(Photo: Bloomberg)
(Photo: Bloomberg)

Lenders of VOVL appoint Deloitte to find buyers for its overseas assets

  • The investment banking arm of Deloitte India will invite EoIs for the exploration and production assets of VOVL
  • The consortium led by SBI Capital Markets includes 17 banks

MUMBAI : Lenders to Videocon group’s energy business have hired Deloitte India to find a buyer for its assets in Brazil, Indonesia and East Timor, two persons aware of the development said.

The investment banking arm of Deloitte India will invite expressions of interest (EoIs) for the exploration and production assets of Videocon Oil Ventures Ltd (VOVL), the persons mentioned above said on condition of anonymity.

“The lenders have appointed Deloitte India as the merchant bank for monetizing these assets. They will start the process shortly," said a banker, one of the two persons mentioned above. The sale process is expected to be complete in a year, the person said.

The consortium led by SBI Capital Markets 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. VOVL owes banks $4.5 billion.

“We are looking at both domestic and international oil companies to bid and we are hopeful they will see value in these assets. If that happens, our target is to realise at least 50% of the loan amount," said the second banker mentioned above.

VOVL, which is engaged in oil and gas extraction through international subsidiaries, holds shares in Videocon Hydrocarbon Holdings Ltd, a Cayman Islands company formed in 2009 for Videocon’s global oil and gas assets.

SBI Capital Markets did not reply to an email sent on 16 May. Deloitte India declined to comment.

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 a non-performing asset (NPA). So far, the Videocon Group has invested around $2 billion in these fields, along with its consortium partners.

The company has 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.

Videocon had acquired 12.5% in the Nunukan Production Sharing Contract on 7 September 2009 from Anadarko Indonesia. The Nunukan Block is located offshore eastern Kalimantan and is the site of the Badik oil and gas discovery. The other partners in the block include Pertamina and Medco from Indonesia, and Bharat Petroleum arm Bharat PetroResources Ltd.

It could be a good time for sellers to find buyers as asset valuations would be good with oil prices expected to go up in the near future, said an analyst.

Videocon ventured into the exploration and production segment 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.

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