Videocon loses one-third of market value after stock slump

Lenders sell firm's shares after Dena Bank's NPA tag

The stock of Videocon Industries fell by 34.5 per cent in the last two days as lenders sold shares pledged by its promoters against loans. The shares of the consumer durables and oil major closed at Rs 64.80 apiece on Tuesday, and the company lost Rs 1,200 crore of its market value since Monday after Dena Bank tagged it as a non-performing asset (NPA) a few days ago.

Company officials said the firm had applied to Indian banks to extend the tenure of its debt worth Rs 22,000 crore after it lost a sizeable amount of funds in its telecom venture. According to the company’s estimates, it lost Rs 25,000 crore in its telecom arm after the Supreme Court cancelled its licences in 2012. The flagship company owes another Rs 22,000 crore of loans from international banks which are serviced through revenues from its oil and gas fields overseas.

“We would like to submit that Dena Bank has recently announced that it had classified Videocon’s loan amounting to Rs 520 crore as a non-performing asset. This has resulted into some negative publicity of the company and, accordingly, impacted its stock price. We believe that the recent crash on the stock price of the company could be due to the said classification of Videocon’s loan as NPA by Dena Bank.  We are not aware of any other information which could explain the movement in the trading,” the company replied to the BSE after the exchange sought a clarification on the fall in its stock price.  

“Everything is in the dark,” says SP Tulsian, founder of sptulsian.com, an investment advisory firm. “There is not much transparency about the company’s oil assets and other businesses like DTH. Also, there are doubts whether the promoters have the intention to repay the debt,” he said. The Competition Commission of India announced on Tuesday evening that it has cleared the merger between Videocon DTH and Dish TV. 

According to statistics collated from the BSE, the promoters own 66 per cent in the company and have pledged holdings worth Rs 1,421 crore.

At the current market price, Videocon’s market capitalisation stands at Rs 2,167 crore. Market experts say the stock will continue to remain under pressure as the steep correction would trigger liquidation of pledged shares if the promoters fail to cough up margin money.

Shares of the company have halved from the one-year high of Rs 114.9 touched in October 2016.

The company vowed to repay banks and said its immediate plan was to use profits of its Indonesian oil block to repay loans. The block is currently operated by Pertamina, an Indonesian government-owned company, which owns a majority stake in the field along with Bharat Petroleum. 

Taking into account the current oil prices, Videocon’s 23 per cent share is valued at $2.5 billion. In an earlier interview, the chairman of the Videocon group, Venugopal Dhoot, said the company wanted to repeat the success of Mozambique gas field which they sold for close to $2.5 billion two years ago. “The profits from the Indonesian asset will go to Indian banks which have supported us in the past,” said Dhoot.