Future Retail's losses widen in Q2 as expenses rise

Future Retail’s (FRL’s) losses widened in the July-September quarter (second quarter, or Q2) of 2021-22 (FY22) as expenses rose in the quarter. The retail chain reported a net loss of Rs. 1,117 crore in Q2FY22, compared with a loss of Rs. 692.4 crore in the corresponding quarter a year ago. Its overall expenses in the quarter was up 60.4 per cent at Rs. 3,500.8 crore.

The company also reported an operating loss of Rs. 339 crore, compared with an operating profit of Rs. 47 crore in the year-ago quarter.

However, the retailer’s revenue was up by 66.3 per cent in the quarter at Rs. 2,369 crore.

Independent directors of the company wrote a second letter to the Competition Commission of India (CCI) stating that American e-commerce major Amazon never intended to invest in Future Coupons (FCPL) and actually wanted to invest in FRL through the foreign portfolio investment route.

However, due to Amazon’s concerns arising out of Press Note 2 (PN2), the investment structure was changed and hence, Amazon decided it would invest in FCPL, and FCPL would acquire 9.82 per cent of FRL.

In 2018 through PN2, India amended its foreign direct investment regulations for e-commerce marketplaces, restricting companies from selling products on marketplaces having equity from the same e-commerce platform.

The fight between Amazon and FRL started last year after FRL’s merger with Reliance Retail, and alleged that the transaction breached its agreement with the US-based e-commerce firm. Amazon had cited its non-compete agreement with the Kishore Biyani-led chain, after which Amazon took the matter to the Singapore International Arbitration Centre (SIAC) and got a favourable ruling in October last year.

In August this year, the Supreme Court (SC) had ruled in favour of Amazon, holding the SIAC award against Future-Reliance deal enforceable in India. In September this year, in a major relief to Future Group, the SC stayed proceedings before Delhi High Court, ordering a no-coercive action. The court also directed the National Company Law Tribunal, CCI, and the Securities and Exchange Board of India not to pass any final order in relation to the dispute for four weeks.

In August 2019, Amazon had acquired a 49 per cent stake in FCPL — the promoter entity of FRL — for around Rs. 1,500 crore.