On 5 January, the National Company Law Appellate Tribunal set aside an earlier order of the National Company Law Tribunal that allowed the Vedanta group’s Twinstar Technologies to take over Videocon Industries through insolvency proceedings, paying around Rs 2962 crore. Videocon owed banks around Rs 62,000 crore and the award of the company was a mere 5 per cent of its debt.
Dissenting creditors, Bank of Maharashtra, SIDBI and IFCI, appealed against the NCLT order. They also brought in an issue of breach of confidentiality, because the quote of Rs 2962 crore by Vedanta was so close to the Rs 2900 crore that the lenders had taken as the minimum acceptable.
Vedanta will go on appeal but regardless of the outcome, this marks the end of the Videocon group, once a corporate major and a household name.
The Indian economy opened up in 1991. Few top industrialists represented to the government opposing the liberalisation. Venugopal Dhoot, Chairman, Videocon Industries was prominent among those.
Soon after 1991, there was a flood of white goods and electronics products. They swept away the Indian industry, notorious for its poor R&D and customer-centricity. Remember Dyanora and Solidaire from Chennai that flourished on screw-driver skills?
Among the few Indian manufacturers who held on to the market were Onida and Videocon. Venugopal Dhoot later said that the company was “harvesting the decline.”
The rise and fall
Tenacious Dhoot quickly diversified, first into oil and gas by picking up 25 per cent interest in the Ravva oil field in the Bay of Bengal and later expanded into mobile phone manufacture. It looked like Videocon Industries, the flagship company of the Videocon group, managed to weather the liberalisation storm. In the first decade of this century, it was still doing good. In 2005, it bought the colour TV business of Thomson for Euro 240 million; in the following year, it took over the electronics business of the beleaguered South Korean Chaebol, Daewoo, for USD 700 mn. In 2005-2006, it made a net profit of Rs 815 crore and paid a dividend of 35 per cent to its shareholders.
Then came the decline. With little R&D to speak of, Videocon’s electronics and white goods business kept losing market share. Its mainstay, the television business, saw market share erosion by the advent of large-sized, wall-mounted plasma TV sets of international biggies.
The group’s telecom business got hit when, on 2 February 2012, the Supreme Court quashed all the Unified Access Service (UAS) licence, including 21 given to Videocon. Videocon tried to salvage the business by participating in the subsequent bids and trading its spectrum rights to Bharti Airtel; but its telecom
businesses, including sales of mobile phones, never took off. The group had invested Rs 7500 crore in Videocon Telecommunications Ltd, a company that had accumulated losses of Rs 6294 crore, as on 31 March, 2017.
Slippery oil business…
As for its oil business, it appears that the company over-stretched itself, by making a series of acquisitions – in Indonesia, Australia and Brazil. The auditors noted in their report for 2016-2017 that the company had “spent significant amounts on acquisitions, explorations and evaluation costs and have liabilities on this account” and that the “ability to continue as a going concern is substantially dependent on their ability to raise funds or continuous financial support from the parent company to meet their operating and capital expenditure.” Videocon responded by saying that it was confident of raising resources. But this period coincided with a sharp fall in global oil prices.
In the year ended 31 March 2018, it reported a consolidated net loss of Rs 5264 crore, which was nearly double the net loss of Rs 2709 crore the company had reported for the earlier 15-month accounts. On 1 January 2018, the SBI filed a petition with the NCLT, under the Insolvency and Bankruptcy Code.
Even as the company’s businesses were running downhill, its image took a beating when it got embroiled in a controversy involving ICICI Bank’s CEO and MD, Chanda Kocchar. The allegation was that a committee headed by her provided loans (of Rs 1875 crore) to Videocon Industries, which Videocon on-lent to a renewable energy company owned by Kocchar’s husband, Deepak Kocchar—just a day after ICICI Bank disbursed the loan to Videocon. – Thungabhadran
