A Bench of the National Company Law Tribunal (NCLT) in Mumbai admitted the insolvency petition filed by the country’s largest lender State Bank of India (SBI) against Videocon Telecommunications Ltd, a subsidary of Videocon Industries Ltd, after the telecom company failed to repay Rs 234 crore to the lender. The bank in its petition has claimed that Videocon Telecommunications has defaulted in payment to SBI and three of its associate banks (now merged with SBI). Out of this, the company owes Rs 193 crore to SBI alone in principal and interest.
A consortium of 18 banks have an exposure of over Rs 2500 crore to Videocon Telecommunications, which has defaulted on loans and bank guarantees since January 2018. Out of this, SBI and its erstwhile associates have together lent around Rs 800 crore.
According to the 2016-17 annual report of Videocon Industries, it has made investments of around Rs 7, 500 crore in Videocon Telecommunications. The telecom firm has incurred a net loss before extraordinary items of Rs 1, 334.46 crore in financial year 2016-17, while its accumulated loss as on March 31, 2017 is Rs 6, 294.1 crore, said the annual report.
The trouble for Videocon Telecommunications began in 2012 when the SC quashed all the unified access services (UAS) licenses granted on or after January 10, 2008 and the subsequent allocation of spectrum to these licenses, which also included the licenses and spectrum allotted to Videocon Telecommunications.
The company was granted license for providing UAS in 21 circles and was allotted spectrum in 20 circles. Owing to the cancellation of licenses and closure of its operations in several circles, the company faced huge losses and severe liquidity crunch and was not in position to repay the debt on time.
Subsequently, Videocon Telecommunications participated in the auction conducted by the DoT in 2013, and was awarded UAS licenses and spectrum in six circles — Bihar, Gujarat, Haryana, Madhya Pradesh, UP (East) and UP (West). The ability of the company to continue as a going concern depended on its ability to fund its operating and capital expenditure requirements. In 2016, it concluded a deal with Bharti Airtel for trading the right to use the spectrum allotted to it in these six circles for Rs 4,653 crore.
In March 2018, rating agency Care Ratings qualified its ‘D’ rating on the telecom company’s bank facilities with the ‘issuer not co-operating’ tag. As per Care Rating’s rating definition, instruments with ‘D’ ratings are either in default or are expected to be in default soon. On June 6, Videocon Industries, the parent of the telecom, too was admitted for bankruptcy proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) by the same tribunal.
Videocon Industries was one of the 28 firms mentioned in the RBI’s second list of corporate defaulters. The consolidated debt of the company stood at Rs 44,827 crore as on March 31, 2017, as per Capitaline. The lead bank SBI has proposed Anuj Jain from KPMG as the IRP for Videocon Telecommunications. Jain has also been appointed as the IRP for Videocon Industries.