Dhoot goes shopping

‘‘We are still looking for more opportunities. Oil and gas will be our focus by buying oil fields worldwide. But at the same time, we will continue to build on our consumer goods business,’’ says Dhoot. Analysts say Videocon overseas acquisition is comparable to Tata Steel’s takeover of Singapore’s NatSteel last year. ‘‘The Indian market is still huge – the bottom of the pyramid will continue to buy CTVs with picture tubes irrespective of advent of plasma and LCD TVs, which will attract niche consumers,’’ said an analyst with a broking firm.

Videocon’s optimism stems from low penetration levels of white goods. Of course, it’s not going to be easy as Korean and Chinese companies are breathing down its neck. At the same time, oil prices — now at a peak rate of $61 — are contributing to the group’s cash kitty as its production costs at Ravva fields are as low as $10. Here again, Indian giants in the field like ONGC and Reliance can give Videocon a run for its money while bidding for oil fields.

India also imports two-thirds of its oil, which means Indian firms can chase international oil assets aggressively. ‘‘With the prices of oil at a new high, and production costs low… the margins can be very high. Companies like Videocon which are now negotiating fields in Jordan have a ready market available in India,’’ said an analyst.

Videocon appointed Development Bank of Singapore and ICICI Bank for mobilising resources for acquisitions. The banks say there’s a need for consolidation of all business units currently owned by Videocon International — the flagship of consumer goods business — as well as Videocon Industries — which is into oil and gas — into one corporate entity. The merger proposal is seen as an enabler to leverage the strength of both the business units. The market capitalisation of the group also soared to Rs 10,200 crore.

Analysts, however, question the rationale behind the merger between an oil & gas company and a consumer goods firm. There are no synergies between the businesses, though it makes the balance-sheet of the combined entity stronger. ‘‘Obviously, there is no synergy. But as the company is going international, it needs a stronger balance sheet. As oil and gas business is very profitable, the cash flows are more stronger. With the combined entity, they can raise funds cheaper both in India and abroad. The most important thing is that they can now even bid for bigger projects abroad,’’ says Care Ratings executive director D R Dogra.

For now the buzz is: what’s next to go into Videocon’s shopping cart?