Introduction
Failed to pay its lease rentals to Reliance Industries (RIL), due to which it had been able to wave off its statuary dues, interest, and one-time settlement to banks and continue its operations provisionally.
Over two years, Reliance has had a major uprising by acquiring a company like Balaji Telefilms, Edcast, Eros, Saavn, etc.
Yet another major profit on its way is Future Retail’s Big Bazar which on February 25 shut down most of its stores and even its website.
Beginning of downfall
The first downfall was marked in 2020 when the Kishore Biyani led company had an outstanding debt of 10000 crores out of which 6000 crores were short-term and long-term loans. Followed by currency bonds worth 3500 non–convertible debentures of a total of 200 crores.
This was when RIL tried to cut down a deal with Future for 3.4 billion dollars to acquire its retail assets. However, due to Amazon’s intervention, the deal was impeded.
Amazon, a shareholder in the company with 49 percent of the stake, has been maintained.
Future since its 200 million dollars 2019 deal stands violated before the Supreme Court and Singapore International Arbitration Centre (SIAC).
The closing of the 24,713 crores deal has been extended to March 31 for the judicial clearance waiting.
Reliance’s Plans
The sealing of the deal will be followed by RIL branding more than 200 stores of BB in the country as Reliance Stores.
Massive funding is planned to be given to retail, wholesale, logistics, and warehousing. All the employees will be re-employed to the stores on similar terms of payroll and staffing.
Along with Big Bazar, RIL will also own popular brands such as fbb, Easyday, Nilgiris, Central, and Brand Factory, which were under Future earlier.
As earlier as possible, RIL plans to reopen a few stores in metropolitan cities to mark the completion of the takeover.
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Impact on stocks
Currently, the price is marked at 2256 rupees on BSE, which was down by 1.21 percent, while Future Retail is at 50 rupees which advanced by 10.04 percent.
The stock had opened at 2,247 rupees against the previous value of 2,283 rupees.
Recently, Reliance announced its highest quarter recorded in October – December having a growth of 41.58 % on a year–to–year basis on the rise of the North American shale gas assets.
Conclusion
The company is slowly scaling down its operations to make the transfer smooth and help itself save a few future losses that may incur.
Certain rumours are around RIL, further extending the deadline to September 30, 2022, instead of March for the final sealing of the deal.
The benefit of brand transfer would come to Future Retail, which found it challenging to finance working capital needs last year.
This formed a vicious cycle where the handle of large operations was obstructed due to store level issues on the rise which made a loss of 4,445 crores.
The current outstanding deal would help Future get out of the losses and space out its operations once again smoothly, as visible through the stock price rise after announcing the takeover news.
