Did ICICI give Videocon Group company Evans Fraser a loan it did not deserve?

Amid the brouhaha over the ICICI-Videocon group quid pro quo loan allegations comes a new media report questioning the bank's justification for sanctioning a loan to a company that was roughly nine times higher than the latter's turnover.

According to Firstpost, back in 2012, Evans Fraser & Company India Limited - one of the five companies in the Videocon Group - received a Rs 650 crore loan from ICICI Bank. This despite the fact that the company had posted net sales of just Rs 75 crore in 2011, albeit up 27 per cent over the previous year. Data from the Registrar of Companies (RoC) accessed by the website also showed that Evans Fraser, operating a realty business alongside a share trading business, posted a net profit of Rs 94 lakh in 2011, compared to a loss of 6.4 crore the previous year. The report adds that the profile of the company ICICI Bank sanctioned the loan to made for a risky bet in terms of getting its money back. In fact, the bank's loans to Videocon Group reportedly slipped into non-performing asset (NPA) category last year.

According to the website, the Rs 3,250 crore loan extended by the bank in 2012 - which is currently under the scanner - had been given to several of Videocon's group companies, namely Trend Electronics Limited, Century Appliances Limited, Kail Limited, Value Industries Limited and Evans Fraser & Company India Limited. A senior banker whose bank was part of the consortium told the portal that these loans were rolled into the consortium loan later. "How can all five companies get the same amount (Rs 650 crore) and what is the creditworthiness of these firms?" he added.

The figures posted by the companies listed above are certainly far from rosy. According to financial details available on the company's website, Trend Electronics' profits nosedived  from Rs 20 crore on December 31, 2010, to  just Rs 3.6 crore a year later. Net sales dipped 13 per cent to Rs 1,658 crore in the same period. Similarly, Value Industries reported net profits plunging 78 per cent and net sales falling 22 per cent y-o-y by December 31, 2011.

While ICICI Bank and Videocon are yet to respond to these new allegations, both parties are facing increasing heat on multiple fronts. Media reports claimed that Goldman Sachs yesterday moved NCLT against Videocon Industries to recover around Rs 36 crore even as the Serious Fraud Investigation Office, Mumbai, has sought its headquarters' permission to look into the quid pro quo allegations.