Reliance Retail Ltd has taken over the operations of at least 200 stores of Future Retail and has offered jobs to its employees after the Kishore Biyani-led group failed to make lease payments to landlords, sources said .
Reliance Retail, the retail arm of the oil-to-telecom conglomerate, had in August 2020 agreed to take over the retail and logistics business of the Future Group for Rs 24,713 crore but the deal couldn’t be closed as Future’s warring partner Amazon went to courts citing violation of some contracts, while Future denied any wrongdoing.
Sources said several landlords had approached Reliance as Future Retail Ltd (FRL) was unable to pay rent.
Future has more than 1,700 outlets, including the popular Big Bazaar stores. FRL was unable to pay lease rent for more than 200 outlets. Facing closure, Reliance transferred the leases of some stores to its step-down subsidiary Reliance Retail and sublet them to Future to operate the stores, the sources said.
It has since started rebranding the stores and offered to take all employees employed there on its payroll, they added.
Sources told ANI that not only Reliance Retail have sublet those stores to FRL, they have also provided working capital to FRL, the amount which could not be known.
In addition, a majority of inventory at these stores was being supplied by Reliance Jiomart as cash-strapped FRL could not clear dues to existing suppliers. Reliance will likely replace Big Bazaar signage and branding from these stores with its own brand.
Without confirming or denying the takeover of its stores, Future Retail Ltd in a stock exchange filing said, “The shareholders are aware that FRL is going through an acute financial crisis. The company has defaulted on its loan servicing and informed earlier, the account of the company has been classified as NPA by the banks.”
FRL said it is finding it difficult to finance the working capital needs and “termination notices have been received for a significant number of stores due to huge outstanding, and we would no longer have access to such store premises.”
“The ongoing litigation initiated by Amazon in October 2020, and which is continuing for the last one and a half years, has created serious impediments in the implementation of the Scheme (Reliance takeover), resulting in a severe impact on the working of the company,” it said, adding the firm is scaling down its operations to reduce losses.
FRL is proposing to expand its online and home delivery business to increase its reach to the customers.
“The company has been finding it difficult to finance the working capital needs. Increasing losses at store level is a grave concern and is a vicious cycle where larger operations are leading to higher losses,” the filing said. “The company has made a loss of Rs 4,445 crore in the last four quarters.”
FRL said it is hopeful that the Reliance deal will be implemented as it will be beneficial for all the stakeholders. Amazon has argued that Future violated the terms of a 2019 deal, the companies signed when the US e-commerce giant invested USD 200 million in a Future Group unit. Amazon’s position has been backed by a Singapore arbitrator.