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Reliance sends notices to scrap sub-leases of 950 Future Retail stores

In a fresh twist in the fight to gain supremacy in the Indian retail market, billionaire Mukesh Ambani’s Reliance Retail has slapped notices on Future Retail for terminating sub-leases of 950 stores it had taken over previously. 


In stock exchange filings, the Kishore Biyani-led, debt-laded Future Group firms said that they had been served notices to terminate the lease of 835 Future Retail stores and 112 Future Lifestyle stores. Last month, Reliance Retail had taken over store spaces for which the Future Group could not pay lease rent. 


These were then sub-let to the Future Group for operation. “The company has received certain termination notice(s) in respect of sub-leased properties from Reliance entities,” Future Retail said in a stock exchange filing on Thursday. 


“So far notices have been received in respect of 342 large format stores (such as Big Bazaar, Fashion@ Big Bazaar (fbb)) and 493 small-format stores (such as Easyday and Heritage stores) of the company,” it said. 


Separately, Future Lifestyle Fashions said that it had received termination notices for 34 Central stores and 78 Brand Factory stores. “These stores have been historically contributing approximately 55 per cent to 65 per cent of retail revenue operations of the company. As of now, these stores are not operational for stock and inventory reconciliation,” it said. 


Reliance Retail, the retail arm of the oil-to-telecom conglomerate, had in August 2020 agreed to take over the retail and logistics business of the Future Group for Rs 24,713 crore. But the deal could not be closed as Future’s warring partner Amazon had gone to courts, citing violation of some contracts. 


Future denies any wrongdoing. Future Group entities said that they were “in continuous discussion with the Reliance Group for maintaining status quo and safeguarding the interest of various stakeholders”. Future, which owns more than 1,700 outlets, including the popular Big Bazaar stores, had not paid lease rents for some of its outlets. 


This is because the company is neck-deep in losses and even defaulted on loan repayments. Facing closure, Reliance had transferred the leases of some stores to its step-down subsidiary, RRVL and sublet them to Future to operate the stores, the sources said. 


In addition, a majority of inventory at these stores was being supplied by Reliance Jiomart as a cash-strapped FRL could not clear dues to existing suppliers. 


Reliance would likely replace Big Bazaar signages and branding from these stores with its own brand. These sub-leases were being terminated. It is not clear why Reliance took this decision. Reliance had since then started rebranding the stores and offered to take all employees employed there on its payroll, they added. 


Amazon had argued that Future had violated the terms of a 2019 deal that the companies signed when the US e-commerce giant had invested $200 million in a Future Group unit. Amazon’s position has been backed by a Singapore arbitrator. 


Future had in January challenged its lenders in the Supreme Court to avoid facing insolvency proceedings over missing bank payments, citing its dispute with Amazon. 


In August 2020, the loss-making retail giant had proposed to sell its retail, wholesale and logistics arms – including Fashion at Big Bazaar, Koryo, Foodhall and Easyday – to Reliance for Rs 24,713 crore. 

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