Today, that old connection with ICICI Bank has contributed to Dhoot’s downfall. With his arrest, along with the arrests of former ICICI Bank MD and CEO Chanda Kochhar and her husband Deepak Kochhar in a cheating case by the Central Bureau of Investigation, Dhoot’s fairy-tale rise has come crashing to earth. The CBI has alleged that in return for kickbacks from Dhoot, channelled through Deepak Kochhar’s firm NuPower, Chanda Kochhar had sanctioned massive loans from ICICI Bank to bail out the Videocon Group, which was struggling to cope with rising competition from Korean and Japanese durables companies, as well as managing its wild diversifications spree.
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These loans have since turned sour. Today, the flagship company is bankrupt and put on the block by creditors, the shares of Videocon Industries are no longer traded. Quite a fall for the Videocon Group, once the poster child of the reforms story, an exemplar of what unleashing the latent entrepreneurial talent in India could achieve.
Starting with assembling cheap television sets in the mid-1980s, Dhoot had managed to vault the Videocon Group into a major Indian conglomerate, with interests in everything from consumer durables and electronics to mobile telephony, satellite television and direct-to-home services to oil and gas exploration and power.
Taking the company public in 1987, Dhoot had rapidly built Videocon into a consumer durables powerhouse. Using the funds from a $90 million GDR placement in 1994, Dhoot set up one of the largest colour television picture tube manufacturing facilities in the world. By the turn of the millennium, with assembly plants in China, Mexico and Poland, Videocon was the world’s third largest picture tube and colour television manufacturer. By 2005, he had bought out competitors Electrolux, Kelvinator, Kenstar and Hyundai Electronics and had taken pole position in India’s rapidly growing consumer durables market.
By this time, his assiduously cultivated connections with the corridors of power in Delhi were paying off. Dhoot went on an unparalleled diversification spree, branching out into oil and gas exploration under the New Exploration and Licensing policy. It also won a bid for an oil block in Nigeria. Between 2006 and 2008, it had ventured into music retail, buying out media powerhouse, the owner of the Times of India, Bennett Coleman’s music retail venture Planet M; bought an oil company in Brazil; and ventured into LCD manufacture. Videocon at its peak was one of the bidders in the fray for acquiring government’s shares in Air India the Vajpayee government of the early 2000s had tried to sell in its blockbuster disinvestment programme.
Dhoot’s downfall, although one didn’t know it at the time, probably began when he bid for – and acquired – licences to operate mobile telephony services in 18 circles in India. It was a troubled journey from the start. By the time Videocon Telecommunications managed to get services going, Reliance Telecommunications had pivoted from CDMA to GSM services and had started pushing for leadership position in the mobile telephony segment. Reliance was also pushing Videocon in the DTH business with the launch of Reliance DTH, while Samsung and LG had set up manufacturing facilities in India and were eating away at Videocon’s core consumer durables market.
It was during this period, between 2009 and 2012, that the CBI alleges that Videocon managed to get a series of questionable loans sanctioned by ICICI Bank. Even as Videocon’s debt pile was rising and its market-share crumbling – it had been wrong-footed by the shift in consumer preference for solid-state TVs – came the 2G spectrum scam. The Supreme Court cancelled 122 spectrum licences in 2012 – including 21 licences held by Videocon. Dhoot won back spectrum in six circles after the spectrum originally allotted under the cancelled licences was auctioned, but it was too late. He eventually sold the telecom business to Airtel.
The Dhoot saga underlines what was right – and what went wrong – with India’s reforms. The abolition of the licence-permit raj meant that an unknown industrialist from middle India could grow to national and even international scale, raise capital from global markets and diversify quickly into new areas. But, as the growing number of scams which beset – and ultimately led to the fall – of the UPA government showed, it was a flawed process, which could be gamed by those with the right connections in the right places. The reckless, debt-funded diversification spree of the first decade of this century has come full circle, with banks writing off bad loans of over ₹10 lakh crore in the last five years. And the very connections which powered his rise are now a millstone around Dhoot’s neck.
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