Chennai/ Hyderabad: Troubled newspaper publisher Deccan Chronicle Holdings Ltd (DCHL) on Thursday spurned the only bid it received for its Indian Premier League (IPL) franchise Deccan Chargers—a Rs.900 crore offer from real estate firm PVP Ventures Ltd—on grounds that the price and payment terms weren’t to its liking.
The outcome of the auction in Chennai is a setback for both the Chargers and its owner, which purchased the franchise for $107 million (around Rs.588 crore today) in 2008. It may also have implications for the brand value of other IPL teams.
The auction was part of debt-laden DCHL’s attempt to dispose assets not central to its core publishing business and repay creditors in the face of a deepening financial crisis.
The Board of Control for Cricket in India (BCCI) said in a statement that the bid met its eligibility and suitability criteria. “The bid was then reviewed by Deccan Chronicle Holdings Ltd which, in its discretion and with no role being played by BCCI, rejected the bid on the basis of the payment terms offered by the bidder,” BCCI said.
The payment terms and what DCHL found unacceptable about them weren’t disclosed. Some analysts said unrealistic price expectations may be to blame.
“The only reason Deccan Chargers is losing out is because of the unrealistic valuations expected, which the market is not willing to pay,” said a senior executive at media agency GroupM, which represents big ticket advertisers. “If BCCI scraps the Hyderabad team and instead offers Ahmedabad there will be high interest as the city provides more opportunity to generate revenue.”
BCCI will discuss the fate of the cricket franchise at a special committee meeting in Chennai on 15 September.
DCHL tried to sell its team on two occasions earlier and appointed Religare Capital Markets Ltd to advise it on the offers. In a stock exchange filing on 15 June, DCHL said it had been approached by “multiple parties evincing interest in acquiring stake in the Company’s IPL Team.” Chennai-based PVP Ventures reported a net profit of Rs.9.19 crore for the quarter ended 30 June, according to data available on BSE Ltd. It earned Rs.245.05 crore net profit in 2011-12, has a market capitalization of Rs.157 crore, and had around Rs.200 crore in long-term borrowings at the end of fiscal 2011-12.
PVP’s chairman Potluri Vara Prasad is a film producer who recently produced an animated box-office hit movie called Naan Ee in Tamil and Eega in Telugu. He is also co-producer of the Kamal Hassan-starrer Vishwaroopam.
Potluri smiled and left without saying a word after the auction ended.
“After opening the price bid, Deccan Chargers management decided the price and terms of payment were not acceptable to them. And therefore they rejected the bid,” BCCI president N. Srinivasan told reporters in Chennai.
Promoters hold a 57.53% stake in PVP Ventures, whose name figured in the first information report prepared by the Central Bureau of Investigation in the disproportionate assets case involving jailed Congress rebel and Kadapa member of Parliament Y.S. Jagan Mohan Reddy.
Videocon Industries Ltd, Harsh Goenka-led RPG Group and two other corporate houses were initially reported to be in the race to purchase Deccan Chargers. Videocon backed out and did not even purchase the tender documents.
Deccan Chronicle has around Rs.5,000 crore of debt, a Union government official said this week, and state-owned Canara Bank that’s heading a creditors’ consortium is conducting a forensic audit on the company’s accounts. The publisher of the English-language Deccan Chronicle, Financial Chronicle, Asian Age and the Telugu daily Andhra Bhoomi recently pledged its trade marks to raise cash.
“They are desperate for cash. Modalities of payments seem to be the main reason (for the rejection of the bid) given the urgency of the cash requirement,” said Satish Kantheti, head of equity research at Hyderabad-based brokerage Zen Securities Ltd. “It was a great price, very reasonable.”
He added: “At one level, this was a flop show. Only one bidder turned up. At another level, BCCI could be worried that there were no takers for one of its franchisees.”
The fact that an IPL franchise attracted just one bidder doesn’t bode well for the brand value of the tournament. “Not being able to attract any takers for the IPL team is a major setback for IPL team owners, BCCI and the brand IPL, as the valuations will now further take a hit,” said Indranil Das Blah, chief operating officer of Kwan Entertainment and Marketing Solutions. “As a media property and in terms of viewership there is no lull, however. BCCI and IPL stakeholders are doing something wrong to get such a dull response.”
“The future participation of the Deccan Chargers or success in finding alternative ownership in some way, is critical for the IPL’s credibility,” Lalit Modi, former IPL chairman and commissioner who was suspended in April 2010, said in an email reply. “The tournament simply cannot afford to lose another team or the revenue from the lost matches, sponsorship and commercial opportunities that could potentially result.”
Deccan Chronicle hasn’t been paying its team salaries; Deccan Chargers’ former chief executive Timothy Wright sued the management successfully in a London court, which ordered Deccan Chronicle Holdings to pay him £10.55 million (about Rs.93 crore) for breach of contract.
Wright has approached a Secunderabad court and the Andhra Pradesh court seeking implementation of the London court order. He filed a civil revision petition to stall the sale of the cricket team and sought a high court directive to the team management to pay him Rs.93 crore in line with the London court order, before the team, an asset of the holding company DCHL, is sold.
The Andhra Pradesh high court on Wednesday refused to intervene in the auction process of Deccan Chargers and instead asked his counsel to approach the lower court.
Deccan Chronicle Holdings stock was down 1.72% at Rs.10.84 per share on Thursday, while the benchmark Sensex gained 0.12% to finish at 18,021.16 points. PVP Ventures shares rose 4.89% to Rs.6.43.
HT Media Ltd, publisher of Mint and Hindustan Times, competes with DCHL in some markets.
Viswanath Pilla contributed to this story