is eerily similar...
“Is Vishal Retail going the Subhiksha way?” This barefaced question has been asked to Ambeek Khemka, Group President, Vishal Retail Limited several times in the last few months by various stakeholders, analysts, journalists and all others who are bemusedly watching the beleaguered retailer desperately steering to clear off the current crunch period. And well, they have all the reason for their apprehensions.
While Subhiksha’s R. Subramaniam had an outstanding debt commitment of Rs.800 crore toward national banks, Vishal Retail has Rs.730 crore riding on its back. Both retailers took heavy loans to fuel their ambitious expansion dreams. The plan was simple: use short-term debt to fund expansion, improve toplines, and then repay short-term debt either by raising equity or converting short-term debt into long-term. While every move was ‘as per the plan’, the economy unfortunately wasn’t, and both the retailers were left gazing at shelves loaded with untouched inventory, empty store aisles, diminishing cash reserves – in short, ruing Gladwell’s misplaced 10,000 hour rule (both Subhikhsa and Vishal Retail have been there and done those hours a long time back).
And to add to the icing on the cake, apart from huge debt pressures, both retailers have also received notices from the Employee Provident Fund Organisation (EPFO) regarding irregularities in the funds credited in the Provident Fund accounts of its employees. As per the EPFO notice received by Vishal Retail, the retailer has not deposited sufficient funds in the PF account of nearly 13,000 employees (Vishal Retail, on its part has said that while the salaries of its employees were divided under basic pay and housing allowance, PF has been deposited on the basic pay. The Courts have asked Vishal Retail to pay the difference of Rs.11 crore).
However, this is where the similarity between the two retailers ends – hopefully. Where on one hand, cash-strapped Subhiksha shut all its stores and filed for bankruptcy, Vishal Retail is fighting against all odds to drive through the rough patch and making tenacious efforts to come out of this mess.
“Is Vishal Retail going the Subhiksha way?” This barefaced question has been asked to Ambeek Khemka, Group President, Vishal Retail Limited several times in the last few months by various stakeholders, analysts, journalists and all others who are bemusedly watching the beleaguered retailer desperately steering to clear off the current crunch period. And well, they have all the reason for their apprehensions.
While Subhiksha’s R. Subramaniam had an outstanding debt commitment of Rs.800 crore toward national banks, Vishal Retail has Rs.730 crore riding on its back. Both retailers took heavy loans to fuel their ambitious expansion dreams. The plan was simple: use short-term debt to fund expansion, improve toplines, and then repay short-term debt either by raising equity or converting short-term debt into long-term. While every move was ‘as per the plan’, the economy unfortunately wasn’t, and both the retailers were left gazing at shelves loaded with untouched inventory, empty store aisles, diminishing cash reserves – in short, ruing Gladwell’s misplaced 10,000 hour rule (both Subhikhsa and Vishal Retail have been there and done those hours a long time back).
And to add to the icing on the cake, apart from huge debt pressures, both retailers have also received notices from the Employee Provident Fund Organisation (EPFO) regarding irregularities in the funds credited in the Provident Fund accounts of its employees. As per the EPFO notice received by Vishal Retail, the retailer has not deposited sufficient funds in the PF account of nearly 13,000 employees (Vishal Retail, on its part has said that while the salaries of its employees were divided under basic pay and housing allowance, PF has been deposited on the basic pay. The Courts have asked Vishal Retail to pay the difference of Rs.11 crore).
However, this is where the similarity between the two retailers ends – hopefully. Where on one hand, cash-strapped Subhiksha shut all its stores and filed for bankruptcy, Vishal Retail is fighting against all odds to drive through the rough patch and making tenacious efforts to come out of this mess.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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