Last week on 25 February, Future Retail shut most of its Big Bazaar stores. Future Retail’s website is down as it missed lease payments to Reliance Industries (RIL) that will open most of the 200 Future Retail stores as Reliance stores in the next week.
RIL is in the process of taking stock, re-branding, and transferring 30,000 Future Retail and Future Lifestyle employees onto the rolls of its manpower and staffing firm Reliance SMSL, according to a source.
The first tranche of Future-turned-Reliance stores is set to be opened as early as in the next two days.
A source said that Future Retail had not paid lease rentals to RIL and added that the latter extended working capital support thanks to which Future Retail has been able to pay statutory dues, interest, one-time settlement to banks, and continue its business operations.
The source said Future Retail owes RIL towards this working capital support.
RIL has taken possession of such stores that had been sub-leased to Future Retail and all of these stores are loss-making. The remaining stores will continue to be run by Future Retail, sources said. This way, Future Retail’s operating losses will be reduced.
RIL’s actions preserve the value of Future Retail and will allow the scheme — Future Group decided to sell its retail, logistics and warehousing businesses to Reliance Group for almost Rs 25,000 crore in 2020 — to continue.
Neither Future Group nor RIL replied to the emails sent to them before the time of publication of this report.
Meanwhile, the Delhi High Court is hearing four cases in the legal battle between Future Group and e-commerce major Amazon. The matter will come up for hearing on Monday. The National Company Law Appellate Tribunal (NCLAT) is also hearing the US firm’s case challenging the Competition Commission of India’s (CCI) order cancelling its 2019 deal with Future Coupons.
In a stock exchange filing on 26 February, Future Retail said it received termination notices for a significant number of stores because of huge outstanding dues, and it 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 business, to increase its reach to the customers,” the company said in the exchange filing.
In 2020, landlords had begun to terminate the lease agreements with Future Group and several of them approached RIL. The lease for those stores was then signed with the Mukesh Ambani-run company and was sub-leased to Future Group. The debt-ridden retail chain has over 1,700 stores across various brands, which include Big Bazaar, Fbb, and Central.
The exchange filing also said, “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.” Future Retail said it has made a loss of Rs 4,445 crore in the last four quarters.