Chennai-based retail chain Subhiksha has closed around 90 grocery stores across the country over the last one month or so. The company has also significantly reduced the inventory levels in its mobile retail arm —Subhiksha Mobile stores.

“We were paying huge rentals for these stores, which was a huge drain on the company’s finances. This, coupled with less-than-expected footfalls, drove the operational costs to unsustainable levels,” a senior Subhiksha executive told Financial Chronicle on condition of anonymity.

When contacted, the managing director of Subhiksha, R Subrama-nian, said, “We might relocate some stores to take advantage of low rent options.” He said the company presently ran more than 1,600 stores and was not planning to shut any of its stores.

On reduced inventories at the Subhiksha Mobile stores, Subramanian said, “Inventories are a function of rationalisation. In fact, we are deliberately reducing inventories as we are in a transition to SAP (a kind of software). We expect all our stores to convert to SAP by next month.”

High rental rates have always been the bone of contention for organised retail owners. The retailers had taken up space on rentals as high as Rs 250 per sq ft. “At one point of time, the retailers were paying close to 40 per cent of their operational cost as rent, leaving hardly any room for profits,” said a senior Delhi-based retail analyst.

The high rental rates could have been justified had the sales figures been high enough to offset the rental rates. Retailers, expecting a boom in the market, had rented out space for stores at key locations throughout the country, but less-than-expected footfalls could not justify the huge operational costs.

Subhiksha started its operations in 1997 as a single store in Chennai. Today, the retail chain has a pan-India presence.

Its stores are located across Delhi, Uttar Pradesh, Punjab, Haryana, Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu.