In 2009, when Videocon Industries launched its first set of mobile handsets, the company’s fortunes were souring beyond most Indian entrepreneurs could have imagined. Its consumer durables business was at its peak - amid competition to the two Korean chaebols Samsung and LG. Riding on the new wave, Videocon had already picked up telecom spectrums for 17 circles and was gearing up to launch its telecom services. Venturing into the then booming mobile handsets market seemed like a natural progression.
Founded in Aurangabad, Maharashtra in late-1970s, the Dhoot family found their first taste of success by distributing Bajaj Auto products. But when India went on to unexpectedly champion the ODI World Cup in 1983 - raising demand for TV sets - it quickly ventured into the business - setting up a manufacturing plant in 1985. According to Anirudh Dhoot, son of Videocon Group CEO Venugopal Dhoot, it became the first company to bring colour TVs in India. Under his father’s stewardship, the group’s diversification begun in 1994, when it picked up a 25 per cent stake in the Revva Oil Fields in costal Andra Pradesh. When Samsung and LG entered India in mid-1990s - post-liberalisation, Videocon’s market dominance was unparalleled with its TVs and washing machines occupying consumer mind and home space. To further consolidate its market position, Dhoot went on to acquire some of the prominent brands of the era - Electrolux, Kelvinator and Kenstar - and ramped up production capacities by adding Philips India’s TV manufacturing facility.
By the time it ventured into the telecom business with its handsets and spectrums, the Dhoot-founded group was already a diversified entity with plans to expand further. That, however, is just the tip of the iceberg - at least from the revelations that are coming to fore from investigations by the Central Bureau of Investigation (CBI). The CBI investigations now reveal how the seeds of failure were sowed in Dhoot’s heydays.
The Chanda Kochhar Saga:
Behind the marketing blitzkrieg for its new launches, backed by an extensive distribution network, Videocon Group’s deals, led by Dhoot between 2009 and 2011, are now a prominent blot on its spectacular success story. While Videocon was investing heavily in its new ventures, as per CBI, Dhoot went on to secure massive tranches of loans from the ICICI Bank against fraudulent kickbacks. One of its new entries - into the renewable power sector - is now under scanner. Incorporated in December, 2008, Nupower Renewables Ltd (NRL) had Deepak Kochhar as its original director, apart from Venugopal and Saurabh Dhoot. It is now alleged that Kochhar, husband of then MD and CEO of ICICI Bank Chanda Kochhar, was hand in glove with his wife and Dhoots in defrauding the bank by laundering money.
A year after formation of NRL, both the Dhoots resigned from its board. But only after allotting 19,97,500 warrants to Deepak Kochhar at a favourable deal. Additionally, Dhoot also transferred his 24,996 NRL shares to Supreme Energy Pvt. Ltd. (SEPL) - a company incorporated by himself in 2008. Meanwhile, Kochhar who used to hold some 24,999 NRL shares through Pacific Capital Services Pvt. Ltd., transferred the shares to SEPL too. As a result, SEPL became the 95 per cent owner of NRL. CBI now alleged, completing the web of transactions, Dhoot resigned from directorship of SEPL soon after and transferred the control of the company by transferring his shares to Pinnacle Energy Trust, which was managed by Deepak Kochhar. As a result, Dhoot’s Rs 64 crore investments in NRL effectively landed in Kochhar’s coffers.
On the other hand, Dhoot was helped by ICICI Bank’s money. During the same period, ICIC Bank was helmed by Deepak’s wife Chanda Kochhar. Joining as a trainee in 1984, she had risen to the ranks to become its Chief Executive Officer and Managing Director in 2009. Graced by the government of India with a Padma award in 2011, Kochhar had broken enough glass ceiling to become an aspiration for many.
CBI investigations, however, now indicate that Kochhar, along with her husband, helped Dhoot with loans worth Rs 3,250 crore - most of which the bank never received back. It is alleged that between 2009-11, under Chanda’s stewardship, at least Rs 1,850 crore were sanctioned to Videocon Group and associated firms in six tranches. While it is not clear yet, whether Dhoot and Kochhars transferred a significant part of those loans through those web of transaction (mentioned above). But the loans sanctioned by the bank under Kochhar turned non-performing assets - at least Rs 1,730 crore of them. The investigation agency said that Kochhar abused her official position and “got illegal gratification/undue benefit through her husband from Dhoot for sanctioning loans to Videocon.”
Dhoot’s fall from grace:
Once considered the king of Indian television and washing machine industry, Venugopal Dhoot’s fall from his throne hit a new low today morning, when the CBI arrested the honcho in the ICICI Bank money laundering case. While a detailed questionnaire sent to his office did not elicit a response, sources say Dhoot’s downturn had started in late-2000s, when Videocon was at its peak. Videocon Group was the dominant player in the consumer durable industry but rapid diversification into unrelated sectors caused much damage to its financial fortunes that proved to be costly in later years.
Take its endeavour in the telecom market, for instance. Even after bagging spectrums for 17 out of the 22 circles, it had to relinquish all of it when the 2G telecom scam unravelled. While it managed to win back airwaves for six circles, mounting debts forced the group to look for an exit by 2015. It entered into an agreement with IDEA Cellular to sell its spectrums for Gujarat and Uttar Pradesh circles against Rs 3,310 crore. By May, 2016, Videocon was practically out of telecom business as Airtel purchased the rest of the spectrums from it for Rs 4,428 crore. Videocon Telecom had to formally shut shop in February 2017, after Reliance Jio disrupted the market with its affordable 4G data packs.
Meanwhile, Dhoot, a passionate cricket lover, made futile attempts to acquire the now defunct Pune team in the Indian Premier League (IPL) in 2010. According to people in the know, this was one of the many attempts that Dhoot made to strengthen Videocon’s position that was being challenged.
After ruling the market for over a decade, by early-2010s Videocon’s fortunes begun to dwindle in its core sector - the consumer durables. Both Samsung and LG had grabbed lions share in the home appliances, TV and audio systems market. While Videocon had made significant investments into the oil and gas sector, it was yet to receive any dividends. Except Ravva oil field, none of its investments - spread across Brazil, Indonesia, East Timor and Australia - had yielded it any returns. In the 18 months period between July, 2012 and December, 2014, Videocon had raked in Rs 20,995.3 crore in revenue. Out of which 83 per cent or Rs 17,567.5 crore came from its durable business, while oil and gas contributed only Rs 1,899 crore. In contrast, loans taken from banks to fund those investments to over Rs 40,000 crore. As per latest estimates, VOVL - the group firm that is involved in oil and gas exploration - alone owes over Rs 30,000 crore to the lenders.
Also Read: ICICI Bank-Videocon case: What did Venugopal Dhoot do wrong?