Homegrown discount retail chain Subhiksha has decided to enter the capital market in the next three to six months. The company is planning to mop up upward of Rs 400 crore, which may be used to make acquisitions, in case opportunities arise, besides funding an aggressive expansion plan.
The company has already appointed Enam Financial and ICICI Securities as advisors for the proposed public issue. Informed sources said if the market conditions are conducive, the company could enter the market in the first quarter of 2008.
R. Subramanian, Managing Director, Subhiksha Trading Services Ltd told Hindustan Times that the company is looking at listing in the next six months.
Subramanian said, “Our internal target was to list the company after opening 1,000 outlets, which we have crossed.”
The south-based chain started out in 1997 and currently has 1,050 outlets, a number which is expected to touch 4,000 by 2010. “We are on aggressive expansion drive,” Subramanian said.
However, the company says it has achieved critical mass and earned enough profit to fund the expansion, said that the managing director. “The main purpose of listing is to create brand value for all the stake holders,” Subramanian said.
ICICI Ventures, which has invested around Rs 100 crore in phases over the last seven years since 2000, divested a 5 per cent stake in June 2007 to a mutual fund for Rs 100 crore. At this price the company is being valued at Rs 2,000 crore. ICICI Venture is currently holding 30 per cent equity stakes in the company.
Given the retail boom, the sources said that the company would enter the market at a valuation of around Rs 4,000 crore. Vishal Retail, which went public earlier this year, is currently valued at Rs 1,600 crore.
“The way the retail story is unfolding in India, consolidation is inevitable in the sector. As this retail business work runs on very thin margins, many smaller players would be available for grab in the short to medium term,” Subramanian said.