Reliance Industries is in the process of transferring 30,000 Future Group employees to its staffing and manpower firm
Reliance Industries is in the process of transferring over 30,000 Future Retail and Future Lifestyle employees and has also taken over 200 Future Group stores that are now being re-branded as Reliance stores, according to a source in the know.
The source said that in 2020 landlords had begun to terminate the lease agreements with Future Group and several landlords approached Reliance Industries and the lease for those stores were signed with the Mukesh Ambani-run company and were then 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.
In a stock exchange filing, Future Retail said that it received termination notices for significant number of stores due to 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 Kishore Biyani-led company said in its stock filing.
As Future Group reduces its store count, Reliance will now rebrand those 200 stores as its own stores.
Reliance is now in the process of also transferring 30,000 Future Retail and Future Lifestyle employees over to its manpower and staffing arm called Reliance SMSL. Business Standard has also reviewed the offer letter given by Reliance SMSL to Future Group employees. Reliance SMSL has started giving out these offer letters to Future Group employees since February 25 (Friday).
According to a distributor who was a supplier to Future Group said that for the last six to eight months he has been supplying stocks to Future Group but has been billing Reliance for the same.
E-mails sent to Reliance Industries and Future Group are yet to be answered.
Future Retail also said in its stock exchange filing: “The company has defaulted on its loan servicing and as already informed, the account of the company has been classified as NPA (non-performing asset) by the banks. The ongoing litigation initiated by Amazon in October 2020, and which is continuing for the last one and a half years, has created serious impediments in the implementation of the Scheme (scheme of transferring its assets to Reliance Retail Ventures), resulting in severe adverse impact on the working of the company.
In January, Future Retail missed repaying its lenders Rs 3,494.56 crore on December 31, 2021 and had sought a 30-day extension to pay its debt but it wasn’t able to do so.
Two senior bankers said while the Reliance deal remains the most worthy option for Future Retail, lenders are attempting to restructure exposure to the entity under Reserve Bank of India resolution framework June 7, 2019. This account has already become a non-performing asset in this quarter (inability to pay principal). It is servicing interest payment obligations. That is how domestic lenders allowed the company to service the overseas interest payment due on the dollar bonds.
This case has too many legal dimensions, making the situation complex to take one stand. Hope is for early legal verdict to make way for a substantive resolution for Future Retail, bankers said.
The 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.
Future Retail also said in the filing that it is hopeful that its deal with Reliance will be implemented, which will be beneficial for all stakeholders. The company has been caught up in a litigation initiated by Amazon in October 2020 and has been continuing for the last 18 months, Future Retail said. The company said the legal battles created serious impediments in the implementation of the scheme, which has resulted in severe adverse impact on the working of the company.
Delhi High Court is hearing four cases in the legal battle between Future Group and e-commerce major Amazon and National Company Law Appellate Tribunal (NCLAT) is also hearing the US ecommerce firm’s case challenging Competition Commission of India’s (CCI), order which cancelled its 2019 deal with Future Coupons. Arguments are on in both cases and will come up for hearing on February 28 (Monday).
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