Future Retail (FRL) surged 8.95% to Rs 49.90 after the media reported that Reliance Industries (RIL) will take over the flagship supermarkets of the Future Group for missed lease payments.
The media reported that RIL has seized control over the sites of 300-odd large-format stores of the Future Group and has been shuttering them in the last few days, for alleged non-payments of rents to RIL. These include 200 sites where FRL's hypermarket chain, Big Bazaar, used to operate. There are also 100-odd locations that housed the outlets of Central and Brand Factory, the fashion stores owned by Future Lifestyle Fashions.FRL announced on 26 February 2022 that it is going through an acute financial crisis. The company has defaulted on its loan servicing and as already informed, the account of the company has been classified as NPA by the banks.
FRL said it has been finding it difficult to finance the working capital needs. Increasing losses at store level is a vicious cycle where larger operations are leading to higher losses. The company has made a loss of Rs 4,445 crore in the last four quarters. Termination notices have been received for significant number of stores due to huge outstanding, 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.
According to the media reports, FRL had received working capital support from RIL, which helped FRL in paying statutory dues, interest, one-time settlement to banks, and continue its business operations. FRL owes RIL towards this working capital support.
RIL has taken possession of those stores that were sub-leased to FRL and all of these stores are loss-making. The reports added that the remaining stores will continue to be run by FRL. In this way, FRL's operating losses will be reduced, reports added.
More From This Section
FRL also informed that the long stop date for its scheme of arrangement with RIL has been extended from 31 March 2022 to 30 September 2022. The company is hopeful that the scheme of arrangement proposed with Reliance will be implemented which will be beneficial for all the stakeholders, it said.
On 29 August 2020, RIL's subsidiary Reliance Retail Ventures (RRVL) announced acquisition of the retail & wholesale business and the logistics & warehousing business of the Future Group as going concerns on a slump sale basis for Rs 24,713 crore.
RIL said that the acquisition of the retail, wholesale and supply chain business of the Future Group complements and makes a strong strategic fit into RIL's retail business.
Later in October 2020, Amazon sent a legal notice to Future Group citing its non-compete agreement with the Kishore Biyani-led chain. According to the notice, the Future-RIL transaction cannot go ahead without Amazon's approval in view of the non-compete clause entered earlier with the retail group.
Amazon has about 5% stake in FRL after it bought 49% in Future Coupons for Rs 1,500 crore in August 2019.
On a consolidated basis, Future Retail reported net loss of Rs 1063.36 crore in Q3 December 2021 as against net loss of Rs 846.92 crore in Q3 December 2020. Net sales surged 86.86% to Rs 2815.68 crore in Q3 December 2021 over Q3 December 2020.
Future Retail of India is leading retailer that operates multiple retail formats in both value and lifestyle segment of Indian consumer market.
Powered by Capital Market - Live News