The Indian and the Korean governments have fully backed India Inc’s largest overseas takeover by Videocon of Daewoo Electronics after the latter’s CEO called the deal ‘undervalued’ and sought increased investments.

Indian Commerce Minister Kamal Nath — who had earlier backed LN Mittal’s bid for steel firm Arcelor — called up Chairman of Videocon, Venugopal Dhoot from Brazil saying that government will fully back the takeover bid.

Daewoo Electronics wanted Videocon to increase capital spending in its R&D to strengthen competitiveness. Korea media reports quoted Daewoo Electronics CEO Lee Seung-chang saying that Videocon must increase its spending on flat panel TVs and build up production lines for white goods as R&D investments had hit the limit due to lack of funds.

This could have hampered negotiations between the two sides if Videocon fails to meet Daewoo’s expectations, Korea media said.

Nath, however, told Videocon that Indian government would back the corporate takeover and chip in with whatever diplomatic help needed by the consumer durable firm. Videocon’s bid is in response to Prime Minister Manmohan Singh’s call to Indian corporates to globalise their operations and brands.

Korean Ambassador to India Choi Jung-il also called up Videocon Chairman Dhoot on Friday saying that the Korean government welcomes investment from India.

When contacted, Dhoot refused to comment on the deal citing confidentiality agreement but confirmed that both Indian and Korean governments are backing his bid.

Videocon is expected to retain the Daewoo brand and make it stronger by taking it across the world. Videocon had jointly bid with US-based equity fund Ripplewood for the Daewoo Electronics, which was put on the block by its lenders. The deal marks Videocon’s third purchase in the last one year after Thompson’s global picture tube business for about Rs 1,260 crore and loss-making Indian subsidiary of AB Electrolux, Sweden.

... contd.