The lenders and the National Company Law Tribunal (NCLT) await the Bombay High Court's green signal to start insolvency proceedings against Videocon Industries, while chairman Venugopal Dhoot and his team scout for buyers for the group's overseas hydrocarbon assets. He will have to find a buyer and settle the dues before the case is admitted in NCLT for insolvency proceedings, say legal sources. "Videocon should be able to counter the claims of defaults at NCLT when it comes for hearing. For that, it will have to settle the dues before being admitted in the tribunal," says a corporate lawyer.
In early January, the country's largest lender State Bank of India (SBI) had filed separate insolvency proceedings against two Videocon group companies, which were part of the second list of big corporate defaulters put out by the Reserve Bank of India (RBI). However, before it was admitted in NCLT, Videocon, which owed over Rs 43,000 crore to the lenders, approached the Bombay High Court against SBI and RBI, and sought a stay on the move. The high court has slotted the case for hearing on April 17.
Dhoot recently told Mint newspaper about his plans of selling the group's lucrative oil assets to make repayments in 2-3 months. He said that the Cayman Islands-based holding company of oil assets, Videocon Hydrocarbon Holdings, has received interests from some potential buyers for taking over the oil blocks in Brazil that could fetch around Rs 30,000 crore.
Will Dhoot get enough time to make repayments?
The hydrocarbon assets sale is a long-drawn process, but deal closure happens faster in the case of small assets. For instance, last month, ONGC Videsh and its partners had acquired a 10 per cent stake in a large offshore oilfield in Abu Dhabi for $600 million in quick move--- the first deal of an Indian firm in oil-rich Emirates. Since the long term outlook of oil price is bleaker, the larger deals are lesser and takes time.
In his last interaction with Business Today, Dhoot claimed that Videocon's oil fields in Indonesia and Brazil are valued at $12 billion at a crude price of $50 a barrel. "We have our share of 1,200 million barrels of oil from these fields," said Dhoot. But the market analysts are quite skeptical about the valuation claims. Of this, the Indonesian block is expected to start production late this year or early 2019, while the Brazilian fields are expected to produce its first oil in 2020.
Diversification into oil and gas in mid-1990s worked well for Videocon group, when they took a 25 per cent stake in the Ravva field in the Krishna-Godavari basin. In 2000s, they ventured globally acquiring stake in oil blocks Brazil, Oman, East Timor, Australia and Indonesia. In 2013, they made loan repayments by selling gas assets in Mozambique for $2.5 billion.
But the question now is whether Dhoot be able to stitch together a deal in a short time. Raising about $5 billion from the sale of oil assets will help Dhoot to make repayments and retain the flagship consumer durables business. The crude price is at $65 a barrel now.
There are a few more non-core assets under Videocon that could be monetised. Dhoot earlier said that the group has land bank worth Rs 10,000 crore on its books. Videocon also plans to sell its equity stake in Liberty Videocon General Insurance Company to Diamond Dealtrade and Enam Securities.
The consumer durables company landed in trouble after its failed ventures in telecom and picture tube manufacturing. In the 15 months ending March 2017, Videocon registered a standalone loss of Rs 1,916 crore, on a revenue of Rs 12,829 crore. The company has been making losses at the consolidated level since 2010. The accumulated losses would be above Rs 9,000 crore after discounting the one-time gain from telecom spectrum sale to Bharti Airtel last year.
According to the media reports, the lenders of Videocon have appointed consulting firm KPMG as resolution professional. The lenders have also decided to take to bankruptcy court all step-down subsidiaries of Videocon Industries in order to put in place a comprehensive resolution plan. But there are legal hurdles in taking the co-obligator to the bankruptcy court.