Following months of denial the Indian retail chain was in trouble, Subhiksha’s managing director admitted last week it was in bad financial health.
In a nine-page letter sent to the media, the company’s MD R Subramanian said “it is sudden collapse,” although allegations of unpaid vendors and staff have surrounded the retailer for some time, reported The Wall Street Journal.
The collapse was the result of rapid, debt-based expansion on a small equity base, Mr Subramanian said.
The operator of India’s largest chain of discount supermarkets grew to 1,600 stores and almost Rs40bn (US$822m) annual revenue, based on an equity base of just Rs320m (US$6.6m).
Mr Subramanian admitted the company had not paid some suppliers or staff in several months.
He maintained the company could be put back on its financial feet, but only with Rs3bn (US$62m) in capital.
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