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The Federation of Universities
Videocon Group
“As Indian business starts to go global, Videocon has proved that it
is right in front. With 10 brands in its portfolio and with factories globally,
Dhoot has proved that with strategy and fire in the belly, you can achieve much.”
– Lakshmi Mittal, Chairman and CEO of Mittal Steel
Speaking on Videocon Global Acquisition.
Videocon Group, which has never been in short supply of ambitious desires to have more global
presence, has scripted two blitzkrieg acts with; by the first act, Videocon Group Chairman
Venugopal Nandalal Dhoot, on June 28, 2005, acquired Thomson SA’s entire color picture tube
business spread in Europe, America and China. From this deal, V N Dhoot also got Thomson SA
to invest in Videocon International and Videocon Industries, the two flagships of Videocon Group.
Later, to increase falling market share of Videocon in electronic consumer goods and appliances,
he acquired the entire stake of loss making AB Electrolux’s Indian operations – Electrolux
Kelvinator, and got the AB Electrolux to invest in Videocon Industries. After scripting the twin
deals, Mr. Dhoot moved to play the second act by merging Videocon International with Videocon
Industries on the advice of Development Bank of Singapore and ICICI Bank, giving Videocon the
cash to play for a greater role in the global market. But the acts surprised the financial markets.
Market analysts wondered whether Videocon Group ambitious vision of becoming a global firm a
hasty and hazy act. The financial markets also wondered whether Videocon had the financial
strength to carry on its further investment plans.
Mr. Dhoot, after having got two high profile low-cost acquisitions amidst severe competition,
began reinventing Videocon with an eye on the global equipment manufacturing market. After
completing the acquisition Videocon Group expects to increase its total turnover from Rs.50
billion to Rs.175 billion, with more than Rs.87 billion coming from the global markets. He
adopted a new slogan for its group – ‘The Sun never Sets in Videocon’ and began moving towards
making the group a multinational Indian company. Currently, he is planning to tap financial
resources from capital and debt markets.
VIDEOCON GROUP – THE EXPANSION PATH
Videocon Group came into being with the incorporation of Videocon International Ltd. (VIL) in
1985. At present, the group consists of four listed companies – Videocon International, Videocon
Appliances, Videocon Industries and Videocon Narmada Electronics Limited. Within a decade,
the group shot its way into the big league and became a leading manufacturer of consumer
electronic goods and house appliances in India.
The Dhoot family, hailing from the backwaters of Maharashtra, traveled a long way from being
producers and sellers of sugar and cotton to become producers of hi-tech products like Color TVs,
refrigerators, washing machines, air-conditioners, and digital assistants. Videocon group was
founded by late Nandalal Madhavlal Dhoot, who migrated from Marwar region in Rajasthan to
Maharashtra and established himself as a successful sugarcane and cotton grower. Nandalal
established sugarcane mill based on French technology in 1955 at Gangapur near Aurangabad, an
important industrial center in the Marathwada region of Maharashtra. Madhavlal Dhoot’s sons
Venugopal, Rajkumar and Pradeep Kumar built their business empire – Videocon Group, and
raised it to become the leading producer of electronic appliances in India.
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Venugopal Dhoot, the eldest son of Nandalal Dhoot, graduated in electronics engineering from
Poona Engineering College and had also trained in TV engineering from Toshiba Corporation in
Japan; he followed his father’s business managing the sugar mill and cotton gins. Venugopal
Dhoot sighted an opportunity for producing color TVs in India when he noticed that Indians took a
fancy for Color TVs ever since color TVs were introduced in India during the 1982 Delhi Asian
Games. He procured a license and through a technical tie-up with Toshiba, Japan, set-up VIL in
the year 1985 with an initial capital of Rs.100 million and began producing Color Television sets
and also monochrome television sets. Their venture with Toshiba gave Videocon group to focus
on product quality and durability and the right platform for establishing themselves in electronic
appliances industry in India. Videocon International Limited got listed at Bombay Stock Exchange
in 1992 and at the time of listing the company had an authorized capital of Rs.200 million and
paid-up capital of Rs.82.80 million.
The company raised money from the markets whenever it required the capital for investments
since it got listed at the stock exchange in 1992. It also issued GDRs and Euro issues in the year
1994. In January 1994, the company issued GDRs at an issue price of Rs.255 and raised Rs.2.82
billion and later in October 1994 the company went for Euro issue, issuing non-convertible bond at
an issue price of Rs.100 raising Rs.340 million from the issue. In 1998, Videocon Narmada
Electronics Limited, a flagship company under Videocon Group, manufacturing glass shells that
go into production of picture tube was merged with Videocon International Limited. The merger
was taken by exchanging one share of Videocon International Limited for every 12 shares of
Videocon Narmada Electronics Limited.
WIDE RANGE OF PRODUCTS
Videocon International Limited, along with Color TV sets, also manufactures digital videos, and
home theaters under consumer electronics. It also manufactures refrigerators, washing machines,
air conditioners and micro ovens under home appliances. In Color TVs, Videocon was the first
Indian Company to introduce Picture-In-Picture, Turbo Sound, Surround Sound, Larger Screen
Sizes, the Full Flat Square Tube, Bazooka technology and the Freedom features.
It was the first to introduce frost-free refrigerators. Videocon tied-up with leading brands that
entered into India post reforms era, and positioned itself as a multi-brand company. It also built a
stronger distribution network and by the end of 1990s it steadily emerged from being the maker of
color televisions to being the largest manufacturer of consumer electronic appliances in India.
Videocon Group, taking the advantage of Tax holiday given to the industries set-up in rural areas,
located its manufacturing units in policy-friendly locations. Its production facilities, located in the
backward region of Marathwada, fall under Special Industrial Development Zones schemes. Its
plants located in the industrial belt of Aurangabad get a tax benefit of 135 percent on investment,
and about 70 percent of sales of Videocon group come from plants that are exempted from sales
tax. The group’s major production facilities of home appliances are:
1. Videocon International Ltd., Chitegaon, Aurangabad. (Color TV assembly Plant) 2. Videocon International Ltd., Gandhinagar (Monochrome TV assembling Plant)
3. Videocon Appliances Ltd., Chitegaon, Aurangabad (Washing Machines and Air Conditioning
assembling)
4. Videocon Narmada Electronics Ltd., Bharuch (Glass shells funnels and Glass shell panels)
5. Videocon Communications Ltd.., Bhalegaon, Aurangabad
6. Salt Lake Plant – Kolkata (Color TV).
The Chitegaon and Bhalegaon plants were built with an investment of Rs.2000 million crore each
and have an installed capacity of about 10,000 CTVs per day. The plants were built to give
Videocon an edge over its competitors producing on the conventional lines. VIL manufactures
glass shells (funnels and panels), electronic components such as electronic tuners, FBTs (Fly Back
Transformers), ATDMs (Asynchronous Time Division Multiplexing) and deflection yokes that go
VIDEOCON 2006-20
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into the manufacture of CTVs. A major strength of Videocon International is its engineering skills
and tool room. The company set-up a high-level backward integration facility to ensure a smooth
flow of material. The Dhoots made efforts to build their plants with state-of-the-art-technology to
give them an edge over their competitors by constantly updating their manufacturing facilities with
the changing technology and maintaining high standards of quality right across its spectrum of
products. Built with the best technical features set to world standards, the plant has every facility,
right from the basic process of manufacturing the components to the final assembly. The
machinery deployed ensured that the products are of international class with zero defects. The
accuracy of component insertion is of superior class, and about 90% of the components of the
CTV are assembled through the process of Auto Insertion. The machine works at the plants are
fully programmable. Further, the soldering of components is done in an Inert Nitrogen Chamber,
which ensures oxidation free solder joints that are more reliable than the conventional soldering
process. The near zero wastage technology adopted at the plants reduce manufacturing costs by
optimizing material inputs at these plants. To ensure the smooth processing of material and to
maintain product quality, Videocon adopts the Japanese 5-S (Seiri, Seiton, Seiso, Seiketsu, Shitsuke)
the five tools of quality which focus on eliminating wastage at all levels of production.
DIVERSIFICATION
The ambitious Videocon Group, diversified into other sectors like real estate, financing, crude oil
business by setting up Videocon Petroleum Limited in 1993, which was renamed as Petrocon India
Ltd. and also in power and energy sectors.
Exhibit 1: Videocon Group
Company Name Year of Incorporation
Videocon International Ltd. 1985
Videocon Appliances Ltd. 1988
Videocon Communications Ltd. 1989
Videocon Industrial Finance Ltd. 1990
Petrocon India Ltd. 1993
Videocon Energy Holdings Ltd. 1996
Videocon Industries Ltd. 1996
Source: CMIE.
Entry of Competitors
During the early ’90s, Videocon International was a leading consumer electronic durables
manufacturer. It controlled more than one-third of the domestic CTV market and had a near
monopoly in washing machines. Along with consumer durables, the glass shells it manufactured
were used in the manufacture of both monochrome and color television sets and added to its
profits. The company claimed that the glass shells accounted for 75 percent of its profits.1
However, entry of Multinational brands in mid ’90s challenged the market leadership of Videocon.
The entry of Korean chaebols LG, Samsung along with the Japanese giants Sony, National
Panasonic, and other multinational companies from the US, Europe and China took the Indian
electronic consumer durable market giant head on. Videocon also lost its market leadership in
washing machines to Whirlpool LG, and Samsung, which entered into the consumer home
appliances sector.
When Samsung Electronics first entered into India in 1995, Videocon International entered into a
joint venture with it and produced Samsung brands on contract basis at its plants located in
Chitegaon and Bhalegaon. Videocon, through its investment arm Reasonable Computer Solutions,
entered into a 49:51 joint venture with Samsung Electronic Company in 1995 with an authorized
1 www.magindia.com
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and paid-up capital of Rs.320 million, with VIL investing Rs.162 million. Later, in the year 20012
Samsung raised its share to 74 percent in the joint venture by increasing its authorized capital of
Rs.1000 million with a paid-up capital of Rs.600 million. Samsung later bought out the remaining
26% also by paying Rs.2500 million to Videocon, at the end of the year 2002.
The entry of other big players – LG, Sony and other consumer electronic manufacturing
companies – into Indian markets unleashed a price war in the Color TV segment. With more
players in the Color TV business, prices came down by 40% at the end of 1999 when compared to
the 1995 prices. Considering the pressure, Videocon International, known for its aggressive pricing
strategy, too reduced its prices. While the multinationals with deep pockets entered into low
volume, premium products cornering higher margins, Videocon International suffered a drop in its
sales and a deep cut in profit margins, and was pushed to high-volume lower-end priced segment
of CTVs.
Driven by higher volumes in the lower segment, the company’s turnover increased by just
15 percent in 1999 from the turnover in the year 1998 and its net profit stood at Rs.403.40 million
decreasing by 60 percent from the previous year’s of Rs.1004.80 million. Market analysts believe
that most of its profits in the year 1999 came from exporting and selling glass shells that go into
manufacturing Color TVs. The once dominant player in the Color TV sector was reduced from a
branded player to a commodity supplier by the end of 1999 with a market share of 10%. It fell out
of dealers’ choice due to its strategy of high volumes and low margins. Videocon, at the end of the
March 1999, has seen its net profit margins shrunk to 13.90 percent from a high of 16.40 percent
in 1997-98. It scrip at BSE also lost its charm. From a high of Rs.625 in 1992 it came down to
Rs.47.50 in the first week of April 1999.
Exhibit 2
PAT
Year Videocon International Ltd.
March 1990 269.10
March 1991 261.70
March 1992 660.80
March 1993 460.10
March 1994 633.30
March 1995 864.90
March 1996 904.50
March 1997 884.00
March 1998 1004.80
March 1999 403.40
Source: CMIE/PROWESS.
In Search of New Strategies
Struck with eroding profits, shrunken market share, Videocon hired the services of McKinsey &
Company in 1999 to draw new strategies for restoring its market leadership. Based on the
McKinsey recommendations, Videocon adopted a multi-pronged, multi-brand strategy and
weighed its strategy on high volumes and low margins. It tied-up with Akai Electric Company,
Japan and floated a joint venture – Akai India Limited with a paid-up capital of Rs.1000 million,
with Videocon holding 70 percent in 1999, and got to market its brands Akai, and Sansui and also
produce them at its plants at Chitegaon and Bhalegaon. Based on McKinsey recommendations the
company decentralized its management with separate heads for each brand under its umbrella.
2 www.domain-b.com
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Videocon also planned to increase the manufacturing capacity of its Color TVs. To add to its
capacity of manufacturing 135,000 televisions from its Chitegaon plant, it acquired Phillips India’s
high tech CTV plant at Salt Lake, Kolkata, for Rs.90 million in 1999. At the time of buyout, the
Salt Lake plant was producing at one-fifth of its total capacity of 600,000 CTV units annually.
Videocon, in the year 2000, invested Rs.2000 million to upgrade the plant to bring it to its near full
production level for manufacturing CTVs of Akai and Sansui brands. It also invested
Rs.100 million at Salt Lake plant for producing plastic moulds for television sets. The company
further drew an investment plan of Rs.11000 million crore over the next two years to increase its
manufacturing capacity of televisions and also household appliances at the Salt Lake plant.
In the year 2000, the group also drew an additional investment plan of Rs.25000 million for
upgrading its component manufacturing facilities situated at Chitegaon and Bhalegaon. The investment includes Rs.20000 million for upgrading its three million capacity glass shell manufacturing units and Rs.2000 million in motor manufacturing and Rs.3000 million in
compressors facility. The company, in the year 2000, set-up a new plant adjacent to VIL’s CTV and appliance manufacturing complex at Chitegaon with an investment of Rs.1500 million and earmarked Rs.5000 million for investment in the next two years. In the year 2001, the company
invested Rs.2000 million for installing a manufacturing plant at Hyderabad for producing 5 lakh CTV, 10 lakh computer monitors and 2 lakh refrigerators and washing machines.
Videocon International further planned to raise Rs.4500 million from the capital markets in the year 2001 for increasing its production capacity at the plants. But, Sebi banned Videocon International from entering into the capital market till April 2004, due to VIL’s alleged
involvement in manipulation of prices during 1998 stock scam. Videocon in 1998 ventured into market to buyback two percent of its outstanding shares at a price of Rs.142, when its market price was looming at Rs.62 and the stock price soared to Rs.165 causing disturbance in the market. The
company was later absolved from the involvement. But due to Sebi’s ban, Videocon raised the equity amount through private placement after getting a nod from its shareholders.
The multi branded strategy instead of increasing its share in the market further eroded its share in the market and also the demand for Videocon brands. It lost its market share at the cost of promoting other brands in its kit. Its promotion of the Akai and Sansui brands helped them
penetrate the market and strengthened their market share while the Videocon market share fell down to 7 percent by the end of 2003 and its operating profit fell down to Rs.1527.7 million from Rs.4771.2 million in the year 2002. Videocon, the household name in metro markets with a full
range of consumer durable products, was pushed into smaller towns and rural areas. While one-fourth of the profits come from the consumer durables, the rest come from the sale of glass shell components to other CTV manufacturers and from manufacturing CTVs for other brands.
Decreasing profits, fall in demand for its brand, and also its dominance in the Color TV segment due to the Korean chaebols pushed it to lower price segment to cater to the needs of the consumers
in small towns and rural areas. As a result, Videocon shifted its business concentration towards manufacture and supply of glass shell panels and glass shell funnels to domestic and international markets for their use in the manufacture of Color TVs. Moreover as the cost of glass shells made
up one-third manufacturing cost of the CTV, Videocon devised a fresh strategy to integrate backwards, to gain profits. Mr. Dhoot himself said, “We no longer call ourselves a consumer durable company, we call ourselves components manufacturers”3. Market analysts said that
Videocon was doing a clever business act by cross subsidizing its consumer durables business with the profits from the glass shells division. Videocon supplies its components to Akai, Samsung and Onida. It also manufactures CTVs for Onida and Salora and for TCL, a China based equipment
maker. It also exportes its glass shells panels and glass shells funnels to Europe, South Africa and Middle East.
After shifting its strategy from being a consumer electronic durable brand to Color TV component manufacturer, Videocon observed that the global electronic majors were increasingly outsourcing the manufacturing of their products and component; and therefore it eyed on the Original
Equipment Manufacturing (OEM) business in the global market, to gain economies of scale by
3 Videocon: Tuning Into The Big Picture – Financial Express, August 23, 2003.
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lowering its cost of production and to corner greater market share in the OEM. Videocon lacking in the R&D facility required for enhancing its glass shell production, was looking for a right opportunity for a vertical integration for setting its foot in the global market and also for increasing
its market share in domestic electronic consumer goods and appliance. S K Shelgikar, group advisor at Videocon said, “Videocon choosing to go global through OEM route is a conscious decision. Since building a brand abroad was tough, we decided to go in for intermediaries.”4
Videocon International looking for vertical integration for its glass shell-manufacturing units found its ally in Thomson SA, the manufacturer of Color Picture Tubes (CPT) and provider of products and solutions to Media and Entertainment Industry.
Two Important Deals Videocon, envisioning to become an Indian conglomerate and to increase its presence in the global
markets, seized the opportunity when Thomson SA decided to wind-up its display and components
units to Media and Entertainment industry and refocus on high-margin provider of equipment and
solutions. Videocon Group, through its offshore entity Eagle Corporation, a hundred
percent subsidiary of Videocon group, clinched the deal in favor of Videocon International
for €240 million (Rs.12600 million) beating 16 bids that included LG Phillips JV and Samsung.
The acquisition gave Videocon, ThomsonSA’s entire Color Picture Tube (CPT) business and CPT
glass manufacturing units located at Piaseczano in Poland, Foshan and Dongguan in China and
Mexicali in Mexico. The deal signed with the Thomson SA’s Chairman and CEO Frank
E Dangeard on 28 June 2005 gave Videocon 19 million units of color picture tubes along with
4 million units of picture tube glasses per annum and made Videocon group the third largest
manufacturer of color picture tubes in the world after LG Phillips JV and Samsung. V N Dhoot
speaking on the deal to the press said, “The Thomson acquisition was in line with our global MNC
strategy. We want to be No.1 in the consumer electronics and consumer durables sectors”5.
Videocon, earlier on 28 February 2005, acquired Thomson’s Cathode Ray Tube (CRT)
manufacturing plant at Anagni in Italy for an undisclosed figure. Market analysts put the deal to be
around Rs.4,400 million ($100 million). After acquiring Thomson SA’s CPT units, Videocon
acquired Swedish white goods major AB Electrolux’s entire stake in its loss making Indian
operation Electrolux Kelvinator Limited for Rs.5,000 million on 8 July 2005. The deal signed
between AB Electrolux Asia-Pacific’s CEO Peter Birch and CFO Paul Gelardi and Videocon
Group’s Chairman and CEO V.N. Dhoot, approved by the board of directors of Videocon, gave
Videocon the entire (91.85 percent) shareholding of AB Electrolux (ABE) in its loss-making
Indian subsidiary – Electrolux Kelvinator Limited; and it will takeover three manufacturing units
of Electrolux Kelvinator Limited located in Shahjanpur in Rajasthan and Warora and Butibora
plants in Maharashtra. In a separate agreement signed with AB Electrolux, Videocon will get
Electrolux brands Kelvinator and Allwyn and also Electrolux brand to market in India. It got the
Kelvinator brands for a 25-year lease with no royalty payment, and the Electrolux brand for five
years with a royalty payment which was undisclosed while Allwyn was an Indian brand bought by
the Electrolux Kelvinator Limited, when it entered into India. The agreement inked with AB
Electrolux also clinched Videocon an annual supply order of finished products and components
worth Rs.50 billion to ABE for five years and the distribution and marketing of Electrolux
Kelvinator brands in SAARC countries.
….Are the Deals a Gain or Loss
The twin deals by Videocon catapulted it to becoming a major original equipment supplier in
global markets. Analysts view Videocon’s twin deals, which are free from the net of cash and debt,
a win-win situation. They point out that the deals are a mere book transaction. Videocon by
signing the deals also got both Thomson SA and Electrolux to invest in its group of companies –
Videocon Industries and Videocon International. Thomson SA agreed to invest €225 million in
Videocon Industries and €15 million in Videocon International and will hold 14 percent stake in
both the groups.
4 Reinventing Videocon – Business World, July 19, 2005. 5 Will Videocon Rise to the Occasion – Financial Express July 16, 2005.
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Thomson SA plants in Italy, Poland, Mexico and China produce most of the important components
that go into a finished Color Picture Tubes (CPTs). The plants produce all components for making
electron guns and deflection yokes and its technological expertise in production of CPTs and
components allowed it to control the cost of higher value-added parts of the tubes. Its CPT
manufacturing units at Mexico and Poland develop integrated circuits and large to very large size
TV picture tubes. Industry experts believe that Videocon could leverage the technology expertise
of Thomson SA to manufacture slim color picture tubes, and also leverage the R&D facilities to
move into liquid crystal displays and plasma TVs. Its plant at Anagni in Italy is among the top four
leading manufacturers of CRTs and stand behind LG Phillip JV, Samsung, and Matsushita.
Compared to the leaders, Videocon has low-cost production base. It has a strong technological
expertise with 1000 engineers. Its display and components units at Poland, China and Mexico have
full fledged R&D facilities with access to a large resource of 2000 patents and intellectual property
rights relating to the most basic technologies in CPTs and can produce a wide range of products
and can offer services to its customers. The acquisition gave Videocon a vast geographical market
that includes China, Asia-Pacific, NAFTA, LATAM and CIS. Except the plant at Dongguan in
China, which has a minor stake of local government, all other plants are entirely owned by
Thomson SA. After the acquisition of Thomson SA plants Mr. Venugopal Dhoot said, “We are
now among the largest integrated players with economies of scale in raw materials and
finished products and are in the process of doubling our picture tube glass capacity to 34 million
units a year”6.
Analysts believe that the buying out of Thomson SA display and components manufacturing units,
Videocon has vertically integrated itself with its glass manufacturing units back home and gave its
glass shell manufacturing units a ready market, and they also believe that this will help the
company to reduce costs of picture tube manufacturing. They argue that with its 2000 patents and
intellectual property rights obtained from the buyout, Videocon could leverage to fight the global
display battle as the market moves out of CPTs to Liquid Crystal Displays (LCDs) and Plasma
TVs. Despite the cathode ray tube market shrinking and lower margins and decreasing profits in
picture tube makers, analysts term the acquisition of Thomson SA as a positive move as Videocon
minimized the financial impact by getting Thomson SA to invest in Videocon group. Merchant
Bankers and a few corporates view Videocon’s acquisition as a strategic move. Ravinder Zutshi,
deputy managing director of Samsung Electronics India said, “Videocon can leverage the
Thomson buyout to be an aggressive price warrior in CPT market globally, though it remains to be
seen how it actually plays”.7
A few financial analysts in India believe that Thomson could have come for a dollar. They point
out that Thomson SA’s display and components manufacturing units were loss-making units and
Thomson SA has structured its policy framework to windup the display and components units and
was looking out for a buyer to bail out. Thomson SA after refocusing on high-margin consumer
electronic market from a low-end consumer electronic market in October 2004, decided to wind-up
its loss making display and components units at Poland, Mexico, China and also its CRT
manufacturing unit in Italy and was looking out for a buyer. The company made an operating loss
of €101 million in 2003 and €105 million in 2004. Its CRT manufacturing plant in Anagni had a
liability of €178 million and the plant needs to restructure for further innovations. Except its units
in China, all the other units were running in losses. After selling its loss making units to Videocon,
Thomson SA, stated in its financial statement addressed to investors that it could sell out its loss
making units six months ahead than excepted. Analysts also argue that it will be costly for the
Videocon Group to get the units in Poland and Mexico on track and with falling margins in CPT
business, the Group will have to reduce the work force of more than 11,000 at these plants to cut
the costs and that could be difficult considering stringent labour laws in Europe and Mexico.
Industry peers question the financial strengths of Videocon and mock that they may have to
dismantle the Thomson’s plants and bring them back to India, where they can convert glass shells
into tubes, and sell them at a cheaper rate.
6 The Great Gamble – Business Today July 31, 2005. 7 The Great Gamble – Business Today July 31, 2005.
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Surplus Capacity in the Industry
Rival Indian CPT players Hotline Teletube and Samtel Colour are baffled by the Dhoot’s decision
to buy huge capacities. They wonder that it will be difficult for Videocon to leverage its capacities
with glut in CPT markets and with prices crashing and low margins. V N Masaldan, MD, Hotline
Teletube, speaking on the Videocon acquisition of Thomson SA said, “The low margins in the
CPT markets has forced global players to close their units and with the picture tube technology on
wane and being replaced by plasma and LCD, it won’t make sense in buying the CPT units”8.
Market analysts point out that the CPT market in India has an annual supply of 23 million units,
and has a demand of just 12 million and questions where Mr. Dhoot would market his capacities.
Moreover, other CPT manufacturers – BPL and JCT being Videocon suppliers, and the other
players like Samtel Colour and Hotline Teletube planning to increase their capacity pumping
volumes back home will only cost Videocon in leveraging its capacity. Girish Rao, LG sales9 head,
argued that adding capacity does not translate into market share; it is one thing to add huge
capacities and another is the ability to sell them. Analysts argue that with the whole world moving
to plasma and LCD TVs, the Dhoots may not have problems in the short-term but will face them
in the long-term when the demand falls for the CRT-based TVs. iSuppli, an electronic industry
research firm, predicted that the CRT TVs would decline at a rate of 0.5 CAGR and the global
demand from 147 millions units today to 131 million units by 2010, and that it will be difficult for
Videocon to grab a major share in the global CPT markets with China’s TCL, and Korea companies in
the fray and questioned the acquisition of a declining business. Analysts also argue that it was not
Videocon, which gained buying the Thomson SA’s loss making units, but it was Thomson SA that
gained by strategically investing in Videocon industries, and getting a share of profits from the oil
exploring business and the electronic business. Analyst believe that by acquiring the share in Videocon,
Thomson SA has achieved a strategic objective of selling its displaying units and magnetized their
financial investment and the same has been echoed in its CEO speech to the investor. They point to the
words of Frank Dangeard, CEO of Thomson SA, after the deal that stated: “Thomson is delighted to
have finalized an agreement with Videocon. With this agreement Thomson achieves the strategic
objective of selling its display units set last October and now can fully focus on its core media and
Entertainment business”10. The CEO speaking of its investment in Videocon said theirs was a financial
investment and that can be monetised.
Controversial View on the CRT Demand
Videocon Group CMD Dhoot observed that emerging markets like Brazil, Russia, India and China
(BRIC), Middle East and parts of Africa will drive the sales of CRT-TV. To counter the growing
demand for Flat TVs, Videocon expects to launch slim tubes, which are a new invention based on
the CRT technology in the next few months and also consider a launch of Plasma and LCD panels
with this technology at its Anagni plant. Mr. Dhoot is confident that with the acquisition of
Thomson SA, the synergies with the Indian operations would help Videocon to reduce the costs
and produce glass shells at very low prices in India, as it has comparatively low cost labor. The
reduction in costs will help it gain profits in the low margin picture tube business. Moreover,
though the demand for CRT TVs is falling, Videocon believes that still about 80 percent of the
CTV market is for CRT driven TVs. The Videocon management plans to invest $500 million in
Thomson plants in the next few years by tapping domestic and international equity markets.
Mr. Pradeep Kumar Dhoot, a director in the board of Videocon group, expressed the same
confidence in the group’s financial strengths. Speaking to press, Mr. Pradeep Kumar said, “As our
glass, oil and gas business are profitable, and since here are very remote chances of raising finance
through debts, the group has approached the Italian government for a grant to expand our business
in the country.11”
8 High Resolution – Business World August 1st, 2005. 9 High Resolution – Business World August 1st, 2005. 10 www.thomson.net. 11 Reinventing the Videocon, Business World, July 19, 2005.
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The GDR Issue and The Merger Activities in the Group
Earlier, Videocon Industries issued Global Depository Receipts (GDRs) worth US $75 million on
28 June 2005 at US$10 per GDR with each GDR representing one underlying equity share of the
Videocon Industries. The GDR issued at a discount of 3 percent to the current market share price
of 434.25. Earlier the issue hit a roadblock when BSE refused to list the underlying GDR issue.
BSE refused the listing on the grounds that it has not increased the non-promoter equity holding
from 11.08% to 25% as per its under taking. Videocon Industries approached Securities Appellate
Tribunal (SAT) as a matter of urgency in the second week of June 2005 and sought its intervention
in the issue. On June 13, the tribunal gave a conditional clearance to the company GDR issue to be
listed on the Luxembourg Stock Exchange. On the day of issue of its GDR, which coincided with
the acquisition of Thomson SA CPT units, the company stock fell by 1.05% to Rs.445. The
company again placed 94,10,145 Global Depository Receipts on 8 July 2005, at the price of
US$10 per GDR, aggregating to US$94.10 million on Private Placement Basis to AB Electrolux.
Each GDR represents one underlying equity share of the Company, issued at the current market
price of Rs.435.25. The company thereby increased its total paid-up capital to Rs.497.9 million.
AB Electrolux picked up 5 percent stake in Videocon Industries Limited. After the issue of the
GDRs, the company now has non-promoter share equity holding at 27.59 percent and fulfill the
SEBI condition.
Industrial analysts believe that Mr. Dhoot, setout to carve a global image of Videocon, has planned
well for its twin deals and believe that Videocon is banking on its cash cow – crude oil investment
through its venture Petrocon. Petrocon holds 25 percent equity in the offshore Ravva oil fields of
Krishna-Godavari basins, While the rest is held by Cairns Energy (25 percent), ONGC holds
40 percent and Japan based Marubeni Oil (10 percent). The JV oil field with proven oil reserves of
more than 250 million barrels and 450 million cubic metric tonnes of gas is operated by Cairn
producing around 50,000 barrels of oil per day and is sold to domestic companies. It is one of the
lowest operating costs in the world, with a cost production less than $1 per barrel of crude oil
produced. The Videocon Petroleum (later renamed Petrocon) invested $20 million in the Ravva oil
field in pre National Exploration and Licensing Policy (NELP). Currently, the company rakes in
Rs.6000 million a year from the oil field.
Mr. Dhoot before going for global acquisition merged his cash cow Petrocon with Videocon
Industries in December 2004. The board of directors approved the deal and the company informed
BSE about the amalgamation scheme and proposed five shares of the company for every two
shares of Petrocon India Limited held. Soon after the amalgamation, the share price of Videocon
Industries that was looming below Rs.30 a year ago jumped to Rs.240 per share. And soon after
the merger with Thomson SA, Dhoot merged Videocon International with Videocon Industries on
July 7, 2005. After the board’s approval for amalgamation and complying with the necessary
approval, the company fixed the swap ratio at 1:5, for every five equity shares of Videocon
International held, the shareholder would get one share of Videocon Industries. Thomson, which
sold its picture tube business to Videocon, will have a 14 percent stake in the company. The
amalgamation was made on the basis of advice given by Development Bank of Singapore and
ICICI. Post-merger, Videocon Industries will have under its umbrella an entirely vertically
integrated multi-brand domestic Indian consumer durable business and also make a conglomerate
with diversified business under its arm that includes oil and gas ventures.
Issues and Challenges Ahead
Videocon, having successfully raised the capital through its issue of GDRs, further plans to raise
the capital from international and domestic markets. Videocon in its ambitious plans to increase its
presence in the global market has vertically integrated itself by acquiring a CTV manufacturing
unit and is betting on the broad technology and huge capacity of the Thomson Units. But the CRT
TV is on a decline and a sharp drop in prices in Plasma and LCD and are likely to hit the bottom
line plant hard, believes industry analysts. And few analysts question the Videocon palns to divest
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cash flows from oil business. R Vartharajan12 analyst in Motilal Oswal, a stock broking house in
India believes that Videocon plans to divert cash flows from oil business for global expansion as
unsound, as one dry well can wipe-out its cash for years. Videocon Industries is now eyeing oil
exploration blocks in Sudan, Nigeria and Jordan and is investing around $100 million. It has
signed a memorandum of understanding with the Government of Khartoum provinces in Sudan
and is investing $100 million for a 76 percent stake in the oil field in Sudan.
Analysts believe that Videocon may face big competition in the space from big branded players
like LG and Haier in view of Videocon’s acquisition of Thomson SA and Electrolux Kelvinator to
have a huge slice of worldwide market for OEM. iSuppli estimated that the present worldwide
market for OEM to be around $131 billion and projected it to grow to $163 billion by 2008.
iSuppli also estimated that the revenue generated from electronic manufacturing services to touch
about $2.03 billion in 2009, rising at a CAGR of 21 percent. Industry analysis also argue that
Videocon’s monopoly in CPT glass could be challenged as Hotline Teletube, the picture tube
manufacturer, has set to produce glass shells next year from its integrated 12-millon CPT glass line
at Gwalior that has been completed.
Videocon’s acquisition of AB Electrolux’s Electrolux Kelvinator Limited began showing teething
problems. Electronic consumer durable industry grapevine believes that Videocon is considering
closure of Electrolux Kelvinator’s refrigerator manufacturing plant at Shahjanpur in Rajasthan as
also the washing machine plant at Butibori in Maharashtra due to its low capacity utilization. If
this happens Videocon has to churn out the Electrolux brands from its plants, while the Electrolux
plants lie idle.
It is observed that with component and raw material prices rapidly going down there could be
more drop in prices of CTVs and added to this the Government of India reduces the custom duty
from 25 percent to 20 percent, the market is expecting huge drop in the price of CTV. The Indian
Government in its Budget 2005 reduced the customs duty on raw materials like plastics, metals,
glass shell from a peak duty of 25 percent to 20 percent. Analysts argue that with the reduction in
customs duty domestic prices of major raw materials that go into making a television will be
coming down forcing domestic vendors becoming more competitive and customer-friendly under
pressure to reduce costs and this could have an effect on Videocon, as the domestic players like
Samtel and Hotline Teletube the domestic manufacturers of color picture tube are having
reasonable market share. Industrial analysts also argue that with global markets already moving
from normal CRT TVs to Plasma and LCD technology, it could decrease the sales of CRT based
CTVs.
Moreover analysts also argue that Videocon group could face problems in raising capital in future.
Videocon group, which has raised capital by going into the capital market either through public
issue or GDRs or debentures or bonds, was banned by SEBI for three years from entering into the
market in 2001, for manipulating their scrips in 1998. Securities Appellate Tribunal (SAT), though
later repealed the ban in June 2002, the ban had nevertheless hit the business profile and dented its
image. Videocon is likely to face problems from Petrocon India, the flag ship of Videocon Group
engaged in Oil and Petroleum business. Petrocon ran into trouble, when the Government of India
found fault with Videocon Petroleum for wrongfully pledging the assets of Ravva oil field with
IDBI and UTI for raising a loan of over Rs.990 crore and warned that the contract would be
cancelled, which Videocon refuted. Later in 2003, the Ministry of Petroleum and Natural Gas and
Directorate-General of Hydrocarbons issued show cause notices for the Rs.800 crore dues owed to
the government and warned that it would terminate the production-sharing contract. Videocon and
its partners in the joint venture owed money to the government on account of the wrong
methodology of calculation of post tax rate of return and Videocon has not paid to Indian
government the profit for petroleum as per the provision of Production Sharing Contract (PSC).
12 The Great Gambler – Business Today July 31 2005.
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The proceedings dragged to International Arbitration Court at London, which held the Indian
government claim against Petrocon India. While the company claimed that it owed only
Rs.3000 million, ignoring the company claim the government in 2004 began deducting
Rs.30 million every month from the sale proceeds of the oil towards the dues. Videocon Industries
will now be losing Rs.30 million every month till it completely pays out the money it owes as
Petrocon India is merged with Videocon Industries. Petrocon merged with Videocon Industries
Limited and was approved by the Board of Videocon Industries on 13 April 2005 the board
proposed exchange ratio of 5 shares of Videocon Industries for every 2 shares held in Petrocon
India.
Its GDR issue also may face problems because it is placed under non-promoter holdings. The
Securities Appellate Tribunal (SAT) has now directed SEBI to clarify whether the issue of Global
Depository Receipts (GDRs) amounted to public issue of shares and whether GDRs should be
considered as non-promoter holdings. If Sebi rules the GDRs issue on negative note Videocon will
have further decrease in its promoter share in order to increase the non-promoter share to 25%.
This issue propped up due to Videocon challenging NSE’s refusal to accept GDRs under the
public holding criteria13.
Videocon Group is moving towards making the Group a global conglomerate by acquiring in
global markets. Speaking about its ambition to become a global conglomerate, S K Sheilgikar,
advisor to Videocon Group, says, “If we do not leverage the huge opportunity we are not
entrepreneurs”14. Videocon Group through its twin deals is set to emerge as a strong player both in
India and globally. The group has now set its eyes on taking a global plunge by bagging and
acquiring oil exploring and production stakes in Jordan, Sudan, Yemen, Ukraine and Niger.
13 According to SEBI guidelines, on capital market regulatory. The public holding to at minimum of 25
percent. 14 The Great Gambler – Business Today July 31, 2005.
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ANNEXURE I
World Market for TVs (in billions of US $)
Source: www.displaySearch.com
Worldwide Television Shipment Forecast by Display Technology
Source: iSuppli/November, 2004.
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ANNEXURE II
Global TV Forecast by Display Technology
Display Type 2005 2006 2007 2008 2009
CRT 146678 143931 141555 138402 131618
Projection 6563 8141 9314 10711 11971
Plasma 4052 6702 10117 14118 18157
LCD 14338 20986 30501 41288 53724
All figures in thousands
Source: isuppli Corp.
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ANNEXURE III
Thomson Income Statement (accounts in accordance with French GAAP in million euros)
1999
(in Euro)
2000
(in Euro)
2001
(in Euro)
2002
(in Euro)
2003
(in Euro)
2003
(in US $)
Net Sales 6619 8995 10391 10187 8459 10239
Content and Networks 927 1581 3460 3924 3714 4495
Components 1279 1686 1642 1560 1072 1297
Consumer Products 4125 5339 4884 4264 3198 3870
Licensing 278 378 395 429 462 559
Corporate 9 11 10 10 13 16
Cost of Sales (5065) (6915) (8116) (7761) (6536) (7910)
Gross Margin 1553 2080 2275 2426 1923 2327
Selling, general and administrative expense
(897) (1183) (1271) (1334) (1120) (1355)
R &D (290) (351) (368) (374) (295) (357)
Operating Income 366 546 636 718 508 615
Content and Networks 132 271 458 420 436 528
Components 216 262 111 84 (101) (122)
Consumer Products (94) (179) (160) (52) (124) (150)
Licensing 218 319 338 387 411 497
Corporate (106) (127) (111) (121) (114) (138)
Interest Income (expenses) Net
(41) (10) (29) 9 (9) (11)
Other financial expenses net (39) (67) (160) (137) (70) (85)
Other income expenses (6) (81) 8 (96) (249) (301)
Income tax (50) 1 (139) (56) (63) (76)
Appropriate amount in accordance with US GAAP
Operating Income 169 284 204 465 32 38
Net Income (Loss) 148 138 191 351 (46) (56)
Source: www.thomson.net
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ANNEXURE IV
Thomson SA Financial Details
1999 2000 2001 2002 2003 2003
∈ ∈ ∈ ∈ ∈ (US $)
(in millions except share and per-share data)
Operating income 366 546 636 718 508 615
Content and Networks 132 271 458 420 436 528
Components 216 262 111 84 (101) (122)
Consumer Products (94) (179) (160) (52) (124) (150)
Licensing 218 319 338 387 411 497
Corporate (106) (127) (111) (121) (114) (138)
Interest income (expense), net (41) (10) (29) 9 (9) (11)
Other financial expense, net (39) (67) (160) (137) (70) (85)
Other income (expense), net (6) (81) 8 (96) (249) (301)
Income tax (50) 1 (139) (56) (63) (76)
Net income before minority interests 224 376 264 360 34 41
Minority interests 7 18 22 13 (8) (10)
Net income 231 394 286 373 26 31
Basic net income per share 1.17 1.56 1.04 1.35 0.09 0.11
Diluted net income per share 1.17 1.56 1.04 1.29 0.09 0.11
Weighted average number of shares basic outstanding
197, 526, 322
252, 039, 992
274, 181, 607
277, 240, 438
276, 796, 602
276, 796, 602
Dividend paid N/A N/A N/A N/A (62) (75)
Approximate amounts in accordance with US GAAP
Operating income 169 284 204 465 32 38
Net income (loss) 148 136 191 351 (46) (56)
Basic income (loss) per share 0.77 0.54 0.72 1.26 (0.17) (0.21)
Diluted income (loss) per share 0.76 0.54 0.69 1.21 (0.17) (0.21)
Source: Thompson SA.
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ANNEXURE V
Balance Sheet
1999 2000 2001 2002 2003 2003
∈ ∈ ∈ ∈ ∈ (US $)
Balance Sheet Data (amounts in accordance with French GAAP):
(in million)
Intangible assets, net 168 196 1696 2183 1935 2342
Property, plant and equipment, net 1090 1122 1536 1622 1474 1784
Total investments and other non-current assets
245 314 417 218 185 224
Total fixed assets 1503 1632 3649 4023 3594 4350
Inventories 1108 1477 1120 962 744 900
Other current assets 1952 2420 3489 3266 2559 3097
Cash and cash equivalents 402 1772 1532 1463 2383 2884
Total assets 4965 7301 9790 9714 9280 11231
Reserves for retirement benefits 590 633 709 705 653 790
Restructuring reserves 156 179 183 127 118 143
Other reserves 225 277 246 216 206 249
Financial debt (short-term and long-term)
361 1143 1161 1694 2128 2576
Total current liabilities 1841 2155 3492 2987 2583 3126
Minority Interests 73 54 71 38 9 11
Shareholders’ equity 1719 2860 3958 3947 3583 4336
Total liabilities, shareholders’ equity and minority interests
4965 7301 9790 9714 9280 11231
Approximate amounts in accordance with US GAAP
Shareholders’ equity 2794 3411 3399 3859 3433 4155
Source: Thompson SA.
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ANNEXURE VI
Shareholding Pattern of Electrolux
Electrolux Kelvinator Ltd. As on March 2005
Private Holdings Share 4.46%
Foreign Promoters/Collaborator’s share 90.21%
Mutual Funds and UTI Share 0.01%
Banks, FIs, Insurance cos Share 0
FIIs Share 0
Private Corporate Bodies Share 0.81%
Indian Public Share 4.48%
NRIs/OCBs Share 0.03%
Total Equity (Nos.) 373441865
Source: CMIE/Prowess.
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ANNEXURE VII
Financial Details of Electrolux Kelvinator Ltd. (Rs. in Million)
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04
Sales 4543.70 3857.50 4765.60 4873.10 3254.80
Net sales 3849.50 3441.30 4099.60 4281.60 2879.60
Raw material expenses 2254.00 1403.30 2164.60 2105.30 1519.50
Purchase of finished goods 434.30 400.80 451.50 213.40 111.40
PAT –51.50 30.50 –1443.60 –1703.30 –2263.01
Operating profit 81.60 61.30 –1229.20 –1689.80 –1203.80
PBT –51.50 31.10 –1443.60 –1703.30 –2263.10
Authorized capital 700 1500 2250 4500 4500
Issued capital 680.90 1359.70 1743.50 1743.50 1743.50
Paid-up equity capital 680.90 1359.70 1743.50 1743.50 1743.50
Preference capital 0 0 500 2000 2000
Net worth 100.90 831.20 734.80 535.80 –1727.30
Borrowings 1219.20 917.80 3928.70 2278.30 3017.40
Net value added 333.80 343.50 –449.50 –813.00 –644.80
Current assets 1506.60 1963.00 4251.50 2729.10 1233.00
Quick assets 558.00 1016.10 1185.90 957.40 256.60
Working capital 203.40 93.70 –959.10 –905.10 –2382.20
Source: CMIE/Prowess.
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ANNEXURE VIII
Videocon Industries – Stock Price Chart
0255075
100125150175200225250275300325350375400425450475
Jun-9
6
Dec-9
6
Jun-9
7
Dec-9
7
Jun-9
8
Dec-9
8
Jun-9
9
Dec-9
9
Jun-0
0
Dec-0
0
Jun-0
1
Dec-0
1
Jun-0
2
Dec-0
2
Jun-0
3
Dec-0
3
Jun-0
4
Dec-0
4
Jun-0
5
Dec-0
5
Source: ICFAI Research Team.
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ANNEXURE IX
Trends in Capacity (Products)
Videocon International Ltd. ’000 no.s ’000 no.s ’000 no.s ’000 no.s ’000 no.s
Product/s manufactured/traded Mar. 2000 Mar. 2001 Sep. 2002 Sep. 2003 Sep. 2004
Glass Shell (Funnels)
for Ctv Picture Tube 3000 2500 2500 4500 6000
Glass Shell (Panels)
for Ctv Picture Tube 3000 3000 3000 7500 12000
Source: CMIE/Prowess.
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ANNEXURE X
Product/s Manufactured/Sales
Sales Qty. Sales Value Videocon International Ltd.
Production Qty.
’000 No.s ’000 No.s
Units Units Rs. in Million
Television Sets Incl. Sub Assemblies 5814.72 5817.75 21889.80
Audio, Assemblies/Sub-Assemblies of Audio 2684.34 2687.83 9246.30
Air Conditioners 133538 130611 1967.90
Glass Shell (Panels) for Ctv Picture Tube 9514.39 9433.71 5559.70
Glass Shell (Funnels) for Ctv Picture Tube 4655.67 4611.15 1365.20
Source: CMIE/Prowess.
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ANNEXURE XI
Capital History
Videocon Industries Ltd.
Issue Month
Issue Type Security Type Face Value
Rs.
Security Amount Rs. in
Million
Additional PUC Rs. in
Million
Increased PUC
Rs. in Million
Oct. 1993 OFFER Equity 10 70.90 28.40 113.50
Nov. 1994 RIGHTS PCD (Fixed Interest Rate) 450 2553.70 0 113.50
Oct. 1996 CONV. NCDW Equity 10 50.10 50.10 163.60
Jun. 2003 POST-AMALGAMATION
Equity 10 0 147.20 328.90
Jun. 2005 EURO ISSUE Global Depository Receipts 10 3257.60 75.00 403.80
Jul. 2005 EURO ISSUE Global Depository Receipts 10 4095.70 94.10 497.90
Aug. 2005 POST-AMALGAMATION
Equity 10 0 1257.50 1755.50
Sep. 2005 PPL Equity 10 999.90 232.50 1778.70
Sep. 2005 EURO ISSUE Global Depository Receipts 10 12600.20 286.50 2065.20
Source: CMIE/Prowess.
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ANNEXURE XII
Capital History Summary
Videocon International Ltd.
Issue Month
Issue Type Security
Type
Face Value
Rs.
Security Amount Rs. in
Million
Additional PUC Rs. in
Million
Increased Rs. in
Million
Feb. 1990 DEB. CONV. Equity 10 0 17.20 42.20
Feb. 1991 RIGHTS FCD (Fixed Interest Rate)
220 261.10 0 42.20
Feb. 1991 PUBLIC FCD (Fixed Interest Rate)
220 188.90 0 42.20
Mar. 1991 DEB. CONV. Equity 10 0 15.20 59.50
Mar. 1992 DEB. CONV. Equity 10 0 23.30 82.80
Sep. 1992 DEB. CONV. Equity 10 0 34.70 117.50
Oct. 1992 BONUS Equity 10 0 141.10 282.00
Nov. 1992 DEB. CONV. Equity 10 0 20.10 137.60
Dec. 1992 RIGHTS Equity 10 846.10 72.30 354.30
Dec. 1992 PUBLIC Equity 10 633.50 52.80 407.10
Dec. 1992 PUBLIC NCD (Fixed Interest Rate) 40 500.00 0 407.10
Jan. 1994 EURO ISSUE Global Depository Receipts
10 2823.30 111.10 518.20
Oct. 1994 EURO ISSUE ENCB (Fixed Interest Rate)
100 34.00 0 518.20
Mar. 1998 POST-AMALGAMATION
Equity 10 0 143.90 712.10
Apr. 1998 PPL Equity 10 215.00 50.00 712.10
Source: CMIE/Prowess.
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ANNEXURE XIII
Shareholding Pattern
Expression Videocon Industries
Ltd. Videocon International
Ltd.
Private Holdings Share 72.41 35.51
Foreign Promoters/Collaborator’s share 0 0
Mutual Funds and UTI Share 0 1.03
Banks, FIs, Insurance cos Share 0.03 6.52
FIIs Share 1.11 2.47
Private Corporate Bodies Share 4.86 15.51
Indian Public Share 2.97 38.08
NRIs/OCBs Share 0.04 0.46
Any Other Share 18.57 0.42
Total Equity 40385050 71212441
Source: CMIE/Prowess.
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ANNEXURE XIV
Videocon International Balance Sheet
(Rs. in Million)
Mar. 2000 Mar. 2001 Sep. 2002 Sep. 2003 Sep. 2004
12 months 12 months 18 months 12 months 12 months
Sources of Funds
Total Share Capital 1411.90 1549.40 1549.40 1311.90 1489.00
Equity Share Capital 710.60 710.60 710.60 710.60 710.60
Preference Share Capital 701.30 838.80 838.80 601.30 778.40
Reserves 13319.90 14394.70 14527.70 12211.30 11999.80
Revaluation Reserves 2056.70 2056.70 2056.70 9528.80 9518.50
Networth 16788.50 18000.80 18133.80 23052.00 23007.30
Secured Loans 9963.20 11968.50 17092.10 21773.10 22401.30
Unsecured Loans 5968.00 4102.60 3763.40 1901.40 2256.00
Total Debt 15931.20 16071.10 20855.50 23674.50 24657.30
Total Liabilities 32719.70 34071.90 38989.30 46726.50 47664.60
Application of Funds
Gross Block 19159.10 21640.90 29482.30 41038.40 46015.20
Less: Accum.
Depreciation
5246.50 6547.90 8709.10 12735.10 16460.00
Net Block 13912.60 15093.00 20773.20 28303.30 29555.20
Capital Work-in-Progress 3300.50 5033.50 5074.40 4799.50 4718.90
Investments 1989.70 2062.30 2990.50 1731.50 1708.10
Inventories 6164.80 6517.30 6465.50 7338.60 7624.00
Sundry Debtors 5801.50 6432.70 7514.90 8143.10 8565.20
Cash and Bank Balance 1986.80 2394.80 1664.60 1709.50 1266.50
Total Current Assets 13953.10 15344.80 15645.00 17191.20 17455.70
Loans and Advances 4187.40 4822.00 6396.10 6863.50 7564.40
Total CA, Loans &
Advances
18140.50 20166.80 22041.10 24054.70 25020.10
Deferred Credit 224.80 430.10 120.50 1141.70 1568.20
Fixed Deposits 0.00 0.00 0.00 0.00 0.00
Current Liabilities 4425.80 8169.80 11726.30 12059.70 13237.80
Provisions 197.80 113.90 163.60 102.80 99.90
Total CL & Provisions 4623.60 8283.70 11889.90 12162.50 13337.70
Net Current Assets 13516.90 11883.10 10151.20 11892.20 11682.40
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 32719.70 34071.90 38989.30 46726.50 47664.60
Source: CMIE/Prowess.
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ANNEXURE XV
Videocon International – Profit & Loss
(Rs. in Million)
Mar-00 Mar-01 Sep-02 Sep-03 Sep-04 Income
12 months 12 months 18 months 12 months 12 months
Sales Turnover 30030.00 32440.50 49739.30 36015.30 40031.00
Excise Duty 1778.30 1675.60 319.70 2414.90 2771.10
Net Sales 28251.70 30764.90 46542.30 33600.40 37259.90
Other Income 55.10 88.60 184.50 133.20 213.60
Stock Adjustments 455.00 315.20 –423.10 235.20 –77.30
Total Income 28761.80 31168.70 46303.70 33968.80 37396.20
Expenditure
Raw Materials 20040.90 22244.30 32952.40 24261.00 26690.00
Power & Fuel Cost 191.80 207.70 407.50 263.90 282.10
Employee Cost 447.40 433.10 625.40 525.30 579.00
Other Manufacturing Expenses 446.60 443.40 506.30 47.70 52.90
Selling and Admin Expenses 2240.50 241.00 3148.80 2334.90 2668.60
Miscellaneous Expenses 1043.40 903.30 1198.80 573.60 472.40
Total Expenses 24410.60 26641.80 38839.20 28006.40 30745.00
Operating Profit 4296.10 4438.30 72.80 5829.20 6437.60
PBDIT 4351.20 4526.90 7464.50 5962.40 6651.20
Interest 1970.90 1925.10 3068.40 2285.70 2393.20
PBDT 2380.30 2601.80 4396.10 3676.70 4258.00
Depreciation 847.00 944.80 2007.20 1975.10 2252.40
Profit Before Tax 1533.30 165.70 2388.90 1701.60 2005.60
Extra-ordinary items –41.50 –01.80 12.30 23.30 82.60
PBT (Post Extra-ord Items) 1574.80 1658.80 2376.60 1678.30 192.30
Tax 123.00 110.00 680.90 652.20 672.70
Net Profit 1410.30 1547.00 1708.00 1049.40 1332.90
Total Value Addition 4369.70 4397.50 5886.80 3745.40 405.50
Preference Dividend 08.80 20.80 0.90 06.90 02.90
Equity Dividend 142.40 71.20 71.20 71.20 71.20
Corporate Dividend Tax 33.30 09.40 0 10.00 09.70
Per share data (Annualized) 0
Shares in issue (lakh) 710.60 710.60 710.60 710.60 710.60
Earning Per Share (Rs.) 19.25 21.35 15.94 14.53 18.58
Equity Dividend (%) 20 10 6.67 10 10
Book Value (Rs.) 197.45 212.57 214.44 181.84 178.87
Source: CMIE.
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ANNEXURE XVI
Videocon Industries Balance Sheet
(Rs. in million)
Mar-00 Mar-01 Jun-02 Jun-03 Jun-04
18 months 12 months 15 months 12 months 12 months
Sources of Funds
Total Share Capital 181.60 181.60 181.60 328.90 328.90
Equity Share Capital 181.60 181.60 181.60 328.90 328.90
Preference Share Capital 0 0 0 0 0
Reserves 03.90 06.30 -203.70 -394.80 -412.20
Networth 185.50 187.90 -22.10 -65.90 -83.30
Secured Loans 0 0 0 0 0
Unsecured Loans 2430.20 2418.70 2629.70 999.60 900.70
Total Debt 2430.20 2418.70 2629.70 999.60 900.70
Total Liabilities 2615.70 2606.60 2607.60 933.70 817.40
Application of Funds
Gross Block 641.70 1797.80 1138.30 1143.70 1166.20
Less: Accum. Depreciation 562.00 551.20 25.10 44.00 66.90
Net Block 79.70 1246.60 1113.20 1099.70 1099.30
Capital Work in Progress 1225.20 0 0 0 0
Investments 1005.30 801.40 799.80 88.40 82.90
Inventories 24.30 06.30 2.70 0 0
Sundry Debtors 79.00 81.70 88.10 0 06.80
Cash and Bank Balance 08.30 02.90 01.80 01.60 02.80
Advances Given By Banks 0 0 0 0 0
Other Assets for Banks 0 0 0 0 0
Total Current Assets 111.60 90.90 92.60 01.60 09.60
Loans and Advances 1513.30 1346.70 1923.90 1701.30 1049.60
Total CA, Loans & Advances 1624.90 1437.60 2016.50 1702.90 1059.20
Deferred Credit 0 0 0 0 0
Fixed Deposits 0 0 0 0 0
Current Liabilities 1319.40 879.00 1321.90 1957.30 1423.80
Provisions 0 0 0 0 00.20
Total CL & Provisions 1319.40 879.00 1321.90 1957.30 1424.00
Net Current Assets 305.50 558.60 694.60 –254.40 –364.80
Miscellaneous Expenses 0 0 0 0 0
Total Assets 2615.70 2606.60 2607.60 933.70 817.40
Contingent Liabilities 0 0 0 0 0
Book Value (Rs.) 10.21 10.35 -1.22 -2.00 -2.53
Source: CMIE.
VIDEOCON 2006-20
456
ANNEXURE XVII
Videocon Industries (Profit & Loss) (Rs. in Million)
Mar-00 Mar-01 Jun-02 Jun-03 Jun-04
18 months 12 months 15 months 12 months 12 months
Income
Operating Income 271.90 206.50 164.00 532.70 139.60
Other Income 3.60 2.90 4.30 51.40 68.20
Total Income 275.50 209.40 168.30 584.10 207.80
Expenditure
Interest & Financial Charges 29.40 10.60 288.70 432.60 76.00
Operating & Admin Expenses 171.60 149.30 378.00 275.60 127.80
Less: Preoperative Exp. Capitalized
0 0 0 0 0
PBDT 74.50 49.50 –498.40 –124.10 4.00
Depreciation 75.00 47.00 29.70 18.90 22.90
Profit Before Tax –00.50 2.50 –528.10 –143.00 –18.90
Extraordinary Items 9.90 0 175.70 22.80 0
PBT (Post Extra-ord items) –10.40 2.50 –703.80 –165.80 –18.90
Tax 0 0 –142.40 70.90 –01.50
Net Profit –00.50 2.50 –385.70 –213.90 –17.40
Total Value Addition 91.90 149.30 378.00 275.60 127.80
Preference Dividend 0 0 0 0 0
Equity Dividend 0 0 0 0 0
Corporate Dividend Tax 0 0 0 0 0
Source: CMIE/Prowess.
VIDEOCON 2006-20
457
References
1. High Resolution – Business World, August 1, 2005.
2. Reinventing Videocon – Business World, July 25, 2005.
3. The Bigger Picture – The Week, July 31, 2004.
4. The Great Gambler – Business Today, July 31, 2005.
5. Tuning with the Time – Business India, March 20 – April 2, 2002.
6. Videocon European Odyssey – Business Line, July 07, 2005.
7. Videocon’s Non-durable Gamble – Business Standard, February 25, 2002.
8. Whirl of a Time – Business India, May 15-28, 2000.
9. www. Appliancemagazine.com.
10. www.magindia.com.
