Videocon Group assets valued without site visits, finds insolvency regulator
Did the registered valuer — RBSA Valuation Advisors LLP – prepare the valuation report of Videocon Group companies without the site visit? An investigation by the insolvency regulator – Insolvency and Bankruptcy Board of India (IBBI) – finds that RBSA Valuation Advisors prepared the standalone valuation report of 13 Videocon group companies based on the information/data collected during the site visit carried out during the year 2017-18. The regulator also found that the registered valuer visited a few sites on selective basis.
According to the regulator, the valuation reports on standalone basis were prepared in February 2019, and the report for consolidated basis was submitted in September 2020. It says that there is significant passage of time between the two.
“The actual availability of plant and machinery on the site and their condition cannot be ascertained without a physical site visit. The depreciation value then used becomes entirely assumptive. Assumption that there is no change in fixed assets is unreasonable. The physical visit was a part of required due diligence for valuation to be conducted by the valuers themselves and not decided on the basis of understanding. Hence, it was observed that RBSA has violated of rule 8(3)(l) of the Valuation Rules,” observed the insolvency regulator.
Brief of the case
RBSA Valuation Advisors was appointed to carry out FV and LV of assets of the Videocon Group entities on a consolidated basis in January 2020. Apart from working out the FV and LV of assets on a consolidated basis, RBSA was also requested to provide the FV and LV of assets segregated into following business segments
1. Consumer Electronics and Home Appliances
2. Oil and Gas
3. Telecommunication
4. Real Estate
RBSA was previously appointed by the RPs/ IRPs of the respective Videocon entities to carry out valuation of all 13 entities of the Videocon Group, on a standalone basis in 2018.
RBSA submitted that while the stand-alone valuations of the Videocon group entities were carried out between June-September 2018, the actual site visits were carried out during the months of September, 2018 to February, 2019. During site visits, they carried out necessary inspections, verification, conducted interviews, market inquiries etc to work out the fair value and liquidation of assets.
During site visit, it was observed by RBSA that majority of the components pertaining to business were in dismantled condition and lying at warehouses. Considering the same, the valuation was carried out on ex-situ scenario, resulting in substantial haircut in value of its assets.
RBSA submitted that considering the consolidated financials of the Videocon Group entities were not available as of the Consolidated insolvency commencement date, based on the discussions with the RP and that most of the units were non-operational, the aggregate amount of the stand-alone fixed assets and other financial assets (except, cash and bank balances, debtors and inventories) of the respective CDs as at the stand-alone insolvency commencement date, were considered as representative of their book balances as on the date when group insolvency started.
The insolvency regulator noted that RBSA got the opportunity to set standards for dealing with group insolvency case, following aggregation approach and simply summing up results of individual assets without discounting the possibility of synergy in treating assets of the CDs as a group is an error on part of his professional judgement.
It, therefore, has barred the RBSA Valuation Advisors from seeking or accepting any assignment or render any services under the Code and its underlying Regulations for a period of 6 months from the date of coming into force of the order.
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