Videocon rises 4.9% on NCLT nod for Vedanta firm’s offer

Shares of Videocon Industries Ltd. (VIL) jumped by the maximum permissible 4.9% to ₹6.43 on the BSE on Wednesday, a day after the Mumbai bench of the National Company Law Tribunal (NCLT) approved the ₹2,962 crore bid by Vedanta Group company Twin Star Technologies Ltd. to acquire bankrupt VIL and 12 other group entities.

Vedanta’s Volcan Investments told the LSE the group’s interest in the Ravva oilfield would rise to 47.5% post acquisition.

“The bid for the Videocon asset consists of an upfront payment of almost $40 million,” Volcan said in the filing. “The remaining deferred payments shall begin post completion of 2 years from the acquisition date.”

As per the terms of the resolution plan Videocon shares will be delisted.

According to previous submissions made before the NCLT, all the financial creditors of VIL and 12 group companies had lodged claims of ₹34,370.75 crore. Besides lenders for the group’s oil and gas business had made claims of ₹23,120.90 crore with the Resolution Professional. This makes the total claim of ₹57,491.65 crore.

With the oil and gas vendors’ claim amounting to about 40.2% of the total claims of the financial creditors of VIL, banks had a collective exposure of ₹43,743.35 crore.

Sizeable haircut

Given the Vedanta group company’s ₹2,962 crore offer banks have agreed to take a haircut well in excess of ₹40,000 crore. This is assuming interest has been frozen since admission of the resolution case in the NCLT since mid 2018.

State Bank of India (SBI) having the biggest exposure of ₹ 10,840 crore and the one which had dragged Videocon to NCLT did not offer any comment on haircut and exposure.

Other banks which have high exposure include IDBI Bank ₹ 9,561 crore, Central Bank of India ₹ 5,063 crore, ICICI Bank ₹ 3,318 crore, Union Bank of India ₹ 2,529 crore, Bank of India ₹ 2,137 crore, Exim Bank ₹ 2,365 crore, Punjab National Bank ₹ 2,100 crore.

The Committee of the Creditors of Videocon had on December 11, 2020 voted in favour of this resolution plan with 95.09% votes.

A query to Vedanta Group as to what it would do with this acquisition went unanswered. Calls and text messages to former chairman of Videocon VN Dhoot remained unanswered. Credit rating agencies, analysts declined to comment. “No one would say any thing on this V to V case” said one analyst.

According to a PTI report this approval will now consolidate Vedanta’s hold in Ravva oil field. “Vedanta’s interest in Videocon is principally driven by the latter’s 25% stake in the Ravva oil field in the KG Basin. Vedanta, through Cairn, holds 22.5% stake in Ravva and after this success, Vedanta will take its stake to 47.5% and it will be the biggest stakeholder ahead of ONGC’s 40%,” the report said.

“The average output from the Ravva block in FY20 was 14,232 barrels of oil equivalent per day (boepd), and it increased to 22,037 boepd in the first quarter of FY21,” the report added.

Declining to comment on the VIL deal, J.N. Gupta, MD at Stakeholders Empowerment Services stressed there was a need for greater transparency in the resolution process. “They should declare the received bids without disclosing the names. Today, the Resolution Professional has the power to twist the deal in anyone’s favour,” he remarked.

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