Took steps to ensure biz continuity: RIL defends takeover of Future stores

Reliance Industries (RIL) wrote to Future Retail (FRL) on March 8 explaining its stance over the takeover of 947 stores in February.

Future Retail had earlier written to RIL over the takeover of its stores, according to three people in the know.

According to a Reuters report, RIL said in its letter to Future Retail that it is, “well and truly beyond what can be expected” to keep Future (Group) “out of harm’s way,” as it took “significant steps” to ensure business continuity at Future and make sure there was "no impediment" to their deal.

The letter also said Future Group’s request for assurances had to be seen “in the light of the rapidly evolving circumstances”. RIL also assured Future Retail in the letter that “as and when the scheme is implemented, it will be in accordance with its terms”.

A source in the know had earlier told Business Standard that Future Retail had not paid lease rentals to RIL and added that the latter extended working capital support thanks to which Future Retail has been able to pay statutory dues, interest, one-time settlement to banks, and continue its business operations.

The source had also said that Future Retail owes RIL towards this working capital support.

RIL took possession of those stores – all were loss-making — that were sub-leased to Future Retail. The source added that the remaining stores will continue to be run by Future Retail. In this way, Future Retail’s operating losses will be reduced.

Future Group has approximately 1,500 stores, of which 947 are in RIL’s possession.

Another source had explained that while RIL took over the stores, it also ended up taking over a lot of physical assets, such as escalators and chillers. Future Group had purchased a bulk of its fast-moving consumer goods and food stocks from JioMart and was making payments in a staggered manner, a chunk of fashion and general merchandise stocks belonged to Future Group.

The earlier mentioned source had also then said that RIL’s actions preserve the value of Future Retail and will allow the scheme it signed with Future Group decided to sell its retail, logistics and warehousing businesses to Reliance Group for almost Rs 25,000 crore in 2020 to continue.

In a stock exchange filing in March, Future Retail said it was committed to taking all actions necessary to seek value adjustments and reversal of takeover of stores by the Reliance Group. Future Retail also said its board had held two meetings and notified Reliance that such a “drastic and unilateral action” had not only come as a “surprise” to Future Retail but also complicated the positive scenario, which had started building up after the Competition Commission of India’s order in December in its favour.