Reliance group, support companies ask 5,000 employees to go

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Cuckoo Paul, Forbes-Network18.

 

MUMBAI

 

The global financial crisis has hit India's largest private sector conglomerate. The Reliance group and its associate companies have asked about 5,000 employees to resign, according to inside sources. A significant portion of the staff reduction has come from the retail operations.

 

Some of the companies involved in the exercise are Reliance Retail, Reliance Logistics, Reliance Info Systems and Reliance Corporate Park. The resignations, as against a straight lay-off, leave employees in a better position to find new jobs.

 

A Reliance Industries spokesman did not comment on a detailed questionnaire sent by Network18, asking for more time to respond.

 

The associate companies have been supporting Reliance Industries' core operations for several years. But now, divisions within these companies are being shut, sources from within the companies said. Most of the affected employees are permanent, middle-level managers.

 

Some employees said as many as 3,000 people in the retail business could be sent home, as the proposed expansion had been scaled back after an abrupt change in economic prospects in the last six months.

 

The group entered the retail business in 2006 with a planned investment of Rs. 25,000 crore. It was a strategic move designed to take the group beyond its core commodity business and was supported by a slew of subsidiary and associate companies like Reliance Gems and Jewels, Reliance Supply chain, Reliance Dairy Production and Reliance Agri Products. But soon protests by small retailers and then the economic slowdown hampered aggressive expansion plans. Now, employees in nearly all departments related to the retail business are being fired, said a former employee, who recently left.

 

In some states, the protests and slowdown have meant the company has decided not to open stores there. Real estate teams are down to one person in such places and other places. While electronics store chain `Reliance Digital' was supposed to have 20- 25 stores in the first year but actually opened only 3- 4, the hypermarket format was supposed to open over a hundred stores but has opened only two.

 

In the footwear store chain and health and wellness store chain, Reliance had hired aggressively to keep up with the expansion, but plans didn't materialize..

 

Reliance Logistics, a Mumbai-based company managed by the RIL chairman's cousin Niraj Ambani, is one such case. The privately held company that was started in 2001, employs about 2,600 people, of which about 1,000 have been asked to leave in the last two weeks. Marketing, process quality and business planning departments in the company are being shut down.  Employees were given oral orders to resign and have been given the option of staying home and collecting their salaries for the next three months, sources who did not want to be named said.

 

Since the beginning of the year, this company had been doing third-party work for other companies in the retail business like ITC and Hindustan Unilever. But this has dried up.

 

Sources in Reliance Retail Limited, a direct RIL subsidiary, said many employees in support functions including information technology have been put on notice. The retail rollout has slowed down considerably specially in Uttar Pradesh, Kerala and West Bengal.

 

Reliance East West Pipelines has completed construction of the pipeline that will transport gas from the east coast to markets in western India. In better times, RIL would have deployed the white collar workforce to other projects. This time around, 400 employees are anxious as no orders have been received. 

 

Cuckoo Paul is Associate editor with the magazine to be launched by Network 18 in alliance with Forbes USA. Special Correspondent Saumya Roy contributed to the report.