Welcome Finance Enthusiasts !!

On 26/02/2022 I went to Big Bazaar for shopping only to find the shutters down. Such a big store closed with a simple note on the shutter saying “Closed for stock taking”. It is suspicious, don’t you think?

About Future Retail:

Future Retail has 1388 stores across 400 cities. This entity owns and runs Big Bazaar, Nilgiris, FBB, Easyday, Central, and Brand Factory.

Current Situation of Future Retail:

Future Retail Ltd (FRL) has been finding it hard to pay its lease payments so it sublet its loss making properties to Reliance. Reliance made the lease payments and recovered it from Future Retail. FRL continued to operate the stores under its name. Now there was too much outstanding to continue this. So on 26/02/2022 Reliance Group took over the operations of FRL and have offered jobs to all its employees. The stores have been shut and the website has been down too. In the coming days Reliance plans to re-brand all the stores. Recently, FRL in its BSE filling reported a loss of Rs 1063.36 crore for the quarter ending 31/12/2021. The loss has widened as the company reported loss of Rs 846.92 crore.

How did Future Retail end up in this situation?

a. Future Retail has 1388 stores across 400 cities. In 2019 FRL and Amazon signed a deal of Rs 2000 crore. Amazon acquired 49% stake in Future Coupons (Promoter Company of Future Retail) through convertible warrants.

b. In August 2020, Reliance Retail Ventures Limited (RRVL) acquired the retail, wholesale, logistics and warehousing of the Future Retail Ltd (FRL).

c. This really pissed off Amazon. The entire purpose of entering the deal was to grab hold FRL’s retail market share. It objected the acquisition stating there was a violation of the non-compete clause. Since then both of them have been engaged in a legal tussle.

d. In December 2021, Competition Commission of India (CCI) suspended the 2019 deal alleging the US e-commerce giant of concealing facts while seeking approval from them. The regulatory body also imposed a penalty of 200 crore on Amazon.

What is next for Future Retail

NCLT allows Future Group to convene meetings to approve the sale of assets to Reliance. Future and Amazon have decided to go for out-of-court settlement.