Future Retail lenders write to SEBI alleging non-disclosure of transfer of lease agreement to Reliance

Forum Gandhi | | Updated on: Mar 09, 2022

A man walks past a Future RetailÕs closed Big Bazaar retail store. | Photo Credit: AMIT DAVE

Lenders said that the move could lower the valuation of the company’s assets.

Lenders to Future Retail have written to the Securities and Exchange Board of India (SEBI), alleging non-disclosure of information related to the lease agreements which have been transferred to Reliance Retail. The lenders said that the move could lower the valuation of the company’s assets.

According to sources, the lenders have raised concerns over at least five points. “There was no disclosure by Future Retail stating that its lease agreement with multiple landlords lapsed and the fact that those leases were taken over by Reliance, which was later subleased by the latter to Future Retail. The closure of these stores means reducing the value of the assets. The lenders will not be able to recover much from the company.”

Sources said that the lenders have expressed concern over diminishing value and, hence, requested the SEBI to “take action”.

On February 26, BusinessLine had reported that over the past 18 months, Reliance has taken over the real estate lease agreements of at least 400 Big Bazaar stores, where Future group defaulted on payment for renewing the lease. The said premises were subleased to Future Retail in order to continue its operations.

However, Future Retail continued to incur losses, which led to Reliance starting the process of taking over those stores. It plans to rebrand these stores to brands owned under Reliance Retail. Reliance will re-employ Future Retail staff working at these locations. According to an estimate provided to BusinessLine, it would employ close to 30,000 employees. 

It was post the media reports that Future Retail informed the SEBI that “termination notices have been received for significant number of stores due to huge outstanding, and we would no longer have access to such store premises. The Company is scaling down its operations which will help us in reducing losses in the coming months. The Company is proposing to expand its online and home delivery business, to increase its reach to the customers”.

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 company has been finding it difficult to finance the working capital needs. Increasing losses at the store level is a grave concern and is a vicious cycle where larger operations are leading to higher losses.” The Kishore Biyani-led company has made a loss of Rs. 4,445 crore in the last four quarters.

A query sent to Future Retail and SEBI remained unanswered. 

Published on March 09, 2022
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