Videocon lenders to seek better offers before last call on liquidation

As economy picks up, they expect bidders to come back to table

The lenders to consumer goods to oil firm, Videocon Industries, have decided to wait to get a better bid for the company before taking a final call on liquidation.  

The committee of creditors (CoC), which met on Friday, said because of the ongoing pandemic very few bidders had shown interest in the firm. If the company is sent for liquidation, the lenders will end up taking a huge haircut. But, as the economy picks up, creditors are of the opinion that the bidders will come back to the table.

When Videocon was sent to the National Company Law Tribunal (NCLT) for debt resolution, the company had dues of Rs 59,451 crore. Of this, claims of Rs 57,443 crore were admitted as of November 2018. 

State Bank of India (SBI) had notched up the highest exposure with Rs 11,175 crore. SBI was followed by IDBI Bank, with claims of Rs 9,561 crore, while Central Bank of India has an exposure of Rs 5,066 crore.

In the last CoC meeting, the lenders discussed the option of sending the firm to liquidation as bidders were backing out. However, with economic activity picking up, the lenders decided to wait for some more weeks to get good offers.  Soon after the banks said that they would discuss sending Videocon for liquidation, the promoters had appealed to the banks to postpone any further action on the company’s bankruptcy proceedings till the pandemic is over.

In a written communication to the banks, Videocon’s promoters said any hasty steps would only bring down the valuation of the company.

Some of the resolution plans that have been submitted to revive the company were not even being opened, the promoters had said, asking the lenders not to undervalue the firm. 

According to the promoters, the liquidation of Videocon would not only cause grave harm and prejudice to its stakeholders, whether they be financial creditors, operational creditors, or workmen/employees, but will derail the entire insolvency process. Even before the decision to liquidate the group companies is taken, the CoC must open and consider each resolution plans that they had received, the promoters said. 

The promoters reiterated that according to the earlier debt resolution proposal, banks would be able to recover dues of up to Rs 27,500 crore (as of November 2017). This was even agreed by the joint lenders forum in November 2017 after the forensic auditors gave a clean chit to Videocon. But, the Reserve Bank of India, then led by Urjit Patel, decided to send the company to the NCLT for debt resolution in December 2017.