Reliance Retail has found another way to take over retail outlets of Future Retail even as the acquisition deal announced in 2020 is stuck in a legal battle with Amazon. Reliance has taken over the real estate lease agreements of at least 400 Big Bazaar stores where Future group defaulted on payment for renewing the lease.
“Instead of taking over Future Retail, Reliance is doing this as a real estate play because retail is all about location and store space. Over 400 such Big Bazaar stores will be rebranded as Reliance Retail. Reliance will re-employ Future Retail staff working at these locations,” said a source.
At least 30,000 employees of Future Retail are being given offer letters and over the next few days, Reliance will start rebranding the stores, the source added.
In August 2020, Reliance Industries had entered an agreement with cash-strapped Future group to purchase the latter’s retail assets for Rs 24,731 crore. However, this deal got caught in a legal tussle after Amazon objected to it. Meanwhile, Future group has been defaulting on payments to lenders and has been finding it difficult to keep the stores open due to a cash crunch..
Future Retail has also defaulted in payment of dues to the owners of the leased premises and many have initiated termination of the lease agreements for repossession of the premises.
“If the lease expires then Big Bazaaar would have had to shut down the stores. That would destroy the value of Future Retail and the lenders would have dragged the company to insolvency. All of these stores were loss-making. In order to protect the value of the company, Reliance stepped in to take over the lease and then further sub-lease all these premises back to FRL so that its business could continue. Reliance had also provided working capital support as well as inventory support to Future Group’s company,” said a source.
But Future Retail continued to incur losses. Future Retail’s net loss was Rs 1,063.36 crore for the third quarter ended December 31, 2021. The company had posted a net loss of Rs 846.92 crore in the corresponding quarter last year. Since the stores were now subleased to FRL, the Kishore Biyani-owned company also owed Reliance a few thousand crores towards sublease rentals and working capital support, which RIL has been providing to its stores.“
To prevent further bleeding, Reliance has now taken over 400 stores for its own retail operations. Reliance will take stock of the inventory at the said stores, calculate against the said dues and remit the rest of the money back to Future Retail. The rest of the stores will continue to be run by Future Retail,” the source said.
“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 company is scaling down its operations, which will help us in reducing losses in the coming months. The company is proposing to expand its online and home delivery businesses, to increase its reach to the customers,” Future Retail informed the exchanges on Saturday.