Mounting debt and low realisation from asset sale has made Videocon Industries vulnerable as more lenders are likely to categorise its loans under non-performing assets (NPAs). The shares of the company were on a free fall for the third straight session registering a dip of around 50 per cent in the last three days.
This happened after two public sector banks-Dena Bank and Punjab National Bank-declared its loans as NPAs. Sources said other consortium lenders are in closed dialogue with the company and may also categorise it in the NPA list.
Videocon Industries, whose domestic debt currently stands at around Rs.24,000 crore, has borrowings from 27 lenders which includes the country's largest public sector bank, State Bank of India (SBI) and it associates. According to an IDFC Securities report, dated 16 May, Punjab National Bank has total exposure of Rs.1,500 crore to the company of which Rs.350 crore has been classified as NPAs. The company has reported losses in five consecutive quarters. It has not announced March quarter earnings.
However, lenders to Videocon Industries have been meeting under the joint lender forum (JLF) system to discuss the stressed debt of Videocon and trying to find ways to deal with it. Apart from sale of assets, discussions have also looked at extending the loan tenure. However, the final decision on the matter is yet to be taken.
The debt was accumulated over time as Videocon expanded into oil and gas, telecommunications, and direct-to-home (DTH) TV. However, its main business of electronic appliances is struggling to make the money required to service the debt, and the new ventures have not shown tremendous promise.
Meanwhile, the Centre has approved an ordinance with amendments to the Banking Regulation Act, 1949, allowing the Reserve Bank of India to specifically direct banks to initiate insolvency resolution process and winding up petitions against defaulting companies under the Bankruptcy Code.
The Reserve Bank of India (RBI), in a circular on Monday, has listed the outline for a turnaround plan for stressed assets which will be driven by the regulator.
The entire banking sector isy sitting on gross NPAs worth nearly Rs.8 lakh crore, while the amount of stressed assets which have not been recognised will be over and above this number.