“The first rule of business is to survive and the guiding principle of business economics is not the maximisation of profit, it is the avoidance of loss.” But for how long can a company avoid loss or never get insolvent? Talking about Videocon Industries Limited (VIL) - an Indian multinational conglomerate, which is set to go under the crease of Anil Agarwal's Vedanta Group, with banks taking a substantial haircut of 95.85 percent from their total claims in the resolution plan approved by the banks and cleared by National Company Law Tribunal (NCLT). Shares of company jumped up after the Mumbai bench of the NCLT approved the ₹2,962 crore bid by Vedanta Group company Twin Star Technologies Ltd. to acquire VIL and 12 other group entities. But let’s begin from the start- back when Videocon was the ruler of consumer electronics in India. THE GLORY STORY- In 1986, a company called Adhigam Trading, which sold paper tubes, chosen to expand uncontrollably. They started manufacturing consumer electronics, truth be told, they were the first Indian company to get a permit to make colour TVs.In 1991, they rebranded to Videocon, which got quite possibly the most famous consumer electronics brands in the country. But the Company had bigger dreams- Videocon started setting up businesses in Oil and Gas, Telecom, Retail and DTH services. Shockingly, it didn't work out excessively well for them as these businesses were capital intensive and didn't generate money and had to borrow a lot of money to get these projects off the ground. And the company’s debt spirals out of control. Notwithstanding the new businesses currently running in max throttle, but in consumer durables Videocon had the option to stay away from rivalry by offering the least costs, yet it neglected to build brand loyalty and companies like LG, Sony and Samsung immediately overwhelmed them. Videocon’s debt pile became steady and the interest was continually rising. It consolidated their DTH services with Dish TV. Videocon sold possession of their gas fields. The telecom business went to Airtel. However, none of it truly made a big deal about a mark. Lastly, Videocon was conceded to the bankruptcy court (NCLT) in 2018, amounted up to a whopping Rs 88,000 crore, making it India's biggest insolvency case ever. Should they have taken a different path & strategies, is it possible the picture would be different? Thank you.
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