Venugopal Dhoot, one of India’s best-known business tycoons, was arrested earlier this week nearly four years after India’s federal investigation agency filed a case of criminal conspiracy and fraud against him. How a ‘loan scam’ led to the Videocon owner’s downfall.
His detention came on the heels of the arrest of former ICICI Bank chief Chanda Kochhar and her husband Deepak for an alleged fraud where it is claimed that Kochhar sanctioned high-value loans to Dhoot’s company in 2009 in exchange for investment in her husband’s renewables business.
ICICI is India’s third-largest lender and Kochhar, an iconic CEO, was seen as a poster woman for the banking industry. Kochhar and her husband have denied allegations of quid pro quo, saying the investment from Dhoot’s company was a genuine one. These arrests mark a crucial turning point in a case that has seen its first arrests since the alleged offenses were recorded by investigators in January 2019.
According to local media reports, Dhoot, who has been denying the allegations, has offered to turn approver (give evidence). “This could open Pandora’s box,” Arvind Gupta, an ICICI shareholder who blew the whistle on the alleged scam in 2016, told the BBC. “The investigation is a start in the right direction, but its scope needs to be widened since Kochhar wasn’t the only person on the ICICI credit committee that approved the loan,” Mr. Gupta said.
He added that the complexity of the alleged fraud would require inter-departmental coordination between all of India’s investigative agencies to get to the bottom of the case.
It was the combination of intense competition from South Korean brands such as Samsung and LG, and Videocon’s unnecessary diversification into “fantasies” such as oil and gas and telecom at a time when they should’ve been protecting their core turf, that precipitated Dhoot’s downfall, Mr Singhal says.
It won the license back in some states, but eventually wound down operations after selling the spectrum to Bharti Airtel. Dhoot’s ambition of metamorphosing into an oil and gas giant didn’t materialize either. His insurance business met a similar fate.
By 2012, Videocon was one among a list of other highly indebted firms – including the Essar Group, GVK, GMR, and Reliance ADAG – that Credit Suisse’s House of Debt report said posed a “concentration risk” to Indian banks.
The aggregate debt of these 10 groups was equal to 13% of bank loans and 98% of the banking system’s net worth. A review of the situation three years later by Credit Suisse found that despite attempts by groups like Videocon and GMR to reduce debt through asset sales, their financial stress had “intensified further”, with Dhoot’s company seeing among the largest increase in debt levels.
By 2018, India’s bankruptcy court had initiated insolvency proceedings against Videocon. In under a year, Dhoot was also battling federal investigations into the ICICI Bank loan, for which he is in custody.
