Hyderabad: Debt-ridden publishing house Deccan Chronicle Holdings Ltd said Friday its board approved a proposal to arrive at a compromise with its lenders in line with provisions of the Companies Act.
The company told stock exchanges that the compromise formula could pave the way for the restructuring of the company in order to pay off debts amounting to over Rs.3,987.50 crore as of 30 September 2012.
The company has defaulted on debentures worth Rs.150 crore which has led to several creditors including financial institutions approaching the Andhra Pradesh high court and the debt recovery tribunal seeking to wind up the company to recover dues.
“If the company is in difficulties, the lenders are not going to get their whole money back. There has to be a compromise,” said Sanjay Kallapur, professor of accounting at the Indian School of Business. Kallapur explained that bringing different lenders to an agreement would be difficult as each of them would have their own interests. “Therefore, as long as the 75% of them agree, the court has the power to enforce that agreement.”
Shares of Deccan Chronicle Holdings rose 1.79% to Rs.4.55 while the benchmark Sensex declined 0.04% to 19,317.01 points.
Deccan Chronicle’s management couldn’t be reached for more information on the proposed scheme. A spokesperson of Yes Bank declined to comment on the latest move by DCHL’s board. He said the bank has initiated the process of recovery through legal means. Yes Bank has an exposure of Rs.194 crore to DCHL, of which Rs.126 crore is still outstanding. The bank has approached the debt recovery tribunal to recover the amount. “This could be part of revival plan for the company,” said Ramesh K. Vaidyanathan, managing partner at Mumbai-based corporate law firm Advaya Legal. “They have applied for demerger. The demerger could be a precursor to sale to a third party… They could be planning to sell loss-making businesses.”
Kallapur said a compromise formula could entail various arrangements. “May be the company and the same management can operate provided these guys (creditors) agree to reduce their claims or they (DCHL management) might try to find a strategic investor. Or they might try to sell this company to another company.”
The financially troubled publisher of Deccan Chronicle, Financial Chronicle and Asian Age newspapers and the Telugu daily Andhra Bhoomi has been dragged to courts by various financial institutions such as IFCI Ltd, Jammu and Kashmir Bank Ltd, Axis Bank Ltd, ICICI Bank Ltd, Kotak Mahindra Bank Ltd, Yes Bank Ltd, Tata Capital Ltd, PVP Capital Ltd, National Pension System Trust, and Royal Sundaram Alliance Insurance Co. Ltd seeking to strip it of its assets.
Besides these institutions, Hong Kong-based newsprint supplier Adonis Ltd and Chennai-based print trader Photon Infotech Pvt. Ltd have also moved the high court of Andhra Pradesh.
According to DCHL’s September quarter earnings statement, the company had long-term borrowings of Rs.147.20 crore and short-term borrowings amounting to Rs.3,755.70 crore. Its total liabilities, both current and non-current, amount to Rs.4,207.54 crore.
Faced with a spate of winding up petitions by lenders, DCHL is exploring all its options for a settlement, analysts said.
“The road ahead would be difficult for the company, given its loans are much beyond the enterprise value of the company,” said Satish Kantheti, head of the equity research division at Hyderabad-based brokerage house Zen Securities Ltd.
Some of DCHL’s lenders have classified the loans as non-performing assets. A few have also invoked promoters’ shares pledged as collateral after they failed to repay loans, leading to the shareholding of the promoters—chairman T. Venkattram Reddy, vice-chairman T. Vinayak Ravi Reddy and managing director P.K. Iyer—falling from 73.83% as of June 2012 to 32.66% at the end of the December quarter.
The company’s woes began with the resignation of its former managing director N. Krishnan in July.
The company’s stock continues to remain untraded on the National Stock Exchange after trading was suspended in January owing to non-disclosure of financial results.