NCLT clears Videocon sale to Vedanta group firm Twinstar Technologies

Twinstar had offered to pay Rs 2,962 crore to the lenders of Videocon Industries which was saddled with debt of Rs 46,000 crore

The National Company Law Tribunal’s (NCLT’s) Mumbai Bench has approved the acquisition of bankrupt Videocon Industries by billionaire Anil Agarwal’s Twin Star Technologies, with the lenders set to take a haircut of about 90 per cent.

Videocon Industries, saddled with a massive debt of Rs 35,000 crore, was sent for debt resolution in December 2017 after it failed to repay bank loans. In November 2019, the NCLT ordered the consolidation of the insolvency resolution process of Videocon and 12 other group companies. Tuesday's debt resolution is the first one where a group-level debt has been resolved in a single process, said a banker.

Some of the debt of the parent company was also due to the guarantees given to other companies. 

Twin Star, a part of the Vedanta group, will pay Rs 2,962 crore to the lenders, in addition to Rs 500 crore cash in the company. The lenders will also get Rs 599 crore worth of equity in Videocon after the takeover by Twin Star. “In total, Twin Star is offering around Rs 4,000 crore to the lenders. This includes cash in the books of VIL,” said a source close to the development.

The NCLT Bench on Tuesday said the few dissenting creditors would have to be paid upfront.

A Videocon official said the debt resolution process of group firms Videocon Oil, Trend Electronics, and KAIL was going on separately and banks would recover dues from these companies also. Another Rs 27,000 crore of debt will be resolved once these companies' (including oil firms') debt process is over, said the banker, asking not to be quoted. 

The promoters of Videocon Industries -- the Dhoot family -- had submitted an application to the committee of creditors (CoC) under Section 12A of the Insolvency and Bankruptcy Code (IBC) last year but failed to get the mandatory 90 per cent votes from the lenders. The lenders had cleared Twin Star’s offer in December last year.

After a promising start, the recovery through the IBC has slowed considerably with lenders sending almost half of the companies to liquidation, according to the latest data from the Insolvency and Bankruptcy board of India (IBBI).

Recoveries from bankrupt firms are down to just 40 per cent on average. At least 16 per cent of the cases were resolved under the 12 A of IBC in which companies are handed back to the owners -- provided they clear all pending dues. “There are not many success stories for the government to show,” said a lender.

The Videocon group fell into a financial crisis after the Supreme Court cancelled its wireless telephony licence in 2012 and the group’s flagship company Videocon Industries’ investment in the telecom arm turned bad. At the same time, the loans taken by the telecom arm from Indian banks had also become non-performing assets (NPA).

Soon after the company was sent to the bankruptcy court, a cash-for-loans scandal involving former MD and CEO of ICICI Bank Chanda Kochhar further impacted the company’s fortunes.

For metal and mining giant Vedanta, the acquisition of Videocon will be the second big acquisition under the IBC. The group had earlier taken over Electrosteel Steels and entered the steel industry.

Vedanta Chairman Anil Agarwal had tweeted in February that India had tremendous potential to become an electronics hub with display and semiconductor fabrication catering for global markets.

Analysts said Agarwal would use Videocon’s acquisition to make a foray into the semiconductor industry.