Videocon went bankrupt at Rs 71000 crore and sold for 2900 crore
Videocon went bankrupt at Rs 71,000 crore and sold for only Rs 2,900 crore. but who is the real loser?
The debt on the head is increasing. even if you are told to sell everything and pay the debt.the debt will not be paid, in the future all the darkness is visible, at such a time the farmer commits suicide for a few thousand rupees on the seventeenth. If the same burden of Rs 71,000 crore is on the head of the company, then what do the directors do?
They file for bankruptcy with their hands up, the banks take the money they get, the company is sold for a pittance, and the directors are free.
A huge valley of contradiction can be seen in these two pictures. The story of Videocon’s bankruptcy is the subject of today’s Bobhata article.
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Story of Videocaon
This is the story of 1986. Three brothers from the Dhoot family of Aurangabad came together and started a small company. Initially, Adhigam was working in the market as a trading company selling paper products. Within a few days, their aspirations skyrocketed as the three partners of the company were young and they started selling televisions in the 1990’s. We had a television revolution in the aftermath of the 1983 Asiad. People had found a new way of entertainment through television. Your kids will not go to another person’s house to watch TV – the air was created in their house. At the same time, the number of companies lending for home appliances (consumer durable) had increased.
There will be a tamerl at the door, but the demand for a TV at home had increased the demand for TV in the market. Learning Trading took full advantage of this television revolution and Videocon was born! Within a few years, there were two companies of one, four companies of two and Videocon was transformed into the Videocon Group of 13 companies. Videocon was the first color TV in India. After TV, the demand for VCR-air conditioner-washing machine individual items increased and Videocon continued to supply that demand.
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Expansion of videocon
As the expansion progressed, the company flourished. There was a race among the banks to lend to Videocon. Everything was like, ‘All is well’. While all this was happening, the year 2007 dawned. At that time, the company had a debt of Rs 10,000 crore. Videocon gave Interest payment on time. Company kept available Sufficient cash for company’s operations i.e. operational profits. In the language of the bank, this is ‘loan servicing’, it runs smoothly.
But then the company jumped into a business it hadn’t done to date. Investment in various industries such as petroleum, telecommunications, retail, DTH increased and the strain on the limits of ‘loan servicing’ increased. By 2016, the debt inflation had crossed Rs 500,000 crore.
Naturally, the question arises as to how the people in the banking sector, who are recruiting so many wise men, did not realize this. It may have been noticed, but banks do not take anything seriously as long as the installments arrive on time. But in the meantime, Raghuram Rajan was the chairman of the Reserve Bank. He had sounded the alarm in 2015. In his own words, banks need to exercise restraint in lending. Some loans may be good. but their message was to know the limits and avoid problems. “Moderation is essential and some debt is good. But not too much. Avoid over-borrowings to avoid problems, ”but Raghuram Rajan went and it happened!
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Fall in 2019
The year 2019 dawned and Videocon stuck with a debt of Rs 63,500 crore. Of this,36 banks gave Rs 57,400 crore and the rest? It has a different story. It didn’t happen overnight. In 2016 alone, the cost of loan servicing had reached Rs 2,426 crore and the annual profit was only Rs 385 crore. In addition, the deal with Axis Bank’s Chanda Kochhar and Videocon collapsed!
Now it’s time for Nirvana and Videocon to file for bankruptcy! Our common man did not realize what happened in this application, but the banks did not get the ‘running away nappy’. Let’s read it now!
This is not to say that there have been no attempts by Videocon in the meantime. He tried to reduce the debt by squandering some of his assets. But that was not enough. The only way out after that was to file for bankruptcy with the NCLT National Company Law Tribunal (NCLT). The application for bankruptcy does not mean that the amount of hemorrhage is the same.
Before that, there are many different ways to go about it. The first step in this is to estimate restructure of the loan . The next step is for all lenders to come together and decide whether or not to get a haircut. A ‘haircut’ is an estimate of the amount of damage. That is, if you have a debt of one rupee, decide how much to settle instead. Selling the company if it looks like nothing will happen even after doing all these maths.
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Bankruptcy of videocon
Government finalize to use Bankruptcy Code (the IBC) . Valuation is the measure of a company. They made bid is announcement by advertisement after this valuation. Government selected Bidders. The company then sells its assets to a company that can offer a fair market price. But no one pays a fair market price. ‘Liquidation Price ” is used during liquidation. ‘Liquidation price’ is a figure to get in the last market.
I hope you understand How Videocon went bankrupt at Rs 71000 crore and sold for 2900 crore.
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Author of this article is “Pranav Divekar”.