Subhiksha Trading, the 11-year-old retail chain which once prided itself on providing value to the shopper, has run out of cash. R Subramanian, 43, managing director of Subhiksha Trading, speaks to Gautam Chakravorthy of Business Standard on the 'pain and continuous struggle' to run even the retail chain's daily operations. Subramanian, however, maintains he is committed to the business and is not ready to walk away.

Excerpts from an interview:

Is Subhiksha shutting down?

The company was close to raising equity in September last year when calamity hit global markets. Lenders were unable to extend further lines unless equity was raised.

It actually became a chicken and egg story with the company running out of cash by October.

It was almost like Lehman which collapsed because it could not raise any credit. We could not trade as we ran out of cash. When we could not pay for fresh buying, the trade cycle collapsed.

From when did you start facing the problem?

We had a high reputation for timely payments till June this year. Our rapid expansion and lack of fresh funding (equity or debt) made things tight. There has been a build-up of unpaid bills since August.

Everyone was waiting for equity to be raised and then bank debt to come. But when the equity raising didn't happen, we were caught flat-footed. In September, banks were not even lending to each other; forget lending to us.

In a business like ours, stock and cash are like blood. So the blood supply got choked.

Has the business model failed?

That would be an incorrect assessment. We did not raise enough equity and we paid the price. It was a capital structure problem rather than a business model problem.

This is the model that everyone else is copying -- from Walmart to Pantaloon [Get Quote]. We mucked up on not raising enough equity.

Where did you falter?

Our over-confidence. We perhaps did not budget for a time when no money is there even for a business as good as ours.

What about payment of salaries and trade credit defaults?

Yes, there are arrears on these. Not because we do not want to pay but because we can't pay. Since August- September, our focus has been on paying our creditors and banks.

This led to employee payments and rentals getting delayed. This got into a spiral and really blew up on all of us. Of course, managing 1600-odd stores and more than 15,000 employees (direct and contractual) at a time when salaries are getting delayed to delays is a nightmare and a tragedy.

What's the status now?

We are at a stage where operations are at near-standstill. We are working with the financial stakeholders, lenders and investors to inject liquidity and get the company back on track.

Getting the pieces closed is taking time. All stakeholders have to come to an agreement and it is a difficult time for many of them as well.

We have been working aggressively to ensure that we spend this time improving our technology and supply chain platform.

How much money do you need?

We need a liquidity injection of up to Rs 300 crore (Rs 3 billion). It doesn't matter whether it is debt or equity. The business can get back to near-peak levels once this cash is available.

We have lost a year in this process. We could have reached our 2,300 store and Rs 4,300 crore (Rs 43 billion) turnover target this year. I guess we will do it next year now.

Is Rs 300 crore (Rs 3 billion) such a large amount for your company?

In normal times, not at all. After all, 10 per cent of our equity got sold for Rs 230 crore (Rs 2.3 billion), even after the market crashed in March 2008.

But the market environment has been so tough that everyone is going through some pain or the other.

What makes you confident of revival?

The business fundamentals are strong. We have the best cost structure. We have the smallest balance sheet size for the sales we do.

We have the best senior management talent and we have a model that has worked beautifully on the ground.

Why don't you cut stores instead of aggravating the pain?

It does not suit anyone. If we cut many stores, we would become unviable and there is the human cost, which we need to be sensitive about.