A forensic audit of Videocon Industries' accounts has been ordered by a consortium of lenders led by the State Bank of India (SBI) to ascertain if the company stumbled due to tough business conditions or financial mismanagement, the Economic Times reported on Friday while citing two sources.
Professional services company KPMG will be conducting the audit of the company's accounts, the report added. The move is a preliminary measure before the restructuring of Videocon's debt can commence under the Insolvency and Bankruptcy Code, according to the financial daily.
The loan recasting has been necessitated due to the debt amassed by Videocon. As reported earlier, Videocon Industries has consolidated outstanding debt of Rs 44,000 crore, evenly divided between its domestic and overseas businesses. The company reported a consolidated gross debt of Rs 47,500 crore at the end of December 2015, the latest year for which the company’s audited financials are available.
If the audit concludes that a difficult business environment was indeed responsible for the company's present predicament, then the lenders can proceed with the restructuring, the ET report said. However, an adverse report will lead to the filing of charges.
More time
According to the financial daily, Videocon Industries Chairman Venugopal Dhoot has said that the company wants more time to repay its loans. Dhoot told the financial daily that Videocon does not wish to go in for a "deep restructuring" or a "haircut", adding that while the account had turned non-performing because the group could not service the principal, it continued to service the interest.
As reported in May this year, the company had plans to use profits from its overseas oil and gas assets and selectively divest its domestic consumer durable business to repay debts.
"We have two large oil blocks on the verge of production in Indonesia and Brazil. These are likely to be highly profitable, allowing us to trim our domestic debt steadily," Dhoot had told Business Standard back then.
Dhoot's statement came after Dena Bank tagged its exposure to Videocon Industries as a non-performing asset (NPA).
According to Dhoot, the Indonesian block is likely to start production late next year or in early 2019 and the Brazilian field is likely to produce its first oil in 2020.