InvestorQ : How did Future Retail end up reporting such a huge loss in the Sep-20 quarter?
Mitali Bhutta made post

How did Future Retail end up reporting such a huge loss in the Sep-20 quarter?

NISHA Nayak answered.
2 years ago

Future Retail, which is part of the package that has been sold to Reliance Retail Ventures, reported net loss of Rs.693 crore for the Sep-20 quarter, in stark contrast to a profit of Rs.165 crore that it had posted in the Sep-19 quarter.

The pandemic and the resultant lockdown really took a heavy toll of the business as revenue from operations fell 74% to Rs.1424 crore. However, against a 75% fall in revenues, the total expenses only fell by 58% resulting in fixed costs being inadequately absorbed.

Ever since the pandemic started and the government forced a lockdown of all malls and large retail chains, the Future Retail business has bene struggling to hold its head above water in the midst of a debt crisis. Future group also runs franchises like Big Bazaar, Food Bazaar, Foodhall, Easyday and Nilgiris.

It may be recollected that Kishor Biyani of the Future group had agreed to sell Future Retail along with other wholesale and warehousing and supply chain business to Reliance Retail for Rs.24,713 crore. That deal is currently entangled in a legal battle with Amazon claiming right of first refusal before the RRVL deal was signed.

On the one hand, Amazon accused Future Retail of breaching takeover norms by misleading investors and also indulging in insider trading in the stock ahead of signing the deal. In fact, Amazon had got an award from the Singapore International Arbitration Centre, which Amazon claims the Future group had deliberately disregarded.

Biyani has admitted that the losses were largely caused by the pandemic which caused revenue losses of Rs.7000 crore in the first 4 months due to shut stores. This forced the company into a debt trap and forced them to sell out to Reliance Retail Ventures.

For the first half of fiscal FY21, Future Retail reported net loss of Rs.1255 crore against net profit of Rs.324 crore in the first half of the previous fiscal year.