RELIANCE TAKES CONTROL OF FUTURE RETAIL STORES, OFFERS JOBS TO EMPLOYEES

Reliance Industries has effectively appropriated the operations of Future Retail stores and has offered jobs to its employees, whilst the Kishore Biyani-led group is locked in a battle with e-commerce major Amazon at several judicial forums over the sale of its business to the retail arm of the oil-to-telecom conglomerate. Reliance Retail has begun to take possession of the premises during which Future Retail is working its stores like Big Bazaar replacing them with its brand stores, according to the sources on the brink of the event. They further added that It has also been offering jobs to employees of Future Retail stores and conveying them on Reliance Retail's payroll. As Future did not make the payments, Reliance has decided to run and rebrand about 200 outlets that might rather be closed, they said. During a statement to Indian stock exchanges, Future said "termination notices are received for a significant number of stores" to which it'll "no longer have access." the corporate is "scaling down its operations which can help us in reducing losses within the coming months," it said, without mentioning


Reliance's decision to take over many such outlets. Reliance and Amazon didn't answer requests for comment. Future - which has around 1,700 outlets, including popular Big Bazaar stores - has been unable to form lease payments for a few of its outlets, which resulted in Reliance transferring the leases of some stores to its name and sublet them to Future to work the stores, said the sources.

After announcing the deal in August 2020, several landlords approached Reliance as Future Retail was unable to pay the rent. Later, Reliance signed leased agreements with these landlords, and wherever possible, it sub-leased these premises to Future Retail Ltd (FRL) so that its business could continue, the sources added.


All of those stores which Reliance is taking up are loss-making and therefore the balance stores will still be traveled by FRL. In this way, FRL's operating losses are going to be reduced and it can continue as a going concern, they said. As per an industry source, Reliance will evaluate and use such premises which are found to be commercially viable. In doing so, Reliance will re-employ nearly 30,000 store staff, who would have otherwise lost their jobs.

In August 2020, the Kishore Biyani-led Future Group announced a Rs 24,713-crore effect Reliance Retail Ventures Ltd (RRVL) for the sale of the retail and wholesale business, and therefore the logistics and warehousing verticals.

However, the deal was opposed by Amazon. The US e-commerce giant dragged Future Group to arbitration at the Singapore International Arbitration Centre (SIAC) in October 2020. The matter is additionally pending before other forums like the Supreme Court, Delhi supreme court, and NCLT.

RRVL had to increase the timeline a second time for completing its Rs 24,713 crore affect Future group to March 31, 2022, because it still awaits regulatory and judicial clearances.

These actions of Reliance will preserve the worth of FRL, allow the scheme of merger to continue, and can even be beneficial to bankers and creditors, the industry source added.


Lenders to FRL have already classified the account as a non-performing asset (NPA) after it defaulted on payment of Rs 3,494.56 crore to banks and lenders in January.

According to the industry source, when the scheme (to merge Future Group's retail business) is implemented, Reliance can pay the consideration following the terms of the scheme, which is the interest of bankers and creditors of FRL.

All this started as Amazon's litigation was delaying the implementation of the scheme and therefore the creditors and landlords of premises were getting edgy, the source said.

Due to continuing defaults on rental payments, the landlords had initiated termination of the lease agreements and repossession of the premises.


Around December, Reliance came to understand the above scenario of the landlords terminating store leases and therefore the prospect of stores getting shut.

If this had continued, then the scheme would are jeopardized, and therefore the value of FRL would are destroyed, pushing the corporate towards insolvency proceedings.

The step is within the interest of all stakeholders of FRL including banks, creditors, and employees as its business continues and its value is preserved, the source said.

As a part of the deal, Future Enterprises Limited is the transferee company to Reliance Retail.

Future Group's 19 companies operating in retail, wholesale, logistics, and warehousing would be consolidated into one entity -- FEL -- then transferred to Reliance.