Venugopal Dhoot’s fall is entirely of his own making

One could go on and on, or simply look at what happened to so many Indian promoters over the past 15 years. It is the same playbook each time and it always ends badly.

So, when Videocon was finally referred to the National Company Law Tribunal for insolvency proceedings in 2018, the surprise was only why it had taken so long. By then, claims against the group’s various entities had soared to nearly Rs 85,000 thousand crore, its net worth had turned negative in the face of massive losses and its stock price was dust.

It hadn’t always been like that for the group.

On the ascendant, it had been the typical tale of a pioneering founder, Nandlal Madhavlal Dhoot, who made his fortunes in cotton and sugar in the India of the 1950s. His three sons, Venugopal, Rajkumar, and Pradipkumar, continued in that spirit and in 1986, the group was the first to diversify into the manufacturing of colour televisions (CTVs) in India through a technical collaboration with Toshiba. This was before the liberalisation of the Indian markets threw up opportunities that a whole new generation of entrepreneurs grabbed, even while older business families like the Bangurs, Singhanias, Thapars, Modis and Mafatlals struggled.

Not the Dhoots, though. The family built on its early success with deeper forays in consumer electronics, launching a slew of products like air conditioners, refrigerators and microwave ovens at very competitive prices. In 1995, they also set up a plant to manufacture CRT (cathode-ray tube) glass shells which were used for in-house consumption as well as being sold to the other CRT manufacturers that had come up to meet the burgeoning demand for CTVs in the country.

The group now had the option of consolidating its strengths in consumer electronics in the face of emerging competition. It was a business where Dhoot made all the right moves, including the foray into DTH services, launching LCDs (liquid-crystal display) and TVs with built-in DTH satellite receivers in 2009. The business showed promise and in 2015, Videocon d2h listed on Nasdaq, months after it had sold a 33.5 percent stake to Silver Eagle Acquisition Corp.

At that time the direct-to-home company was valued at over a billion dollars. From those auspicious beginnings, the business quickly went downhill as debts piled up, eventually leading to a merger in November 2016 with Subash Chandra’s Dish TV, which in turn was put on the block when Chandra himself ran into the same debt-fuelled crisis.

Venugopal Dhoot, of course, was much too ambitious to be content with success in consumer electronics. He decided to diversify into oil and gas, a completely unrelated area of business, but one which held out the promise of vast riches in future. The October 1994 production sharing contract for the Ravva oil field off the coast of Kakinada in Andhra Pradesh, in itself, seemed harmless enough since Videocon was purely an investment partner. But like a gambler who’s swayed by beginner’s luck, Dhoot didn’t know where to stop and in 2006, he cast his net beyond India, successfully bidding for blocks in Timor Sea as well as Oman. When in 2008, Videocon acquired 10 percent participating interest in an oil and gas block in Mozambique, the die had been cast.

Eventually, this one move would precipitate Dhoot’s downfall since the present charges filed against him relate to manipulation of loans taken from a consortium of banks led by SBI to fund the same oil block.

By this time, the group had compounded its missteps in oil and gas with an entry into telecom, a business that would be the kiss of death for many Indian businessmen. In 2010, it rolled out telecom services in 11 of the 22 states for which it had successfully bagged licences in the infamous 2G spectrum auction of 2008.

Following the cancellation of all its licences by the Supreme Court order in the 2G case, it made another attempt to claw its way back into that business after winning back licences for six states in 2012. The business, however, was doomed and four years later, it sold these to Bharti Airtel. Analysts say the group lost nearly Rs 7,000 crore in the telecom business.

Add to that losses in its core electronics business and the heavy burden of its oil and gas ambitions and what emerges is a picture of a businessman whose ambitions far exceeded his resources. Now, facing the heat from the CBI as well as the enforcement directorate, his business in tatters, the man who just five years ago was counted among India’s richest faces an uncertain future. Nandlal Dhoot, hailed as one of the pioneers of industrial activity in Marathwada, and the pioneering spirit behind the Videocon group, would have been saddened at the turn of events.

(Sundeep Khanna is a senior journalist. Views are personal.)