SBI-Led Banks Or­der Foren­sic Au­dit of Video­con’s Ac­counts

Check by KPMG to see if there was bungling; move a pre­cur­sor to start of debt re­cast

The Economic Times - - Front Page - San­gita.Me­hta @times­group.com

Mumbai: A SBI-led con­sor­tium of lenders has or­dered a foren­sic au­dit of Video­con In­dus­tries’ ac­counts to find out whether the com­pany foundered be­cause of ad­verse busi­ness con­di­tions or fi­nan­cial mis­man­age­ment, said two peo­ple with knowl­edge of the mat­ter. The move is pre­lim­i­nary to the start of debt re­struc­tur­ing af­ter Video­con de­faulted on loans worth .₹ 43,000 crore, they said. KPMG, one of the Big Four au­dit firms, will con­duct a thor­ough in­spec­tion of the ac­counts of the group, which has in­ter­ests that range from tele­vi­sion man­u­fac­tur­ing to oil ex­plo­ration in Africa.

Loan re­cast pro­ceed­ings un­der the In­sol­vency and Bank­ruptcy Code (IBC) could be kicked off once KPMG fin­ishes its re­port. “Lenders and pro­mot­ers are now look­ing at re­struc­tur­ing of the loans and be­fore they go ahead with it, it has been de­cided to con­duct a foren­sic au­dit,” said one of the two peo­ple cited above.

In­dian banks have be­come in­creas­ingly wary of tak­ing de­ci­sions based on the dis­cre­tion of man­age­ment af­ter the ar­rest of five IDBI Bank of­fi­cials, in­clud­ing its for­mer chair­man and man­ag­ing di­rec­tor, in the King­fisher Air­lines loan de­fault case.

If the au­dit finds that an ad­verse busi­ness en­vi­ron­ment was re­spon­si­ble, bankers can go ahead with re­struc­tur­ing loans or file charges if the re­port is ad­verse. Video­con In­dus­tries chair­man Venu­gopal Dhoot said the com­pany will meet its obli­ga­tions but wanted more time. “The ac­count has turned into non-per­form­ing loans since we were not able to ser­vice the prin­ci­pal part,” said Dhoot. “We con­tinue to ser­vice in­ter­est. We do not want deep re­struc­tur­ing of loans. We are not ask­ing for a hair­cut. All we want is a longer time to re­pay the loan.” While many small lenders such as Dena Bank have clas­si­fied the loans as bad and be­gan mak­ing pro­vi­sions for them in the March quar­ter, big­ger ones are in the process of do­ing so in the June quar­ter. Pun­jab Na­tional Bank and Cen­tral Bank of In­dia have clas­si­fied Video­con In­dus­tries loans as bad, and State Bank of In­dia may do so when it an­nounces re­sults on Au­gust 11.

A foren­sic re­port will also give lenders a clear idea of the liq­uidi- ty po­si­tion of the com­pany, whether there has been any di­ver­sion of funds, mis­ap­pro­pri­a­tion of as­sets, and non-com­pli­ance with reg­u­la­tory norms, said bankers.

Lenders have been seek­ing to per­suade the Dhoot fam­ily, Video­con’s pro­mot­ers, to in­vest eq­uity in the com­pany by March 2017 or sell non-core as­sets. Fol­low­ing this, the com­pany has put its real es­tate as­sets up for sale and has urged banks to buy some of them so loans can be re­paid. Video­con House in Mumbai was re­cently sold for .₹ 300 crore. The Dhoot fam­ily owns 62% of the com­pany, which is val­ued at .₹ 793 crore.

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