From industry icon to defaulter: How Venugopal Dhoot lost his empire

As the top court cancelled all telecom licences in February 2012, Videocon Telecom had to shut shop. It was the beginning of a slide the group could never arrest

During the 80s, when founder of Videocon group Venugopal Dhoot, now 71, visited Japan for the first time to seek a partnership with Toshiba to bring colour televisions to India, he did not expect the spectacular success of his maiden venture.

Starting from his first plant in Aurangabad, Dhoot set up consumer durable manufacturing facilities all over India since the 80s. The initial products, including TVs and washing machines, received spectacular success as the Indian middle class bought these products for the first time.

In 1999, Dhoot acquired Dutch consumer products major Phillips’ manufacturing business in India to cater to the demand of Eastern India markets. As Korean majors LG and Samsung started launching their new-age products in India, Dhoot hired Bollywood superstars such as Shah Rukh Khan, Saif Khan, and Abhishek Bachchan to endorse his products.

“While LG, Samsung and Sony focused on the upper end of the market, Videocon was the undisputed king of the mass market. At that time, there was no other TV company that had dealers in almost all small cities in India. Videocon was available in every small city,” said a former official, asking not to be quoted. Dhoot took advantage of his massive nationwide network by launching direct-to-home satellite broadcast brand — Videocon D2H and several other sub brands like Kelvinator and Akai. 

The success of his maiden venture made Dhoot invest in other unrelated businesses like real estate and oil and gas in the mid-2000s.

In 2007, Videocon acquired Planet M, the loss-making music and entertainment retail arm of media house Bennett, Coleman & Co, for Rs 200 crore. 

All was going well for Dhoot till 2008 when the group decided to enter the wireless telephony business by acquiring 2G (second generation) based licences under the then UPA government’s policy of granting telecom licence under first-come, first-served basis. After getting the licence, Videocon Industries borrowed heavily from local banks to support its telecom company. By 2010, Videocon cellular phone services were available across India with the company targeting low-end customers in smaller cities. VIL invested Rs 10,000 crore in its telecom subsidiary equity and guaranteed the loans taken by the telecom company.

In a massive blow to the Indian telecom sector, the Supreme Court cancelled all the telecom licences granted by the UPA government, saying the government should have auctioned the licences and spectrum.

With their licences cancelled, over a dozen telecom services companies had to shut down their services overnight in February 2012. In Videocon Telecom, 6,000 employees were laid off.

The telecom subsidiary of VIL continued to repay the loans to its lenders until 2015. In 2014, Videocon Industries sold its 10 per cent stake in oil block in Mozambique to Oil and Natural Gas Corp (ONGC) and Oil India (OIL) for about $2.5 billion to repay its bank debt. Another oil block in Brazil is still owned by Videocon Oil Ventures, another subsidiary of VIL. 

But 2017, Videocon started delaying on its loan repayments and sought a debt restructuring package from its lenders. In 2018, the State Bank of India agreed to restructure the loans but the Reserve Bank of India sent a list of companies to the banks recommending to send the companies for debt resolution under the Insolvency and Bankruptcy Code of 2016.

In the bankruptcy court, banks made claims of Rs 64,637 crore from the company, according to the National Company Law Appellate Tribunal (NCLAT) order.

Former VIL executives say the company’s debt was less than Rs 35,000 crore and not Rs 64,637 crore as claimed by the banks. Since it had availed of loans from banks as ‘obligor/ co-obligor’, its debt had ballooned. Since the oil and gas assets were primarily held by subsidiaries and VIL only had interest by virtue of its shareholding, the company itself had requested to be freed from its obligation as co-obligor. 

“Due to its co-obligor status, all its loans were counted as VIL loans, showing huge dues to banks,” said a former executive.

As the court-appointed auditor took over the company, a majority of the employees were laid off and its headquarters in Mumbai was sold by the banks.

To make matters worse for Dhoot, soon after the company was sent to the bankruptcy courts, a cash for loans scandal involving former MD and CEO of ICICI Bank, Chanda Kochhar erupted. According to the CBI, Deepak Kocchar, husband of Chanda Kochhar, floated a company called NuPower Renewables, which received a Rs 64 crore loan from Videocon Industries just a few days after ICICI Bank cleared a Rs 3,000 crore loan for Videocon Industries.

Kochhar and Dhoot have denied any quid pro quo. ICICI Bank has denied any loss to the bank and even sent a letter to the CBI in July 2021 saying Videocon has repaid all loans and it has not suffered any loss.

In the court hearing on Saturday after Kochhars were arrested, Amit Desai, Kochhar’s lawyer, referred to the letter written by ICICI Bank to the agency saying the bank had not suffered any wrongful loss due to any of these transactions and stated that there were “errors of facts in the CBI FIR”. 

Vedanta takeover

A promoter entity of Vedanta Group, Twin Star Technologies, won the race to acquire VIL by offering Rs 2,962 crore to lenders in June 2021. The matter is pending in the SC.

According to Twinstar’s plan, the claims of financial creditors have been settled below 5 per cent. Dhoot, meanwhile, has reiterated his offer to take over Videocon in the Supreme Court with zero haircut to the lenders.

“All eyes are on SC to give a judgment in the Videocon bankruptcy case,” said an executive.

But the quid pro quo case involving Kochhars will go on for some time.