Reliance Retail contributes over 63% of sales of Future Consumer in FY22

Reliance Retail was the largest customer of Future Consumer Ltd (FCL) in FY22, contributing 63.06 per cent of its sales, according to the annual report of the Kishore Biyani-led Future group's FMCG arm.

FCL is engaged in the business of sourcing, manufacturing, branding, marketing and distributing food and processed food items and health and personal care (HPC) products.

In the annual report, the list of top customers who individually contribute more than 10 per cent of FCL's total revenue mentions only two companies -- Reliance Retail and FRL -- which together contributed Rs 854.22 crore of its total revenue of Rs 970.08 crore, or nearly 88 per cent.

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Reliance Retail contributed Rs 611.75 crore, said the report, adding that the failure of the Rs 24,713 crore deal with Reliance Group in April this year had a significant impact on its business.

Future group's flagship company Future Retail (FRL), now facing insolvency proceedings, contributed Rs 242.47 crore, which is around 25 per cent.

Reliance Retail is a subsidiary of Reliance Retail Ventures Ltd, the holding company of all the retail firms under the RIL group.

A year before that, Reliance Retail had accounted for 26.81 per cent of the total sales of Rs 587 crore for the financial year ended March 31, 2021. FRL had contributed around 55 per cent.

According to the company, its current liabilities exceeded its current assets by Rs 306.47 crore. FCL had defaulted in repayment of its debentures of Rs 26.66 crore as on March 31, 2022 , which has been subsequently paid.

"During the current financial year 2022-23, the company is aggressively working on debt reduction plan by monetising few of the assets and investments/ brands," it said.

It has plans to establish business through general/modern trade channels and franchisee operations of Aadhaar and Nilgiris. Additionally, it will rationalise manpower, and capacity utilisation with third-party manufacturers to shape its business in the current fiscal, it said.

In August 2020, Reliance announced a Rs 24,713 crore deal to acquire 19 Future group companies operating in retail, wholesale, logistics and warehousing segments.

FCL was among the companies that were supposed to be transferred to Reliance Retail as part of the deal.

However, the deal was called off by the billionaire Mukesh Ambani-led Reliance Industries Ltd in April after Future group companies failed to secure lenders' approval.

According to FCL, in FY22 it primarily focused on portfolio expansion and gaining market share. Its business operations "with Reliance group by way of supply goods to Reliance stores and Seven Eleven stores provided the potential for higher sales and capacity utilisation."

"However during the end of the fiscal period under review, the failure of Scheme of Arrangement with Reliance and the consequential impact on Future Retail stores had a significant impact on the business and overview on future performance," it added.

To overcome this, FCL plans to change gears by focusing on building a strong distribution network outside of Future Retail on the front end, along with optimising costs at the back end, driving synergies and conserving cash, the annual report said.

The company added that it "strongly" believes the medium to long-term consumption opportunity in India remains intact.

It also plans to continue the growth of its portfolio of food and home and personal care products.

"Key brands including Golden Harvest, Tasty Treat, Karmiq, Desi Atta Company, Mother Earth, Voom, Cleanmate and Caremate are expected to drive Company’s volume and value growth," it said.