Billionaire Mukesh Ambani’s Reliance Industries Ltd has taken over operations of at least 200 stores of Future Retail and offered jobs to its employees after the Kishor Biyani-led conglomerate failed to make lease payments to landlords , sources said on Saturday.
Reliance Retail, the retail arm of the oil-to-telecom conglomerate, had agreed to take over Future Group’s retail and logistics business for ₹24,713 crore in August 2020, but the deal could not be closed as Future’s warring partner Amazon Could it in the courts citing breaches of certain contracts. Future denies any wrongdoing.
Sources said that several landlords had approached Reliance as Future Retail Ltd (FRL), which was making loss, was unable to pay rent.
Future has over 1,700 outlets, including popular Big Bazaar stories, and has not made lease payments for some of its outlets. Sources said that facing closure, Reliance transferred leases of some stores to its step-subsidiary, RRVL, and sublet them to Future to operate the stores.
Since then it has started rebranding the shops and offered to take all the employees working there on its payroll, he said.
Further, most of the inventory at these stores was being supplied by Reliance JioMart as cash-strapped FRL could not clear the dues to the existing suppliers. Reliance can replace the signage and branding of Big Bazaar with its own brand from these stores.
Amazon has argued that Future violated the terms of the 2019 deal, when the US e-commerce giant invested $200 million in a Future Group unit. Amazon’s position is supported by a Singaporean intermediary.
Without confirming or denying the acquisition of its stores, Future Retail Ltd. in a stock exchange filing said, “Shareholders are aware that FRL is passing through a serious financial crisis. The company has defaulted in its debt service and as such the Already informed, the company’s account has been classified as NPA by the banks.”
FRL said meeting the working capital requirements is becoming increasingly difficult and “due to large dues, termination notices have been received for a large number of stores, and we will no longer have access to such store premises.”
“The ongoing litigation initiated by Amazon in October 2020, and which has continued for the past year and a half, has created serious impediments in the implementation of the plan (Reliance acquisition), resulting in a serious adverse impact on the work of the company, Having said that 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 is finding it difficult to meet its working capital requirements. Incurring losses at the store level is a serious concern and is a vicious cycle where larger operations are leading to more losses,” the filing said. “The company has incurred a loss of ₹4,445 crore in the last four quarters.” FRL said it expects the Reliance deal to be implemented as it will be beneficial to all stakeholders. When contacted, Amazon declined to comment on the development.
FRL challenged its lenders in January to the Supreme Court to avoid facing bankruptcy proceedings over missing bank payments, citing its dispute with Amazon.
The Delhi High Court will hear arguments in the dispute between Amazon and Future Group on February 28, 2022.
In August 2020, the loss-making retail giant proposed to sell its retail, wholesale and logistics arms including Fashion, Koryo, Foodhall and Easyday in Big Bazaar to Reliance for Rs 24,713 crore.
FRL missed the due date of repayment of ₹3,494.56 crore to its lenders on December 31, 2021. The retail venture blamed the delay on an ongoing dispute with Amazon. But she had demanded to repay the loan in the next 30 days i.e. by January 2022, which she too defaulted.
It then sought to sell off its smaller format stores to pay off the first installment of the debt, but Amazon opposed that move as well. The latter volunteered to help FRL with a loan of ₹7,000 crore through Samara Capital, which was rejected by FRL’s independent directors.
Giving relief to Kishor Biyani’s FRL, the Supreme Court recently directed bankers and FRLs to find a solution.
The Delhi High Court was also directed by the apex court to hear the matter from Future Group’s point of view as any order would affect the firm’s many Indian employees, bankers and lenders.