Sep

8

Indian Retail Industry: Subhiksha Wants To Sell Out

Filed Under India Business, India Investment Opportunities, Indian Retail Industry | 2 Comments

Subhiksha to be put on the block is the news from Indian Retail Industry.

If you have been following Indian retail industry, you would have noted Subhiksha rapid growth over the last couple of years, adding hundred plus stores per quarter.

Here’s a brief Q&A with Sandeep Saxena, Managing Director of 7Avenues Private Equity and CEO of 7to9 Retail

Q: Why would Subhiksha want to sell now given the valuations aren’t great?
A: I believe it has been reported in different places about the heavy opex costs (potentially losses) that Subhiksha has been incurring due to their large number of open store fronts. As the consumer spending has tightened in the last 6 months, I believe it creates a difficult situaiton that needs lot of cash injection to stay afloat.

Q: But aren’t all Indian retailers facing the same opex burden currently?
A: Not necessary. Those who have grown cautiously over the last couple of year, and focused on building systems and processes to manage the supply and inventory. Market reports have suggested their systems and processes had not kept pace with the pace of new store openings, which can really lead to high opex costs.

Q. What’s your take on the retail business valuation?
A: Every serious investor knows retail is a long-term business, and today’s consumer spending patterns are short-term hurdles. Valuations are based future growth prospects. While I can’t comment on specific valuation of Subhiksha without their revenue and profitability numbers, I can say with confidence having seen successful retailers in the West that those retailers who invest in systems and processes — for better customer management, inventory and supply chain management  — are able to command best valuations.

To learn more about Sandeep Saxena, please visit here: http://7avenues.com/about.html