Shops looted as Subhiksha fails to pay bills and security guards

India’s biggest discount retailer said hundreds of its stores were attacked over the weekend, after it failed to pay its security guards because of liquidity troubles.

The attack points to the potential socio-economic implications of the credit crisis hitting India’s ailing retail industry.

Subhiksha Trading Services said about 600 of its discount food stores and warehouses were vandalised across the country, after it admitted it was on the verge of collapse as it had “mucked up on not raising equity”.

“At a time when our business is at a standstill . . . the company seems unable to protect its properties as, due to non-payments to security agencies and staff, the properties have become vulnerable targets for looters,” said R. Subramaniam, founder and managing director of the group.

Subhiksha, which expanded tenfold to 1,655 stores in two years, generating $470m in revenue, had been in trouble for months as it failed to pay suppliers and employees after its banks refused to lend it money. It was unclear last night whether laid-off workers were responsible for the attacks.

Troubles at the chain underline the broader difficulties Indian retailers are facing because of a lack of credit, a slowing economy and high property prices – rents in the Delhi and Mumbai areas are among the highest in Asia.

Foodland Fresh, a smaller Mumbai-based retail chain, announced the closure of 39 of its 42 stores across the city last week in another sign of toughening economic conditions.

Key sectors of the Indian economy shed more than half a million jobs in the final three months of last year. Analysts predict that gross domestic product growth will fall well below 5 per cent this year, firmly ending India’s double-digit growth hopes.

Since India’s Retailers Association has cut the sector’s growth outlook from 30-35 per cent to 15-20 per cent, several leading retailers, including Reliance and Argos, have announced plans to shut stores or curtail expansion.

Reliance is considering cutting its wholesale team and closing 25 of its 590 Reliance Fresh flagship grocery stores.

Argos, the UK online and catalogue retailer, pulled out of India last month after only two years.

The company said the Indian venture, which was a franchise arrangement with India’s Shopper’s Stop and HyperCITY retail groups, had been abandoned after failing to meet targets.

Financial Times.

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