Subhiksha Trading Services, which operates about 1,600 discount stores across the country, ran out of cash last October, and has been struggling to pay wages, rentals and its suppliers, its founder R. Subramanian said.

"The properties have become vulnerable targets," he said.

"We are taking all steps to protect our assets. It is really sad that we have been unable to prevent this so far."

Over the last few days, Subhiksha stores in several parts of the country have been damaged and warehouses looted because the company has been unable to pay its employees and the security agency that provides protection, he said.

The perpetrators could be "disgruntled vendors, employees or anti-social elements taking advantage of the situation", he said, adding in some cases even owners of the real estate the company uses have broken locks and taken away assets.

Chennai-based Subhiksha, which launched its first discount grocery store in 1997, was considered a pioneer in India's highly fragmented retail industry which is estimated at more than $350 billion worth of annual sales and forecast to nearly double by 2015.

Rapid economic growth and rising middle-class incomes had encouraged a boom in the industry, with large conglomerates including Reliance Industries, the Tata Group and Bharti Enterprises setting up shop and hiring tens of thousands.

The industry has also drawn global heavyweights including Wal-Mart Stores Inc, Tesco Marks & Spencer and Metro AG in the cash-and-carry segment.

Subhiksha, which had more than 15,000 employees, expanded quickly on borrowed cash, with its plans to raise money from the stock market last year shelved by a volatile market.

As the credit crunch bit, banks also became wary of lending.

"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," Subramanian said.