Future Retail plans to move up to its offline processes to decrease its failures in the coming months and rather than focus on broadening its online and home delivery firm, the company announced in a stock exchange filing on February 26.
“The firm has been getting it tough to finance the working capital necessities. Heightening losses at store level is a grave problem and is a terrible cycle where larger operations are leading to bigger losses,” the company expanded.
The firm has earned a loss of Rs. 4,445 crore in the last four quarters. Termination reports have been obtained for significant amount of stores due to vast outstanding, and we would no longer have entry to such store premises. “The company is scaling down its systems which will enable us in decreasing losses in the coming months,” it announced.
The retail major also notified that the long stop date for its scheme of agreement with Reliance Industries has been expanded to September 30. “The company is optimistic that the scheme of arrangement formulated with Reliance will be implemented which will be effective for all the stakeholders,” it announced.
Meanwhile, according to reports, Reliance Retail has begun taking over undertakings of Future Retail shops such as Big Bazaar and displaced them with its brand stores. Reports announced Reliance Retail has also begun to offer jobs to employees of Future Retail stores and fetch them on Reliance Retail’s payroll.
In August 2020, the boards of Future Retail Ltd (FRL), Future Group firms, and Reliance Retail Ventures Ltd (RRVL) authorized a Scheme of Arrangement for the transfer of Future Group’s retail and logistics industry to RRVL on a recession sale basis for total consideration of Rs 24,713 crore.
At the time of the treaty, Future Group was in sharp financial trouble. It had defaulted on expenditures to creditors and landlords for its leased outlets. The amount outstanding to the creditors and the owners surpassed a staggering Rs 6,000 crore.
At the same time, Amazon commenced a litigation, thereby slowing the implementation of the Scheme of Arrangement. This deal a blow to the creditors and the holders for Future Retail.
According to people close to the advancement, had the situation prevailed, Future Group would have undergone a severe loss in price and fell over into insolvency. Incapable to bear the burden of defaults, many owners canceled their lease pacts with FRL by January 2021.
Reports announced it was in these dire conditions that various landlords of FRL, who recognized about the Scheme of Arrangement as it was in public domain, approached Reliance for assistance. Taking cognisance of the circumstance, sources announced, Reliance took a slew of measures to allow FRL to proceed with its operations, resist the prospects of insolvency.
Reliance ensured expense of dues to a number of owners by signing lease agreements for their premises and at the same time, it allowed FRL to proceed with its operations at these premises. Reliance has so far incurred an expenditure of over Rs 1,500 crore towards expense of dues, as per reports.
