Lenders to Videocon Group may appeal the National Company Law Tribunal (NCLT) order passed on 12 February which said that the company’s foreign assets should be included as part of ongoing insolvency proceedings in India, said two people familiar with the matter.
The lenders’ consortium led by the State Bank of India (SBI) believes that these assets should not be linked with others and should be sold or sustained till their value is realised. Lenders have already received expressions of interest from eight investors including Vedanta and ONGC Videsh Ltd for the overseas assets, said the first person cited earlier.
“We believe that we could get a good valuation for the overseas assets once production starts next year. So far nothing has happened with the resolution process of the 15 group companies of Videocon," said the first person.
The lenders’ consortium led by SBI includes 17 banks such as Bank of India, Export-Import (Exim) Bank of India, Central Bank of India, IDBI Bank, ICICI Bank, and Union Bank of India.
Videocon’s foreign assets are held under Videocon Oil Ventures Ltd (VOVL), which in turn holds shares in Videocon Hydrocarbon Holdings Ltd, a Cayman Islands company that was set up in 2009 for its international oil and gas assets in Brazil, Indonesia and East Timor. Together, Videocon Oil Ventures Ltd (VOVL) owes banks $4.5 billion.
This is the first instance of overseas incorporated subsidiaries being brought under the ambit of local insolvency laws.
The lenders had given credit facilities to VOVL and IBV Brasil Petroleo Ltd, an equal joint venture with Bharat PetroResource Ltd. Videocon’s Brazil block has turned into a non-performing asset (NPA). Videocon Group had invested around $2 billion in these fields in Brazil alone, along with its consortium partners.
The company had interests in four major blocks in Brazil through IBV Brasil Petroleo Ltd. Brazil’s national oil company Petrobras SA is the operator in three of the four blocks.
The Videocon Group and its consortium partners—IBV Brasil Petroleo Ltd and Bharat PetroResource Ltd—had plans to begin production from its fields in Brazil and Indonesia by 2019, which was postponed to 2021. The company’s share in the oil reserves in Brazil was expected to be one million barrels.
On 22 August 2019, NCLT ordered for a stay of the overseas oil and gas assets after Videocon chairman Venugopal Dhoot appealed that all the overseas assets should be part of the insolvency process so that lenders are restrained from selling these assets. This led to lenders appealing in the National Company Law Appellate Tribunal (NCLAT) which ordered that the bankers should take a decision in two weeks. Thereafter, Dhoot went to court asking lenders to consolidate the assets under the resolution plan, which resulted in Wednesday’s order.
Videocon ventured into the exploration and production business in 1994 when it 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.