Debt-laden Videocon Industries to sell off stakes in Brazil oil blocks
Videocon Industries, named in RBI’s second defaulter list, is looking to raise Rs30,000 crore from stake sales in Brazil oil blocks and repay bank loans
Mumbai: Videocon Industries Ltd plans to raise as much as Rs30,000 crore by selling its stakes in oil blocks in Brazil, as part of the debt-laden company’s plan to repay bank loans.
“We will repay banks in the next 2-3 months,” Venugopal Dhoot, chairman and managing director of Videocon, said in a phone interview. “By selling oil blocks in Brazil, we hope to raise around Rs30,000 crore.”
Videocon Hydrocarbon Holdings Ltd (Videocon), the Cayman Islands firm that owns the stakes, has received interests from some interested parties, Dhoot said, without naming the companies.
Through its subsidiaries and affiliates, Videocon Industries holds economic interests in oil and gas concessions in Brazil, Indonesia and East Timor.
According to Videocon Industries’s FY17 annual report, the company is liable to repay the liability of other group companies to the extent of Rs5,082 crore as on 31 March 2017. The company’s total debt stood at Rs19,506 crore as of March last year.
Last month, the country’s largest lender State Bank of India (SBI) had filed separate insolvency proceedings against Videocon Industries and Videocon Telecommunications Ltd. They were both part of the second list of big corporate defaulters put out by the Reserve Bank of India (RBI).
Videocon owns stakes in four major blocks in Brazil through an equal joint venture, IBV Brasil Petroleo Ltd, with Bharat Petroleum Corp. Ltd. Brazil’s national oil company, Petrobras SA, is the operator in three of the four blocks.
Oil and gas became part of Videocon’s portfolio in 1994 when the company signed a production-sharing contract for the Ravva oil and gas offshore block, off Kakinada in Andhra Pradesh where it is a 25% non-operating partner with Oil and Natural Gas Corp. Ltd (ONGC) and Vedanta Resources Plc’s Cairn India Ltd as other partners in the block.
In a bid to pare its debt, Videocon in 2013 had sold its 10% stake in the Mozambique gas field to ONGC Videsh Ltd (OVL), the overseas upstream arm of Oil and Natural Gas Corp. Ltd and Oil India Ltd for close to $2.47 billion.
“Oil and gas business has been a tremendous success for us. We are the largest and most successful Indian private sector explorer in the world today. Total reserves in the fields that we have discovered in Indonesia and Brazil, have around 4 billion barrels of oil and oil equivalent. We are working towards getting those fields in production. We were in the phase of the development cycle of these projects,” Saurabh Dhoot, executive chairman of Videocon d2h, said in a July interview.
Videocon’s oil assets in Brazil are estimated to be worth Rs40,000 crore, according to Venugopal Dhoot.
“Oil prices have been going up and it is a good time for sellers to find buyers as asset valuations would be good. We expect that the current prices would not prevail over a longer time period due to both supply and demand side issues, and it’s an opportune time for companies to cash out of blocks if they want to,” said K. Ravichandran, senior vice president, group head-corporate ratings, ICRA.
On Thursday, shares of Videocon Industries fell 3.33% to Rs12.76 on the BSE, while the benchmark Sensex rose 0.96% to 33,351.57 points.