More lenders to Videocon Industries Ltd. may look at classifying their loans to the company as non-performing assets (NPAs) in the April-June quarter as the company's asset monetisation plans are yet to yield results, two bankers in the know said.
Earlier this month, public sector lender Dena Bank Ltd. had said that it had classified Rs 520 crore worth of debt to Videocon as NPA in the January-March quarter. The disclosure led to a sharp fall in the company's stock, which hit the lower 20 percent circuit for the second consecutive time on Tuesday.
According to the first of the two bankers quoted above, the company has been attempting to monetise its assets for some time now, however, the results have not been satisfactory. The management has indicated to the lending consortium that it will be selling controlling stake in its Kenstar brand of home appliances, some real estate properties and some international oil assets, said this banker.
These sales would have helped the company tide over a few quarters worth of interest payments, by which time, the core operations would have turned around. But now the lenders are turning impatient since the monetisation plan is yet to materialise, the first banker added.
The Indian lending consortium to Videocon Industries consists of 27 banks, which includes State Bank of India Ltd. (SBI) and its five associate banks. Together, Videocon’s gross borrowing stands at over Rs 47,000 crore, as on 31 March 2016, according to the India Corporate Health Tracker report by Credit Suisse released in February.
The company’s domestic debt currently stands at around Rs 24,000 crore, while the rest of the debt belongs to foreign lenders, Venugopal Dhoot, chairman and managing director, clarified.
“Our oil operations in Indonesia have discovered oil. We have already told the lending consortium that proceeds from this oil operation will be used to repay the domestic lenders. So far they have not indicated any concerns to us,” said Dhoot, while speaking to BloombergQuint over the phone.
Domestic lenders have been meeting under the joint lender forum (JLF) system to discuss the stressed debt of Videocon and trying to find ways to deal with it for over a year now. Apart from sale of assets, discussions have also looked at extending the loan tenure. However, the final decision on the matter is yet to be taken.
Both bankers quoted above said that some of the problems being faced by the company are because of its decision to merge all businesses under one entity. This meant that the debt to all these firms got consolidated, making the number look large.
In November 2016, the company merged its direct-to-home television service business, Videocon D2H Ltd., with Dish TV India Ltd. However, earlier this month, corporate governance advisory Stakeholders' Empowerment Services (SES) asked shareholders of Dish TV India to vote against the proposed merger citing lack of transparency in the valuation and fairness reports.
The company has already sold 10 percent stake in a gas field off Mozambique to Oil & Natural Gas Corp Ltd. (ONGC) last year. It has also sold its entire telecom spectrum to Bharti Airtel Ltd.
Videocon is slated to report its results for the January to March quarter on May 29. The company's standalone net loss had widened to Rs 509.78 crore in the quarter ended December, compared to a loss of Rs 84.42 crore in the corresponding period in the previous year.
Meanwhile bankers are keen to speed up recovery and resolution plan in large stressed debt cases, as an inability to do may lead to the intervention of the regulator.
The Reserve Bank of India (RBI), in a circular on Monday, has listed the outline for a turnaround plan for stressed assets which will be driven by the regulator. The outline said that the regulator has been in discussions with lenders over some large stressed cases and is working on a framework to resolve these accounts, which includes using the insolvency and bankruptcy code.
The banking sector is presently sitting on gross non-performing assets (NPAs) worth nearly Rs 8 lakh crore, while the amount of stressed assets which have not been recognised will be over and above this number.