Future Group lost Rs 7,000 cr revenue in first 3-4 months of COVID-19 pandemic, now defaults on Bond Payments

0
79

Kishore Biyani, the retail Tycoon of India, said at the Phygital Retail Convention “We got into a trap to be very honest with COVID-19. In the first 3-4 months, we lost nearly Rs 7,000 crore of revenue.”

The future group filed an exchange late Tuesday and was unable to service the interest payments that were due Monday. They defaulted on the bond payments amounting to 151.4 million rupees ($2.1 million), on two of the local currency notes. Covid-19, resulting in a loss in the revenue could be one of a major reason for this.

Covid-19 pandemic has caused a lot of harm to Indian Businesses. As a result of it, the retail giant, Future group failed to pay interest on some of its bonds this week. It clearly shows that businesses are still reeling under the pandemic.

Yesterday, on the 14th of October, Future Group founder, Kishore Biyani said that the business has nearly lost Rs. 7,000 cr. of revenue, in the first 3-4 months of Covid19-Pandemic. This was because of the lockdown and hence closing of stores. He eventually had to sell his business to Reliance Industries.

The pandemic bought good news for Mukesh Ambani and Reliance Industries. Reliance, to expand its portfolio of retail business, announced the acquisition of logistics and warehousing business from the future group. They also announced the acquisition of the retail and wholesale business of the Future Group as going concerns on a slump sale basis for Rs 24,713 crore.

Biyani said at the Phygital Retail Convention “We got into a trap to be very honest with COVID-19. In the first 3-4 months, we lost nearly Rs 7,000 crore of revenue.”

He added that “the problem is rent doesn’t stop, interest (on debt) doesn’t stop” saying that there wasn’t any for the company to survive losing that must amount.

He also quoted that “We did too many acquisitions in the last six-seven years. I thought there was no other answer but to exit.”

According to him, the worst for retailers is yet to come. His calculations suggest that in the upcoming few years, it will be very difficult for the physical stores to maintain a good profit. “We have designed business to be profitable at 90 percent of our targets. In any scenario… we will not be able to touch 70-80 percent (of target)… If you look at long-term planning – 5 to 10 years — it will not be easy for physical stores.”

Future Retail owns Big Bazaar, which sells everything. From groceries to cosmetics and apparel. You can find an item costing from 10 rupees to 10 thousand rupees in the retail chain. They also have Future Lifestyle Fashions Ltd that operates fashion discount chain Brand Factory. Through the deal made in August, the Ambani-led firm will acquire all of these businesses.

While Reliance is going to take over the Consumer business, personal care, groceries, fashion. Future group’s financial and insurance businesses are not a part of the deal.

Around 1,550 stores are being operated by Future Retail. It has flagship brands like and Foodhall, WHSmith, Easyday, Heritage Fresh, BigBazaar, and FBB. Around 354 stores are operated by Future Lifestyle Fashion Ltd.

Huge investments made by Reliance are surely going to help Biyani pay off the debts.

However, last week, US e-commerce giant Amazon gave notice to Biyani led Future Group alleging that they are violating an agreement with the e-commerce giant by selling Rs 24,713 crore assets to Reliance Industries.

A spokesperson for the Seattle-based e-commerce giant said “We have initiated steps to enforce our contractual rights,”. “As the matter is sub-judice, we can’t provide details.”

The future group has an unlisted firm name, Future Coupons, which owns a 7.3% stake in Future Retail. Last year Amazon made a deal with the Future Group. Under the deal, Amazon bought a 49% stakes in Future Coupons, along with the right to buy into flagship Future Retail after a period between 3 and 10 years. According to Amazon, the August deal with Reliance is violating contractual rights. The deal however is awaiting regulatory approvals.

Contuining the miseries,

The future group filed an exchange late Tuesday and was unable to service the interest payments that were due Monday.

Future enterprise ltd. failed to pay interest on some of its bonds on Tuesday. They defaulted on the bond payments amounting to 151.4 million rupees ($2.1 million), on two of the local currency notes. Covid-19, resulting in a loss in the revenue could be one of a major reason for this. They missed the obligations last month as well and another group firm sought to defer the debt obligations.

The corporate sector is facing a lot of stress. An example of this is the Future group being unable to interest in two of the local currency notes. Apart from it, there are at least 17 companies that haven’t serviced the principal or interest on rupee notes this year.

The central bank stepped up stimulus measures again this month after the economy slumped and as banks struggle with the world’s worst bad-loan ratio.

The fortunes of Future Group took a further beating after a cash crunch worsened due to the virus outbreak. It was already facing stiff competition from other e-commerce firms amid a mounting debt pile.

 

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here