Lenders seek extension on resolution proceedings against Videocon Oil

Led by State Bank of India (SBI), lenders have sought the Reserve Bank of India’s (RBI’s) permission to suspend debt resolution proceedings against Videocon Oil Ventures, a subsidiary of Videocon Industries, for two years. 

A senior public sector banker, who confirmed the consortium's request to the central bank, said, "Going by the February 12 circular, we had to finalise the resolution plan by August 27, which was not possible as it is a large account with many complex issues.”

Bankers said they expected the valuation of Videocon Oil's assets in Brazil to double by next year due to rising oil prices. They would then take a lower haircut as compared to the debt resolution initiated under the Insolvency and Bankruptcy Code (IBC), 2016.

Videocon Industries is already facing bankruptcy proceedings after lenders sent the company to the National Company Law Tribunal (NCLT) in June, following a default of its Rs 237 billion of debt. 

The lenders’ plea to the RBI comes at a time when they are taking around 60 per cent haircut on the debt of firms which have been sent to the NCLT since June last year. In some cases, banks recovered only 5-6 per cent of their debt after initiating the IBC — leading to huge losses for the banks.  

Besides, litigation by various creditors and bidders has delayed debt resolution of many companies, with banks not being able to recover any money till the litigation gets over.

When contacted, a Videocon spokesperson declined to comment. If the RBI gives permission then banks will suspend IBC proceedings and go ahead with resolution of the account on their own. According to the IBC amendment, an application for withdrawal from the bankruptcy proceedings requires the consent of 90 per cent of the lenders.

Videocon was included in RBI’s second list in December, under which lenders were directed to begin bankruptcy proceedings. Videocon had moved the Bombay High Court against the proceedings. But in June, Indian banks sent Videocon, along with its subsidiaries, to the NCLT for resolution and an insolvency professional was also appointed.  

The fortunes of Videocon collapsed after the telecom licence of its arm was cancelled by the Supreme Court in 2012. As the firm had invested in a pan-Indian wireless telephony network, cancellation of the 2G telecom licence hit the finances of the parent company.

Videocon had earlier made an offer to the lenders to sell off its global assets to pay its domestic debt. In the past two years, Videocon sold many of its properties, including the company’s headquarters at Fort, Mumbai, to repay debt.