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
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.