Reliance takes over Future Retail stores despite Amazon case
The group led by Mukesh Ambani has started to take possession of the premises of the Big Bazaar and replaced them with its branded stores
Reliance Industries has effectively taken over operations of Future Retail stores and offered jobs to its employees, even as the Kishore Biyani-led group is locked in a bitter battle with e-commerce giant Amazon in several court forums over the sale. of his business. to the retail arm of the oil-telecom conglomerate.
Reliance Retail has begun taking over the premises in which Future Retail operates its stores such as Big Bazaar and replacing them with its branded stores, sources familiar with the development said.
It also began offering jobs to employees of Future Retail stores and integrating them into Reliance Retail’s payroll, they added. When contacted, Amazon declined to comment on the development. After the deal was announced in August 2020, several landlords approached Reliance as Future Retail was unable to pay the rent.
After that, Reliance signed lease agreements with those landlords and, where possible, sublet those premises to Future Retail Ltd (FRL) so that its business could continue, the sources added. All of these stores taken over by Reliance are loss-making and the remaining stores will continue to be managed by FRL.
This way, the FRL’s operating losses will be reduced and it can continue to operate, they said. However, the exact number of stores that would now fall under Reliance Retail could not be determined.
According to an industry source, Reliance will assess and use premises that prove commercially viable. In doing so, Reliance will rehire nearly 30,000 store workers, who would otherwise have lost their jobs.
In August 2020, Future Group led by Kishore Biyani announced a Rs 24,713 crore deal with Reliance Retail Ventures Ltd (RRVL) for the sale of the retail and wholesale businesses, as well as the logistics and logistics verticals. storage.
However, the deal was opposed by Amazon. The US e-commerce giant took Future Group to arbitration at the Singapore International Arbitration Center (SIAC) in October 2020. The case is also pending before other courts such as the Supreme Court, Delhi High Court and the NCLT.
RRVL had to extend the deadline a second time to complete its Rs 24,713 crore deal with Future Group until March 31, 2022, as it is still awaiting regulatory and court clearances. These actions by Reliance will preserve the value of FRL, allow the merger plan to proceed and will also benefit bankers and creditors, the industry source added.
FRL lenders 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 plan (to merge the retail business of Future Group) is implemented, Reliance will pay the consideration according to the terms of the plan, which is in the interest of FRL’s bankers and creditors.
It all started as Amazon litigation delayed implementation of the program and creditors and property owners grew nervous, the source said. Due to persistent defaults in rent payments, the landlords had initiated the termination of the rental contracts and the repossession of the premises.
Around December, Reliance became aware of the above scenario of landlords terminating store leases and the prospect of store closures. Had this continued, the scheme would have been compromised and the value of the FRL would have been destroyed, pushing the company into insolvency proceedings.
Read also : Reliance wins Supreme Court victory in battle against Future Group
This measure is in the interest of all FRL stakeholders, including banks, creditors and employees, as its business continues and its value is preserved, the source said. As part of the agreement, Future Enterprises Limited is the transferee company of Reliance Retail.
Future Group’s 19 companies operating in retail, wholesale, logistics and warehousing would be consolidated into a single entity – FEL – and then transferred to Reliance.
(With agency contributions)