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Venugopal Dhoot, a well-known business mogul in India, was detained this week. This occurred nearly four years after India’s federal investigative agency initiated a case against him for fraud and criminal conspiracy.
His arrest happened after the former CEO of ICICI Bank, Chanda Kochhar, and her husband, Deepak, were arrested for alleged fraud. Kochhar is reported to have given Dhoot’s company high-value loans in exchange for investments in her husband’s renewables business in 2009.
ICICI is India’s third-largest bank, and Kochhar, the bank’s famed CEO, was seen as a role model for women in banking.
Kochhar and her husband have denied any bargain was made in exchange for Dhoot’s investment.
These arrests are a significant step forward in a case where the first arrests have been made since the alleged crimes were documented in January 2019.
According to local media, Dhoot, who has disputed the claims, has offered to become an approver (give evidence).
He also stated that because the alleged fraud was so complex, all of India’s investigative agencies would have to work together to solve the issue.
How Venugopal Dhoot rose through the chain
Venugopal Dhoot was a familiar presence at business gatherings, corporate parties, and budget meetings during the 1990s and early 2000s.
Business journalists adored him because he was easy to talk to and willing to provide a short sound bite or statement. His thoughts were likewise highly valued.
Venugopal Dhoot grew up in a farming family. His family was authorized to sell Bajaj scooters in Aurangabad and other western Maharashtra cities. By the 1990s, Dhoot had assisted Videocon in transitioning into a consumer goods corporation.
The company was a pioneer in the sale of color televisions in India. Dhoot earned the nickname “king” of India’s white goods market after it began producing other household appliances such as air conditioners, washing machines, and refrigerators.
Venugopal Dhoot was from a tiny village and struggled to speak English initially, but that didn’t stop him from establishing friends with politicians and other entrepreneurs.
Arvind Singhal, chairman of retail consultancy firm Technopak Advisors, claims that he benefited from excessive import duties on global corporations till the 1990s. These fees made it difficult for other brands to compete with Videocon.
However, a great marketing and distribution strategy was a major reason why it outlasted rival local companies for nearly 20 years.
What went wrong?
Mr. Singhal claims that Dhoot’s demise was caused by tough competition from South Korean brands like Samsung and LG, as well as Videocon’s unnecessary expansion into “fantasies” like oil and gas and telecoms at a time when they should have been preserving their core turf.
Videocon Telecommunications was one of the firms whose licenses were canceled due to the 2G spectrum scandal, which was about suspected irregularities with how telecom spectrum licenses were auctioned.
It regained its license in several states; however it was forced to close after selling the spectrum to Bharti Airtel.
Dhoot’s ambition of creating a large oil and gas firm did not come true. Instead, his insurance company did the same.
According to Credit Suisse’s House of Debt study from 2012, Indian banks faced a “concentration risk” from heavily indebted corporations such as Videocon, Essar Group, GVK, GMR, and Reliance ADAG.
The aggregate debt of these ten groups was equal to 13% of bank loans and 98% of the banking system’s net worth.
Credit Suisse examined the scenario three years later and discovered that, despite efforts by companies such as Videocon and GMR to lower their debt by selling assets, their financial stress had “intensified even more,” with Dhoot’s company experiencing one of the largest increases in debt levels.
By 2018, India’s bankruptcy court has begun the process of putting Videocon out of business. In addition, Venugopal Dhoot had to deal with government probes into the ICICI Bank loan in less than a year. He is presently in jail as a result of these investigations.
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The final straw
While an inquiry into the alleged wrongdoings is underway, ICICI Bank remains a solid organization. However, except for Kochhar, it has moved on from the catastrophe.
However, Dhoot’s return to the top spot will take a lot of work.
According to Amit Tandon, founder of IiAS, an institutional advising firm, his rapid ascent and catastrophic fall are similar to those of other Indian businesspeople who borrowed money to diversify their businesses in the 2000s.