American Tower Corporation (ATC), an operational creditor with claim of Rs 450 crore from Videocon Telecommunications, Wednesday moved the NCLT opposing the lenders plea for consolidating all the group companies of Videocon group for the ongoing bankruptcy process. While the Videocon group has over 50 operational entities, the lenders are seeking to consolidate the accounts of 14 key entities for speeding up the bankruptcy process and to ensure value maximisation in case of liquidation.
While Videocon Telecommunications owes around Rs 24,000 crore to lenders, 12 other group entities under Videocon Industries owe Rs 59,000 crore to the system. ATC, in its objection to the consolidation of all accounts of the group–a first since the bankruptcy law was enacted in May 2016–argued that the move will be more like merger, which is impossible as the debtors of each company are different and that it has no exposure to any other group companies except Videocon Telecom which owes it Rs 450 crore.
“The business of each of the 14 entities are also different and no way inter-linked and not all the 50 entities at the NCLT,” the ATC counsel argued and also sought permission to attend the committee of creditors meeting due to his exposure to the firm. To this, the counsel of State Bank, which is the lead banker, argued that it is a merger but merely a consolidation of the books of accounts, so that the bankruptcy process is speeded up.
“Since the number of entities are smaller with interlinked businesses, consolidating their books will only speed up the resolution process,” he said. The SBI counsel further argued that “if consolidation is allowed there might be some takers, otherwise there might be no hope for liquidation.” After listening to the arguments of both the sides,an NCLT bench of MK Shrawat asked ATC to file submission by June 17, and kept the matter for further hearing on July 15.
It can be noted that on January 25, the lenders and resolution professional had approached NCLT seeking a direction to consolidate all the 14 group subsidiaries under one financial entity saying as all these entities have common lenders and are engaged in common businesses. They had also cited global precedents in this regard saying there are four kinds of consolidations globally– procedural, consequential, partial and sub-standard–and that various courts have allowed such measures.
However, the lawyer of Trend Electronics, a group company, had objected to this saying it was a publicly traded entity and would do better if the resolution plan was carried out independently. Trend Electronics manufactures set top boxes for Videocon D2H. Echoing a similar view, another entity called KAIL said the tribunal did not have the jurisdiction to order such a consolidation.
The Videocon group is among 40 large defaulters identified by the Reserve Bank’s first list for insolvency. The group’s core businesses are consumer electronics and oil & gas exploration. The lenders plan to first auction the electronics business estimated to be worth USD 2 billion. The subsidiaries of Videocon Industries are into manufacturing, sale and distribution of consumer goods. Some of the units referred to the NCLT include Value Industries, Trend Electronics, KAIL, Millennium Appliances, Applicomp, Sky Appliances, Techno Electronics, Century Appliances, PE Electronics, Next Retail, Evans Fraser & Co and Videocon International Electronics.―Devdiscourse