Videocon was the ‘brand’ of the middle class, how come the brink of bankruptcy?
When products like TVs, fridges, washing machines and ACs were considered luxury, Videocon transported it to homes and homes.
When products like TVs, fridges, washing machines and ACs were considered luxury for the big middle class of the country, Videocon transmitted it to the house. Videocon Limited had launched the middle class pocket in the 1990s in the product market like Black and White TVs, Color TVs and Washing Machines. After making the electronic appliances a core business, there was a time when Videocon joined the country’s highest profit-making companies. But, in the way of trying to grow faster, the company did not have the resources to pursue business expansion in other areas such as telecom, energy besides core business. This strategy was unsuccessful and the debt burden was rising on the company. Under pressure of credit, holding on core business also weakened day by day. As a result, Videocon has come on the brink of bankruptcy today
Gaurang Shah, the research head of the massive Geojit Financial Services, which has entered into other sectors except core business, says that Videocon is one of the key reasons for the drowning of industries, leaving its core business and entering into another sector. He said that Videocon tried his hand in other business except his main business. Since 2008, the company had made huge investments in sectors such as telecom, direct to home, oil and gas. But the company did not get profits from these business. The debt grew on the company, which became difficult to pay. On the other hand, due to this loan, the company’s focus also shifted from its core business. The main business of the company was the electronic appliances, which mostly came from Revenue. But the company had to bear huge losses on the second business sinking, due to which the company was now on the brink of bankruptcy.
It is difficult to survive in growing competition
A former senior official associated with Videocon’s consumer electronics business told moneybhakar that Videocon is known for its reach in small towns. Looking at the user’s need and his pocket, the product has the advantage. But when foreign companies came to the market, after that we could not focus on innovation and did not do the expansion like them. The company’s focus shifted to another business, which was influenced by its core business. Actually, the company was unable to spend much on core business in return for repaying the loan.
Company’s second business
2009: The company launched its first mobile phone market.
2009: Company came in Direct to Home ie DTH Business The company started this business on Modern Technology from other companies.
2010: Videocon Telecommunication Limited got license to operate mobile service in the country. This year the company came in this business.
Retail Business: Planet M, Digi World, NEXT
Videocon Petroleum: Videocon Petroleum has a 25 per cent stake in Ravva Oilfield, which Cairn India operates.
The company, which has a debt of 800 million profit, was considered a debt free company by the year 2007 and was consistently profitable. The standalone profit of the company stood at Rs 800 crores for 3 consecutive financial years till September 2008. But since this, the company has started its expansion plan and the debt has increased. By 2010-11 the company’s debt was Rs 12500 crores. At the same time, in the financial year 2017, standalone debt increased to Rs 40,000 crore on all the group’s companies. In the second quarter of fiscal year 2018, the company lost more than 1300 crores.
The market cap decreased by 98% in 11 years since December 2007. The market cap of the company has fallen more than 98 percent since then. In December 2007, Videocon Ltd had a market cap of Rs 18,500 crores, which fell to Rs 294 crores on June 7, 2018. During this time, there was a huge drop in the company’s share. On December 28, 2007, a share of the company was Rs 754, which was reduced to Rs 8.80 per share.
The company is selling assets to repay the debt, the company has planned to sell its own assets to repay the company’s debt. In the last two years, Videocon has sold the Kenestar brand to Everstone Capital. The group has assured the banks that they will sell their land to repay the debt. Fort was the headquarters of the company in Mumbai, which was sold for Rs 300 crore last year and is now the temporary headquarters of the Tata Group.
According to the media report, Videocon Industries chairman Venugopal Dhoot expects the company to exit the banking process. They hope that they will use new provisions, under which 90 percent of the lenders agree, the case can be withdrawn. According to them, in the case of the company, 100 per cent of lenders do not want the company to be taken to the National Company Law Tribunal.
The Bombay Bench of the National Company Law Tribunal (NCLT), which came under the scope of NCLT, has accepted bankrupt petition of creditors against Videocon Industries. Videocon has now come under the purview of NCLT under the BankerPixie Code. The company failed to repay Rs 21,000 crore loan of banks In the next 180 days, a new owner can be searched for the company through bidding. Videocon Industries shares a 5 percent lower circuit in Thursday’s business on this news. Videocon shares fell 5 percent to Rs 8.62 on BSE. At the end of the trading, the stock closed 2.98 per cent down at Rs 8.80.
Companies which have filed petitions in the Bankruptcy Court, include the Century Appliances, Value Industries, Trend Electronics, Sky Appliances and PE Electronics. These are the subsidiaries of Videocon Industries, which are engaged in manufacturing, cell and distribution of consumer goods.
The creditors started the case against the company after the Videocon was included in the second list of companies with debt settlement under the Bankruptcy Code from the Reserve Bank of India outside the Foreign Exchange scope . Videocon Industries has a total debt of Rs 44,000 crore, but the creditor has not taken its foreign unit to the bankrupt court because he is still repaying his loan. About half of Videocon’s debt is from its foreign entity.