Videocon Industries was among the first companies that went under the hammer in 2017. Cut to the scenario today and the company is yet to close a deal with a buyer. After Anil Agarwal won the bid this June to acquire the company, Venugopal Dhoot, the original promoter of Videocon, moved the National Company Law Appellate Tribunal (NCLAT) on the grounds that the company was being sold cheaply. After four years, the transaction is back to square one and for all the wrong reasons.
The total debt on Videocon's books is as large as Rs 46,000 crore, with Twin Star Technologies, a company backed by Agarwal, getting the go-ahead, this June, for a bid of Rs 2,900 crore or a massive 95% haircut to the lenders. It did not miss the attention of too many people that this was very close to the liquidation amount of Rs 2,600 crore.
Interestingly, Dhoot, last October, made an offer to buy back his company for Rs 31,789 crore, which the lenders rejected. The issue, says one of the lenders, was that there was no clarity on how he would fund it. The strategic interest for Agarwal lies in the Ravva oil and gas field, where he already holds a 22.5 per cent stake. Videocon has a 25 per cent stake and the buyout would have put Agarwal in a position of strength.
As the thing stands, the fate of Videocon is in limbo and no different from what it was in 2017, when it went to bankruptcy court. It was among 12 companies, which also included the likes of Jaiprakash Industries. The big worry is the time lost in the process and what lies ahead for Videocon. Those tracking the development say the resolution process could take anywhere between 4-12 months.
Arush Khanna, Partner, Numen Law Offices, a law firm based in New Delhi and Mumbai, explains how the story could play out from here. "If the NCLAT sends the plan back to the committee of creditors for reconsideration, it is likely that Twin Star Technologies will move the Supreme Court. The other scenario may have the NCLAT dismissing the appeal of Videocon, in which case the dissenting creditors may go in appeal. In either of the two scenarios, the wait for a resolution to this matter keeps getting longer."
He adds: "There is little doubt that the bid for Videocon is shrouded in suspicion, none of the companies that have been referred to the bankruptcy courts have seen anything as complicated as this."
At a time when the NCLAT was set up to speedily resolve both contentious and complicated issues of bankruptcy swiftly, the sale of Videocon Industries puts that process under some level of scrutiny. How this closes out will be interesting for all the wrong reasons. Clearly, time has stood still here.
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