Why Videocon giving up Philips and Electrolux may be too little, too late

beleaguered consumer-durables firm VideoconBSE 4.95 % is mulling giving up its licence to make and sell televisions under Dutch brand Philips and appliances under Swedish brand Electrolux in India.

An e-mail questionnaire and text messages sent to Videocon managing director and CEO Venugopal Dhoot did not get a response. We will update the story when we hear from him.

Why? The ET report says that the move is meant to reduce Videocon’s royalty payouts and fixed costs at a time when it is unable to sustain production without access to working capital.

The company is saddled with debt three times its size owing to misadventures in telecom and oil, among other reasons. It is grasping at straws to repay the debt without being dragged to the National Companies Law Tribunal and face liquidation.

Will it help? Hardly. Any decision to offload the brands may be a case of too little to late.
Sales of Electrolux in India have stagnated since at least 2013, per data from its website. In 2017, sales stood at SEK64 million (Rs50.71 crore), paltry compared to its takings in comparable economies: SEK500 million in Malaysia, SEK266 million in Indonesia, and SEK911 million in Thailand.
Sales of Philips have suffered the world over as the television market is overtaken by Chinese firms.
In fact, this prompted Philips to sell its televisions business to Hong Kong-based electronics firm TPV Technology in 2012.

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Savings from the exit of these brands will barely make a dent in the Rs27,341.78 crore of total liabilities on Videocon’s books as of March 31, 2017. Cash flows cannot pay for this: The consumer durables business has consistently reported losses for the last few quarters. In the December 2017 quarter, it made over Rs1,000 crore in losses on sales of Rs228.15 crore. economictimes