Business

Reliance Industries Defends Future Retail Store Acquisitions


Over the months, Reliance has taken over the leases of more than 900 of Future’s 1,500 stores

New Delhi:

India’s leading retailer, Reliance, has privately defended the sudden takeover of debt-laden rival store Future Retail, saying a $ 634 million increase in fees forced it to act beyond expectations, a company letter showed.

The acquisition was part of a race to dominate the $ 900 billion retail sector that sparked a heated dispute in which the Supreme Court of India will decide whether Reliance or Amazon.com Inc will acquire Future’s assets.

The March 8 letter, seen by Reuters, revealed for the first time Reliance’s stance on the events of the night of Feb. 25, when staff suddenly showed up at many of its rival stores to control missed lease payments.

The move shocked not only Future but also Amazon, which has cited certain contract breaches to be legally blocked, since 2020, of the $ 3.4 billion deal between the two Indian giants.

In the letter, Reliance said it “goes beyond what can be expected” to keep the Future “out of danger”, as it takes “significant steps” to ensure business continuity in the Future and ensure “no barriers” to their deal.

These measures include financial support of Rs 4,800 crore ($ 634 million), comprising Rs 1,100 crore unpaid lease rent and Rs 3,700 crore working capital.

For months, Reliance has taken over the leases of more than 900 of Future’s 1,500 stores, while still allowing the company to run them.

As Future proved unable to pay outstanding fees and losses in its retail operations increased, Reliance faced “compelling circumstances” and decided to exercise its legal right to take over the store, the letter added.

Neither Reliance nor Future immediately responded to a request for comment.

The future, which is contemplating bankruptcy as its losses mount, previously called Reliance’s move “drastic and unilateral”.

Before Amazon blocked it, Reliance, led by India’s richest man, Mukesh Ambani, had proposed a $ 3.4 billion deal to buy Future’s retail, wholesale and logistics operations, as well as several other businesses.

But following Reliance’s abrupt takeover of its store, Future asked for some guarantees in a March 2 letter, also seen by Reuters, asking whether Reliance would stick to the deal without changing its value or terms.

In its response on March 8, Reliance said Future’s request for guarantees should be seen “based on rapidly evolving circumstances”.

It added, “When the scheme (business) is implemented, it will follow its terms.”

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