Subhiksha to list via acquisition

Food and grocery retailer Subhiksha has taken the acquisition route to list its shares on the stock exchanges. The company wants to avoid an initial public offer in view of the turbulence in the capital market.

Chennai-headquartered Subhiksha Trading Services on Saturday announced that it has acquired 40 per cent stake in Blue Green Constructions and Investments, a non-banking finance company listed on the Madras Stock Exchange, for Rs 2 crore (Rs 20 million). Subhiksha is planning to merge Blue Green with itself and the merged entity will be called Subhiksha Limited.

After the listing, the company is likely to go in for a follow-on public offer next year. The company is expected to list its shares on BSE and NSE apart from MSE, where Blue Green is already listed. The trading in Subhiksha shares are likely to start from January 2009, after the merger is completed.

The boards of Subhiksha and Blue Green are meeting on Monday (June 30) to consider the merger of the two companies. "We have not decided whether it will be a forward or a reverse merger. We will complete the process by December this year," R Subramanian, promoter and managing director of Subhiksha, said.

Earlier, Subhiksha said it has plans to raise Rs 400-500 crore (Rs 4-5 billion) from the stock markets. ICICI Ventures holds 24 per cent in the company.

The acquisition is expected to help Subhiksha to enter the consumer durables retailing as Blue Green has chalked out initial plans for the sector.

"We want to enter the consumer durables space in a big way and Blue Green also had similar plans. Though they have not opened any outlets, they have identified some properties and built initial systems. They needed funds and we thought that it was a good strategy to buy them,'' Subramanian said.

Subramanian said Subhiksha would invest Rs 800 crore (Rs 8 billion) in FY09 to expand its network and add consumer durables to its product portfolio. "It will also enhance value for our stakeholders and help us achieve our objective of becoming a $5 billion company," he added.

Subhiksha plans to expand its retail network to 2200 stores by the end of FY09, from 1480 outlets. "We expect the turnover to reach Rs 4500 crore (Rs 45 billion) this financial year from Rs 2300 crore (Rs 23 billion) in the last fiscal," he said.