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The Rise and Fall of Videocon।

           For home appliances like tv, refrigerator, washing machine etc videocon was famous in each home of india. But now videocon is in the way of bankruptcy because of not repaying the 47,000 crore rupees debt. In this ariticle you will know about reasons for the bad condition of the videocon that was a successful business once. 

Videocon story

         Mr. Nandalala Dhoot formed a sugar mill, named Gangapur Sugar mill in 1955. He successfully continued the business. In 1986 he started Adhigam Trading with his three sons. Later the name, adhigam trading was changed into Videocon. Within some months they got license of colour television making. After that venugopal dhoot, son of nandalala dhoot started to take the control of videocon. And he gradually made videocon the leading company of colour television. Then videocon started to make other home appliances like air conditioner, music systems etc. And videocon became no 1 home appliances company in india. After getting success in home appliances businesses videocon started to enter into other businesses. 


        Videocon entered into oil & gas sector. That time the price of brent crude was increasing. For this videocon mostly focused on oil & gas business. Oil & gas business is a capital intensive business. It means the business needs more capital investment. So videocon started to invest heavily in that sector. To invest in the oil & gas business videocon started to take debt from banks. For the aggressively expansion of videocon in the oil & gas sector videocon transformed into oil & gas company. Once venugopal dhoot, chairman of videocon said that videocon was allmost 80% oil & gas company. And videocon got success in this field. After getting success in home appliances and oil business videocon started to enter in new businesses and acquire companies.   


        Videocon did entry in retail, d2h, power, semiconductor, telecom, glass manufacturing, insurances etc. Videocon bought many companies such as Next Retail India, Plantet M, Daewoo Electronix, Electrolux India etc. Even videocon bid for pune team for IPL. But it was a unsuccessful deal. For all these videocon needed more funding and for this videocon took loan. So videocon took up loan from banks. Videocon also hugely invested in telecom sector. But in 2012 supreme court cancelled all the license of 2G for 2G scam. For this videocon faced huge loss. In 2013-14 videocon didn't get the expected returns from oil & gas business because of the decreasing demand oil. 


           Videocon didn't get expected retutns as they expscted. It means they couldn't generate that much cash flow such way they did expansion. Videocon's 80% revenue came from  its standalone home appliances business. But for the fast expansion of videocon their focus moved from the home appliances businesses. And that time samsung, sony, LG etc started to capturr the market of home aplliances. As a result the market share of videocon were decreasing. And thus videocon lost their no 1 position in home appliances market. Overall its profit decreased and the debt increased. For this videocon faced the difficulty of repaying its existing debts. 

Videocon profit graph
Profit and loss graph

Videocon debt graph.
Videocon debt graph

So in this situation the repay of debt's interests is become difficult for the company. 

Rise and fall of videocon
Here you see that interest is bigger than their operating profit.


          About 47,000 crore rupees debt is upon the videocon. To repay the debt videocon sold their some assets but it didn't effect more on debt. In august 2017 RBI declared some defaulter companies where the videocon name was also included. RBI ordered the companies to make a resolution plan with banks before december 2017. If any company failed to make a resolution plan before december 2017 then the company had to refer to NCLT or National Company Law Tribunal and banks could recover their money selling their all assets through bankruptcy. Videocon didn't make any resolution plan before deadline. For this banks started to proceed bankruptcy on videocon. 


         India Rating and Research, a rating agency gave negative rating in 2012 watching its poor financial condition. Another rating agency, Care Ratings suspended videocon saying that videocon didn't share minimun required information to the agency. Later india rating and research left to cover videocon saying the same problem. 

Videocon share price
Share price decreased from 250 rupees to 20 rupees

        About 10 years ago the market capitalization of videocon was 15,000 crore rupees and in 2018 the market capitalization of videocon was about 600 crore rupees. In 2013 mr Venugopal Dhoot, the chairman of videocon was 30th richest person in india. 


          If you have any query related to videocon failure story please comment below so that the topic can be covered.


Best wishes to invest.



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