Subhiksha's margins are much lower than the industry norm. While chains like TruMart plan to operate consistently at gross margins of 20 per cent or so, the Subhiksha model pencils in a gross margin of only 15 per cent.

How does that work? Subramanian explains that net margins will improve from around 1.5 per cent (post-extraordinaries) at present to about 2.8-3 per cent as costs get absorbed over a larger base.

From revenues of Rs 811 crore (Rs 8.11 billion) in the year ended March 2007, Subshikha is aiming for Rs 5,000 crore (Rs 50 billion) by March 2009 - already, monthly turnover is close to Rs 250-300 crore (Rs 2.5- 3 billion), which will go up further to Rs 400 crore (Rs 4 billion) by 2009.

It's already got scale. All Subhiksha really needs now, says Mishra, is technology: investments in the back end and supply chain. Surely it can afford to hike margins up a bit? Subramanian disagrees. The price at which it sells now is the price at which the kirana buys from the distributor.

"We want to keep prices down at these levels because we want to keep the competition at bay," he explains. Future Group's Mall predicts that the new winning formats will emerge in the next few years. With some luck and more effort, Subhiksha may well be one of them.