Reliance Industries has effectively taken over the operations of Future Retail stores and offered jobs to its employees, even as the Kishor Biyani-led conglomerate has started its business with e-commerce major Amazon. is locked in a bitter fight at several judicial fora over the sale of Rs. For the retail arm of the oil-to-telecom conglomerate.
Reliance Retail has started taking over the premises in which Future Retail is operating its stores viz. Big Bazaar Sources close to the development said that and replaced them with their own brand stores. It has also started hiring employees of Future Retail stores and bringing them on the payroll of Reliance Retail, he said.
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. Subsequently, Reliance signed lease agreements with these landlords and, wherever possible, sub-lease these premises to Future Retail Ltd (FRL) so that its business could continue, the sources said.
All these stores which are being taken over by Reliance are making loss and the remaining stores will continue to be operated by FRL. In this way, the operating loss of FRL will come down and it can continue as an ongoing concern, he said.
However, now the exact number of stores that are under Reliance Retail is not known.
According to an industry source, Reliance will evaluate and utilize such premises which are found to be commercially viable. In doing so, Reliance will re-employ around 30,000 store employees who would otherwise have lost their jobs.
In August 2020, Kishore Biyani-led Future Group announced a deal worth Rs 24,713 crore with Reliance Retail Ventures Limited (RRVL) for the sale of retail and wholesale business and logistics and warehousing verticals.
However, this deal was opposed by Amazon. The US e-commerce giant dragged Future Group to the Singapore International Arbitration Center (SIAC) for arbitration in October 2020. The matter is also pending before other forums like Supreme Court, Delhi High Court and NCLT.
RRVL had to extend the deadline for the second time to complete its Rs 24,713 crore deal with Future Group till March 31, 2022, as it is still awaiting regulatory and judicial approval.
The industry source said Reliance’s action will preserve the value of FRL, allow the merger plan to continue and will also be beneficial to bankers and creditors.
FRL’s lenders have already classified the account as a non-performing asset (NPA) after defaulting on payments of Rs 3,494.56 crore to banks and lenders in January.
According to an industry source, when the scheme (to merge Future Group’s retail business) is implemented, Reliance will pay the consideration as per the terms of the scheme, which is in the interest of the bankers and creditors of FRL.
The source said it all started when Amazon’s petition was delaying the implementation of the plan and the creditors and landlords of the premises were being harassed.
Due to frequent defaults in rental payments, the landlords took the initiative to terminate the lease agreements and take back the premises.
Around December, Reliance came to know about the above scenario that the landlords have terminated the leases of the store and the store is likely to be closed.
Had this continued, the plan would have been in jeopardy and the value of FRL would have been lost, pushing the company into bankruptcy proceedings.
The source said the move is in the interest of all stakeholders of FRL including banks, creditors and employees as its business continues and its value is protected.
As part of the deal, Future Enterprises Limited is a transferee company of Reliance Retail.
Future Group’s 19 companies dealing in retail, wholesale, logistics and warehousing will be consolidated into a single entity – FEL – and then transferred to Reliance.
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