Future Retail says 'going through acute financial crisis' amid ongoing lawsuit by Amazon

Kishore Biyani's Future Retail on Sunday said that it is going through an acute financial crisis and the company is finding it difficult to finance the working capital needs. The company informed that it made a loss of Rs 4,445 crore in the last four quarters.

In a press release, Future Retail said, "The shareholders are aware that FRL is going through an acute financial crisis. The company has defaulted on its loan servicing and as already informed, the account of the Company has been classified as NPA by the banks. The ongoing litigation initiated by Amazon in October 2020, and which is continuing for the last one and a half years, has created serious impediments in the implementation of the Scheme, resulting in a severe adverse impact on the working of the company."

The statement informed that Future Retail has been finding it difficult to finance the working capital needs. "Increasing losses at store level is a grave concern and is a vicious cycle where larger operations are leading to higher losses," it read.

The FRL made a loss of Rs 4,445 crore in the last four quarters, the company said adding termination notices have been received for several stores due to huge outstanding. To reduce the losses, the company is scaling down its operations. However, the company is proposing to grow its online and home delivery business to increase its reach.

"The Company is hopeful that the Scheme of Arrangement proposed with Reliance will be implemented which will be beneficial for all the stakeholders. The above is for your information and record. This may be treated as disclosure under applicable provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015," the company added.

Reliance takes control of around 200 Future Retail stores

According to sources of news agency ANI, Reliance Retail Ltd has taken over the operations of at least 200 Future retail stores and offered jobs to its employees after the firm failed to make lease payments to the landlords. 

Mukesh Ambani-led Reliance retail in August 2020 had agreed to take over the logistics and retail business of the Kishore Biyani-led group for Rs 24,713 crore but the deal coun not be closed as Future's conflicting partner went to courts citing violation of some contracts, while the Future group denied any wrongdoing.

Sources informed that several landlords had approached Reliance as Future group was unable to pay rent. FRL has over 1,700 outlets, including Big Bazaar stores. The company was unable to pay rent for more than 200 outlets. 

"Facing closure, Reliance transferred the leases of some stores to its step-down subsidiary Reliance Retail and sublet them to Future to operate the stores," the sources said.

Image: ANI