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Reliance Retail is now the second-largest customer of Future Consumer Ltd, the FMCG arm of the Future Group.
The FMCG company said that for FY21, sales to Reliance Retail stood at Rs 157 crore. In FY20, Reliance Retail did not purchase products from Future Consumer.
“Apart from Future Retail Limited and Reliance Retail Limited, being the largest customers of the Company, the Company does not have significant credit risk exposure to any single counterparty.
“Concentration of credit risk related to these two customers did not exceed 95 per cent compared to 85 per cent with one customer of gross trade receivable as at the end of reporting period,” per Future Consumer’s annual report.
Future Consumers’ maximum revenue came from Future Retail, which is struggling to stay afloat itself. For the fiscal, Future Retail contributed Rs 475 crore to Future Consumer’s FY21 total revenue as compared to Rs 2,919 crore in FY20. This was a drop of of 84 per cent vis-a-vis the previous fiscal.
However, sales to Reliance Retail brought respite for the FMCG company.
This comes in the light of the fact that in August 2020, Future Retail decided to sell off its retail and wholesale business, and logistics and warehousing business for ₹24,731 crore to Reliance Retail Ventures.
However, this deal was challenged by Amazon who invested Rs 1,400 crore in Future Coupons Private Limited in 2019. The matter is currently in litigation in the apex court of India and in the Singapore International Arbitration Centre.
It was earlier reported that since this deal was taking longer than expected and Future Retail was struggling to stay afloat, Reliance Retail was helping with Future Retail’s operations. In light of this, it doesn’t come as a surprise that Reliance Retail became Future Consumer’s customer in this fiscal.
During the year under review, Future Consumer has recorded revenue from operations of Rs 1184.5 crore as against revenue from operations of 4040.3 crore in the previous year. The loss after tax increased from Rs 216.5 crore in FY20 to Rs 483.3 crore in FY21.
The company said that the loss after tax was “primarily on account of expected credit loss recorded on trade receivables, limited operations due to the pandemic, and one time impairment costs of over Rs 42 crore recognised on account of losses on account of invocation of force majeure by major customer and impairment of brands during the year.”
The company, chaired by FCL Chairman G N Bajpai said that its transactions are done on credit, the Company is exposed to credit risk on trade and other receivables. Any delay, default or inability on the part of the other party to pay on time will expose the Company to credit risk and can impact profitability.
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