Videocon sold at a huge discount to Vedanta, says Dhoot
Videocon Group Chairman Venugopal Dhoot
Venugopal Dhoot, the promoter of Videocon Industries, has moved the National Company Law Appellate Tribunal (NCLAT) against the debt resolution professional of the company, Deloitte and the Committee of Creditors for selling the company “cheap” to Vedanta group, in a move that caused a huge loss not only to the lenders but also failed to realise the true value of the company.
Asking the tribunal to scrap the entire resolution plan and seek a fresh resolution plan, Dhoot said both oil and consumer durable assets should be sold jointly and not separately so that the company gets its true value. Anil Agarwal-owned Twinstar Holdings of the Vedanta group, the highest bidder for Videocon’s domestic assets, has also been also made a respondent in the petition.
In the appeal, Dhoot said NCLT Mumbai has already held that the foreign and gas assets of Videocon group are VIL’s assets. The liquidation value of these oil assets in Brazil is not less than Rs 15,000 crore and the RP and the CoC have no authority to sell oil assets and consumer durables separately. “If the RP had sold the oil and consumer durables together, the RP would have received a minimum Rs 25,000 crore against VIL’s debt of Rs 49,000 crore (Rs 29,000 crore debt of VIL’s consumer durables business and Rs 20,000 crore debt of oil assets). Thus, the recovery would have been around 50 per cent and not just 5 per cent as seen today,” Dhoot said.
The Videocon debt resolution is already in the NCLAT with a few lenders led by IFCI, Sidbi and Bank of Maharashtra moving the tribunal complaining that they will get miniscule recovery from the debt resolution cleared by the CoC last December.
Dhoot said the RP should have mentioned these facts in the information memorandum to all the bidders, but failed to do so in violation of the Insolvency and Bankruptcy Code (IBC). “The RP has been responsible for diminishing the value of Videocon group by closing the factory and not paying employee dues. The RP is taking a remuneration of Rs 1.5 crore per month from the CoC as their fees for keeping the companies as a going concern; however nothing was done to keep the group as a going concern,” he said.
“This has resulted in eroding the brand value and key employees moving out of the company.
This business would have got a huge valuation because of its brand development, after sales service network and relation with the retailers. But all these systems were ruined. Post pandemic, the bidder did not give correct value and thus the company was sold at just Rs 3,000 crore,” Dhoot said.
Dhoot said the commercial wisdom exercised by few members of the CoC is arbitrary and irrational and does not reflect any applicability of mind by rejecting his own proposal which was offering 10 times higher recovery and was submitted at an early stage of the process. “As observed by the NCLT, there is fair reason to suspect that the entire CIRP (corporate insolvency resolution plan) is compromised for the benefit of a few. The value maximisation on the basis of consolidation of CIRP order of corporate debtors has not been achieved, rather compromised on the face of it,” he said.
“It needs to be investigated why the resolution professional and their appointed agencies did not discharge their duties diligently and just eroded the net worth of the entire group by not maintaining the companies as a going concern,” Dhoot said.
“It needs to be considered as to what are the reasons for arriving at such a low liquidation value when for the same assets for restructuring, the same lenders and experts were agreeing on a much higher valuation and particularly he was ready and willing to take the company back without any haircut,” Dhoot said.
“It needs to be considered as to whether the resolution professional or any other person acting on his behalf has managed the liquidation value and whether confidentiality has been maintained or whether it has been leaked to Vedanta,” Dhoot said.
Dhoot said State Bank of India had sought a consolidated CIRP and also pooling of assets of Videocon Industries, and had even invited offers for publication of sale of domestic and foreign oil and gas assets of Videocon Industries Ltd in Brazil and Indonesia. “But State Bank of India’s action was stayed by the NCLT and the issue of inclusion of oil and gas assets is sub-judice before the NCLAT whereas the claims of the oil and gas assets to the tune of Rs 23,120.90 crore have been admitted by the Resolution Professional and assets are being kept outside the purview of CIRP of VIL despite the order of NCLT treating the oil and gas assets as assets of VIL,” he said.
Dhoot said the votes in the resolution plan were assigned arbitrarily and mainly to those creditors who voted in favour of the resolution plan. The Vedantá resolution plan proposes only 4.89 per cent repayment to the secured financial creditors who cast vote in favour of resolution plan while another set of the similar secured financial creditors who did not cast vote in favour of resolution plan are being offered lower repayment of 4.56 per cent, he said.
“The resolution plan of Twin Star was approved at a throw away price which is a glaring example of a failed legislation by not setting any benchmark/test in exercise of arbitrary and irrational decision by the CoC,” he said.
Prior to being admitted into insolvency, Videocon Group, in accordance with the corrective action plan, had decided to sell assets to ensure that the entire consideration is directly deposited with the consortium of lenders for repaying the debt facilities. But this was ignored despite a clean forensic audit report, he said.
Dhoot’s Legal Challenge
* RP did not sell oil, gas assets and consumer durables jointly.
* Vedanta offer is not showing full potential of company.
* Liquidation value likely to have leaked to Vedanta.
* Oil and gas value worth Rs 15,000 crore not taken into account.
* Debt recovery would be 50% if oil assets are included.