Videocon hiving off energy biz into new co

Videocon Industries is spinning off its myriad energy businesses—stretching from coal fields in Indonesia to oil and gas blocks in Brazil—into a separate company, in an attempt to help unlock shareholder value. The Dhoot-promoted Videocon, which currently gets a conglomerate discount thanks to the bunch of diverse businesses under its roof, will spin off six different units into a separate company called Videocon Natural Resources (VNRL). The move will result in two entities operating in two separate industries. The flagship Videocon Industries will retain a substantial stake in the new entity and continue to operate in the consumer electronics and retail sectors. VNRL will be an independent energy company with a large and growing presence in conventional and non-conventional energy. Its assets will include oil and gas blocks in Brazil and East Timor, coal blocks in Indonesia, and other conventional and non-conventional energy assets in India and the world. But the spin-off will not include Videocon’s stake in the hugely-profitable Ravva oil field for now. “The unbundling will help Videocon Group to be re-rated in the market. Each business will get focused management effort,” said an official at Edelweiss Capital. “There is tremendous growth opportunity in the energy space, both globally and in the domestic market, and we want to be a part of it,” Videocon chairman Venugopal Dhoot told. He refused to divulge further. Investment banker Morgan Stanley is advising the company on the restructuring. The move is expected to help the energy business acquire substantial investor interest of its own, especially at a time when energy prices and demand are soaring. Surging crude oil and gas prices have helped fatten profits of oil and gas companies and sparked a world-wide frenzy for new assets. Companies from Chile to China and from Australia to Iceland are scouring the world to buy oil and gas blocks. Company officials believe that the energy business is getting buried in Videocon Industries with attention largely focused on the electronics business. Consumer durables contribute over 80% of the total turnover but energy contributes about 50% to profits. “Focus on the energy businesses will offer significant upsides for Videocon provided the company makes sustained and significant investments in the area,” said the head of a large brokerage firm.