Hold 25% interest in Ravva Oil Field: Videocon

Venugopal Dhoot, CMD of Videocon Industries informed CNBC-TV18 that his company has 25% interest in Ravva (Oil) Field along with Cairn and ONGC. The net profit from Ravva Field was Rs 400 crore last year at USD 60 per barrel, he said. He expects the net profit to be at Rs 800 crore, at USD 120 per barrel. The company is doing three power projects in India currently.

Videocon's subsidiary has bought telecom licence for 22 circles, Dhoot said. Dhoot expects to roll out telecom services in Chennai on August 15. He values the telecom business currently at USD3billion.

Excerpts from CNBC-TV18's exclusive interview with Venugopal Dhoot:

Q: Could you give us a breakup of the entire oil and gas business, even your consumer electronics business? What sort of growth do you expect from both these spaces and if you could focus on your 25% holding in the Ravva JV you have with ONGC?

A: We will start with Ravva Oil Fields, where we have a 25% joint venture with Cairn Energy. We got a 25-million barrel equivalent of oil and gas from Ravva Oil Fields last year. If you take the price of crude USD 125/bbl,  it would amount to a total production of 2.5 billion and Ravva Oil fields is one of the cheapest in the world.

We get oil at less than one dollar a barrel. Our production cost is less than one dollar and the balance is profit for us. When the oil price last year was at USD 60/bbl, our net profit from Ravva Oil field was at Rs 400 crore. The prices now have been doubled, so the profits have also doubled. Ravva Oil field is doing very well and this is good for us but bad for the country.

The LCD (liquid crystal display) manufacturing and the Plasma TV manufacturing have been very successful in getting the Plasma panel technology. We have also got LCD technology. We have got patent rights from IBM. From picture tubes we have now deviated to LCD. The margins of LCD at the moment, are very good because we are at a very good position in India. We have appointed Mr. K.R. Kim as the Managing Director for the consumer durable division globally and in India. K.R. Kim has been the person behind LG here in India and now he will be driving Videocon.

Videocon doesn’t get over with oil and consumer durables. Other projects of Videocon include power projects where we are currently doing three power projects of 1,600 MW each in Gujarat, West Bengal and Chhattisgarh. There is also the DTH story and Datacom which has a mobile phone license for 22 circles and most of the spectrums are in India. We have already received most of the spectrums in South India and we are now starting the rollout. The rollout will begin from Chennai. The mobile phone rollout will give Videocon  a very good boost. Our Next Retail is also doing very well. We hope to be very successful in all our endevours.  

Q2: If we can break this into the two companies that you own Videocon Industries and Videocon Appliances, I guess Videocon Industries is the one that has a stake in Videocon Natural Resources, which owns all those power companies or has a stake in all the power companies. Can you tell us the main sources of income for Videocon Industries, your listed stock? What percentage comes from consumer durables and what percentage from Rawa and what percentage from the natural resources company, which owns the power stocks?

A: There has only been a capital expenditure on the Natural Resources Company, which we call as an infrastructure company. Coming to oil, at USD 125 per barrel our profit will be very high. In the consumer electronics segment we are have a very good profit margin. Last year we had a turnover of around Rs 6,000 crore and this year the margin will go up. As inflation numbers have gone up, the spending capacity of the consumer has gone down. The interest rates too are very high, and everything in our industry is based on interest because consumer finance is the key to selling.

On the other hand, we have had an 8% GDP growth, which means 20% of consumer durable increase. So the growth for consumer durables is 20% and we are now thinking bout plans to attract consumers to our business again. The season starts from August 15 and the prices are falling and we are now depending on the volume shares. Our volumes will go up by 30% and our  margins may fall by 20%. So overall, profitability will be up.

We have also acquired telecommunication license, which is currently valued at more than USD 3 million. Videocon has got a very bright future in times to come.  

Q: Can you update us on your telecom company, Datacom Solutions? Also recent reports suggest that you were looking at entering the South African market where GSM foray, a tie up with MTN, any update on that deal?

A: We were trying to have their collaboration and enter into the South African market. But Bharti Airtel has already gone there and they are very big. Their capitalization is around Rs 2 lakh crore. So we are not competing with them. We back Bharti on this end and we believe that some Indian should have a base in South Africa. As far as we are concerned, we will be launching our mobile phone service in Chennai by August 15. We have already got a 22 circle licenses and now we will in time get the spectrum. As soon as we get the spectrum, we will roll out. Videocon as a brand is famous. So we think that we will have a very good market. In five years time we plan to attain 5 crore subscribers. Around 200 people are working to get our mobile license into Indian market. We should be very good player in the cellular phone segment.