Videocon Industries' high debt and falling revenues have been a major concern for its lenders for quite some time now. In a recent development, a consortium of lenders, headed by State Bank of India has finally ordered a forensic audit of the company's books to find out whether it tripped over harsh business conditions, or its financial misconduct paved the way for being on the hit list of its lenders.
This Mumbai-based home appliances company owes around Rs 43,000 crore to its lenders, as per a news report by The Economic Times. KPMG has been entrusted with carrying a detailed inspection of Videocon's accounts. Only after the audit firm concludes that the debt accumulation was a result of harsh business conditions, the loan recast proceedings should commence under the Insolvency and Bankruptcy Code.
"Lenders and promoters are now looking at restructuring of the loans and before they go ahead with it, it has been decided to conduct a forensic audit," reported ET, quoting one of the two sources who were aware of the development.
The arrears started building up soon after Videocon ventured into oil and gas, media communications, and direct-to-home (DTH) TV. Besides, its primary business of electronic machines is as yet attempting to make profits, which could have been used to pay back the obligation. To add to its miseries, Videocon's new undertakings still haven't demonstrated a good show.
Videocon, an aggressive borrower, expanded its reach and businesses but failed to repay. In 2016, its financing cost was Rs 2,426 crore against its operating profit that was a meagre Rs 354.87 crore.
Credit Suisse, in its survey in 2015, named Videocon Industries among the top 10 groups with the highest debt in India.
The group's continuous efforts to trim the debt haven't paid off. The company has sold about Rs 11,000 crore worth of assets over the last one year.
Dena Bank had already classified the company's debt as non-performing in the March quarter, while Punjab National Bank and Central Bank of India followed suit in the June quarter.
It is also expected that State Bank of India would also declare Videocon's loans as non-performing when it announces its June quarter results on August 11, 2017.
