With government-owned Dena Bank tagging Videocon Industries as a non-performing asset (NPA), the company has vowed to use profits from its foreign assets and sell Indian assets to repay bank loans.
Videocon Group, which has Rs 23,899 crore (as on September 2016) of debt from Indian banks, will use the profits from Indonesian oil asset to repay lenders in India, its chairman, Venugopal Dhoot said today.
Dhoot’s comments come in the background of Dena Bank’s statement yesterday that it took a hit of about Rs 120 crore in the form of provisions and reversal of interest income in the fourth quarter for the account and hence tagged the account as an NPA. Other banks are expected to follow suit in the current quarter.
Dhoot said the company has applied to banks to elongate the tenure of the domestic debt by few years so that it can set its house in order. The immediate plan is to use profits of Indonesian block in which it holds 23 per cent stake. The block is currently operated by Pertamina, an Indonesian government-owned company, which owns majority stake in the field along with Bharat Petroleum.
The oil reserves are estimated at 351.59 MMBOE (million barrels of oil equivalents) worth $24.61 billion taking into account today’s oil prices. Of this, Videocon’s 23 per cent share is valued at $2.5 billion. Dhoot said the company wants to repeat the success of Mozambique gas field which they sold for close to $2.5 billion two years ago. “The profits from the Indonesian asset will go to Indian banks which have supported us in the past,” said Dhoot.
The group owes an additional Rs 22,000 crore to foreign banks which lent money for its overseas oil and gas blocks. The group is also selling stake in its general insurance business at a valuation of Rs 5,000 crore as an additional measure to reduce debt. Another marquee brand, Kenstar is also on the sale list which has attracted 20 bidders, Dhoot said. The group's foreign assets including Brazilian assets are valued at $12 billion, he said.
Telecom tangle
Just two decades ago, Videocon group was one of India’s most ambitious conglomerates with interests in consumer durables, direct-to-home TV, wireless telephony services and oil and gas. It was on an acquisition spree both in India and abroad. All was going well till 2012 when the Supreme Court cancelled 122 telecom licenses in India including of the big boys of the industry, Tata and Birla. Videocon lost its entire pan-India license which resulted in a loss of Rs 25,000 crore. “The SC judgement was unexpected but later we participated in the auction so as to carry out our operations. But to service the loans taken on the previous rollout of telecom services was becoming difficult,” said Dhoot. “We have made interest payments worth Rs 26,000 crore to the banks in the last six years. For the first time, we asking banks to increase the tenure of the loans as we bring back the group on track,” said he.
In its efforts to reduce debt, the group is also selling real estate worth Rs 10,000 crore. The company’s headquarters in Fort, Mumbai is already sold for Rs 300 crore. The group has funds blocked in power and coal business which has ready infrastructure for any buyer to come in and start construction of a power plant. “We are having 1500 acre of land in Madhya Pradesh and another 700 acres land in Raipur, Chhattisgarh with all related infrastructure. As a lot of funds are blocked in these stalled projects, we have to exit these projects,” Dhoot said.
The road ahead
Post restructuring of its debt, the group will focus on its core businesses of consumer durables, and oil and gas business. While both consumer durable and oil and gas businesses are making money, the extension of tenure of its loans would give the company some breathing space to come back on tracks. The sale of unrelated businesses like insurance will also free up management to focus on its core competency.
With unrelated businesses and land parcels out of its way, the group is awaiting its second innings.
| Full year Ended | Total Debt | No of Months | Net Sales | Interest | Net Profit |
| Sep '2009 | 9084.6 | 12 | 9163.0 | 665.8 | 400.7 |
| Dec '2010 | 11773.8 | 15 | 14409.7 | 950.6 | 744.7 |
| Dec '2011 | 18656.0 | 12 | 12650.2 | 1045.1 | 539.9 |
| Jun '2013 | 22986.9 | 18 | 18157.3 | 2753.2 | -71.6 |
| Dec '2014 | 24271.4 | 18 | 18967.6 | 3543.8 | 3.0 |
| Dec '2015 | 23773.8 | 12 | 12418.2 | 2385.1 | -55.8 |
| Sep '2016 | 23899.8 | 9 | 8256.49 | 1792.6 | -858.2 |
| Source Capitaline | |||||
| Compiled by BS Research Bureau | |||||