Mumbai: In what could severely dent the chances of lenders to recoup over 587 billion rupees from bankrupt Videocon Industries Ltd, the company has admitted that it can no longer continue as a ‘going concern’ and that it is ascertaining its valuation on a liquidation basis. A business is considered a ‘going concern’ if it is operational and has a potential to generate profits.
This development may force the company’s lenders, led by the State Bank of India, to take huge haircuts. Any potential bids for the company under the resolution plan will factor in the ‘going concern’ status and are likely to be close to the liquidation value of the company, said a resolution professional, who did not wish to be named.
Videocon Industries’ inability to continue operations came in the observations made by the company’s auditors as part of its results in Jan-Mar, when it posted a record net loss of nearly 21 billion rupees for the quarter, taking the year-to-March loss to 52.6 billion rupees. Videocon Industries concurred with the auditor’s assessment that problems such as a strain on working capital, a substantial fall in sales and losses have hampered the ability of the company to continue operations.
In the notes to the company’s results, Videocon Industries said that “the going concern concept stands vitiated and (the company) is in the process of ascertaining the liquidation value of the assets”. Videocon Industries has blamed the insolvency proceedings against the company for the fall in its sales. The proceedings had a severe impact on the business, with dealers returning goods and the company having to offer discounts and incentives to reduce inventory, the company said.
The city-headquartered company, incorporated in 1986, started as consumer electronics and home appliances manufacturer and later ventured into oil and gas exploration and telecommunications. It owns participating interest in various oil and gas blocks in India, Mozambique, Brazil, Indonesia, and East Timor.
