Videocon goes for bank license, to keep Brazil assets

Videocon has applied for a banking license yesterday by partnering with Citystate Holdings, part of the US-based Liberty Mutual Insurance group, says CMD Venugopal Dhoot. The group has been scouting for an international partner for the venture and is said to have set aside Rs 1000 crore for banking foray. The Reserve Bank has set a deadline of July 1 to receive banking licence application and chalked out stringent rules to be eligible. 

In his interview with CNBC-TV18, Dhoot also threw some light on the just concluded Mozambique deal and his outlook on the oil business. Below is the edited transcript of his interview with CNBC-TV18: Q: The market was quite excited to hear about your plans for applying for a banking license. Could you confirm that first and whether or not indeed you are also looking at roping in a foreign entity as part stakeholder in that? A: We have already applied for banking license yesterday and we have been very successful in our insurance arm. We are having Liberty as our partner which is the 5th largest company in insurance in the world. From that we have taken inspiration and we have applied yesterday for the banking license. A number of foreign banks are interested to invest with us. There are Non-Resident Indian (NRI) groups and big industrial groups also. As a promoter we will be joined by many classes - art, science, film and all the industries, some of my friends will be taking 1-1 percent. So this is the way we have organised this bank matter. Also Read: Will continue to be in oil biz; keen on bank foray: Dhoot Q: Can you share some names with us of these notable worthies that you are speaking about including global financial institutions? A: There are many. We have not finalized and as you must have seen the RBI application form that once you give the application then you should talk about that. So I think I should avoid that question today. Q: Post the conclusion of the Mozambique deal do you plan to capitalise on some of your Brazilian assets as well in the same way that you have done with Mozambique? A: Mozambique and Brazil are two different stories altogether. Mozambique is too small a field compared to our Brazilian assets. The valuation of Brazil today is more than Rs 40,000 crore and we have various oil fields in Australia, Timur Sea, Indonesia. So all these assets are very good and we would like to develop. Let me give you an idea about Videocon's oil and gas business. What we do is that we go into exploration, we develop it and some of the field we convert into production field and as soon as the production field is there we sell it or some of the production field we continue. This is the method we follow. One more thing I’d like to say here is that everywhere across the globe the success rate in such type of business is 20 percent but Videocon has been extraordinarily lucky in this and has achieved a success rate of 80 percent. All over the world people want us to join in exploratory business also but as far as Brazil is concerned it is a very, very promising field. The pre-salt discovery is one of the best in the world and nowhere in the world such type of a discovery is present.
Its first success in Wahoo in Brazil and its continuous advancements inspired us to go for it. Besides this, Petrobras being second largest company in the world, we would like to continue with them. Q: Whatever money is raised from the deal though, will all of that accrue directly to the listed Videocon as also to the shareholders and can you just confirm whether the management is toying with the idea of a special dividend or a bonus because there has been talk in the market that Videocon could be looking to do that? A: Let me give you the structure. The company Videocon Mauritius which will be getting around Rs 15,000 crore is a wholly owned subsidiary of the main company, Videocon Industries Ltd. So the shareholders of Videocon Industries Ltd. are owner of that money. How much dividend is to be given, how much money we keep as a war chest, how much money we have to return to the bankers; that we are now deciding. This time we have decided that we would like to reward shareholders also. We would like to give them some bonus also and some money to the repayment of the bank. For all this decision we are likely to call a special Extraordinary General Meeting (EGM) and in that EGM we will take each and every shareholder's view and accordingly we will make a distribution policy. Q: I believe you are also planning listing of the DTH business. Can you give us some timelines? What kind of valuations you are looking at there? A: For DTH business after the public issue we are looking at the valuation of around Rs 6,000 crore. In DTH also we have been very lucky. We started 5 years later, but the day we started we became number one in the market and for customer acquisition in last five years we have been number one. So it is a great story and whenever the market is good, anytime we will be coming with the 25 percent offload of the shares and we will be listing DTH. DTH has given us great success apart from consumer durables which is also now booming and also giving us great money. There is a great future for our consumer durables, DTH and telecom business too.