Financial Insights

Reliance Retail improves efforts to take control of Future Retail

As the Future group remains stuck in a legal battle against Amazon, Reliance Retail has increased its efforts to take control of Future Retail (FRL). It is said that several employees at the Kishore Biyani led Future Retail group have received employment offers, asking them to leave the company and join Reliance Retail. This move is seen to be a ‘hostile takeover’ from the Reliance group.

This move comes as FRL is entangled in an 18-month long legal tussle with Amazon over FRL’s proposed sale of assets worth Rs 25000 crore to Reliance. The legal case is pending before the Supreme Court, Delhi High Court, NCLAT and Singapore International Arbitration Centre (SIAC). In 2019, Amazon bought 49% stake in FCPL for Rs 1500 crore, an unlisted entity of the Future Group. Since FCPL held 10% stake in FRL, Amazon claims it gave it rights over FRL. So when the sale of assets to Reliance was proposed, Amazon dragged the Future Group to SIAC court over violation of contract. Recently, Delhi HC has postponed the hearing of the case as the FRL counsel argues that if FRL goes bankrupt, the deal with Amazon for stake sale will not stand & that the offer from RIL was better.

FRL is currently facing insolvency as it owes Rs 3500 crores to its creditors as on 31st December and Rs 9,119 crores to its lenders, including SBI and BOI, as on March 2022. When FRL was unable to repay its landlords, Reliance took over the stores and then sublet them to Biyani’s company. Moreover, a majority of the inventory from these stores was being supplied to Reliance JioMart as FRL was unable to clear its dues.

The development of these stores could include replacement of the Big Bazaar signages with those of Reliance Retail as it is suspected that Reliance will operate these stores without the Big Bazaar branding. Recently, Private Wealth Management firm Bernstein claimed Reliance retail to be the ‘King of India Retail’ on account of the impressive growth posted by the company. Reliance Retail currently posts a growth of 50% YoY and 3x+ times growth as compared to its competitors.

Highlights by Aman Agarwal.

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