The Reserve Bank of India has reportedly sent a list of 26 corporate defaulters with huge pending loans to the National Company Law Tribunal. Companies named in the list will have to face insolvency actions for failing to repay loans. The central bank has already handed over a list of 12 corporate defaulters to the Tribunal.
Videocon Industries and Jaiprakash Associates are the two biggest defaulters on the second list referred to the Tribunal by the central bank, a Livemint report quoted two bankers privy to the information, with outstanding dues to the tune of Rs 1 trillion between them. The former of the two seems to have decelerated a great deal from being the biggest consumer durables company in the country.
Videocon now has become one of the 50 biggest defaulters in the nation, with an outstanding debt of Rs 19,500 crore. The present valuation of the company now stands at a mere Rs 600 crore.
Losses in telecom sector
Videocon was making profit until it tried its luck in the telecom sector. The consumer durables giant entered the fast growing telecom sector in India in 2010, two years behind schedule. Its licences were revoked in 2012 on orders from the Supreme Court of India after the 2G scam, when it already had eighty lakh subscribers in 16 circles across the country.
Reluctant to give up, Videocon once again bought spectrum, but the competition was tough. Bharti Airtel bought Videocon Telecommunications' spectrum in six circles for a sum of Rs 4,428 crore last year. Financial reports on March 2015 showed Videocon Telecommunications to have accumulated losses of Rs 7,060 crore.
Falling behind in the television race
After leading the television business in India during the 90's, Videocon faced problems when Korean and Japanese brands came to Indian markets with cheaper goods, better technology and a huge distribution network.
Even when other Indian electronics companies were having a hard time with foreign players coming on to the scene, Videocon kept afloat by acquiring assets. The company bought the colour picture tube business of Thomson SA in 2015, becoming the third largest entity in the sector. However, technologies changed and Videocon attempted to upgrade the glass shell factory in Gujarat to LED. This attempt failed, leading to loss of Rs 4,000 crore.
The factory is non-operational now. Videocon is now planning to invest another Rs 1,000 crore in the facility to get it working again.
What's next
Videocon is now planning to sell assets to cover its losses. Venugopal Dhoot, Chairman, Videocon Group claims that the company has a land bank worth Rs10,000 crore on its books and is ready to monetise a part of it. The company is also looking at reducing its majority stake in the general insurance venture with Liberty Mutual of the US at a valuation of Rs5,000 crore.
Also, it has reportedly put Kenstar consumer goods business and brand for sale to raise about Rs2,000 crore. The company's direct-to-home (DTH) business is being merged with Dish TV for creating the largest satellite television company in the country. Videocon also plans to sell some of its oil assets to repay debt at an opportune time. Its oil fields in Indonesia and Brazil are valued at $12 billion, claims the group.
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