Deccan Chronicle’s woes pile up but the show continues7 min read . Updated: 14 Aug 2013, 04:37 PM IST
The debt-laden firm continues to stay afloat on the strength of advertisement
The debt-laden firm continues to stay afloat on the strength of advertisement
Hyderabad: Creditors may be turning up the heat by seizing assets mortgaged to them by Deccan Chronicle Holdings Ltd (DCHL), but the debt-laden newspaper company continues to stay afloat on the strength of advertisements drawn by the instantly-recognizeable brand in its home ground, Hyderabad.
IDBI Bank Ltd, which is owed ₹ 250 crore by the company, on Tuesday invited bids for four newspaper titles—the English-language Deccan Chronicle, Financial Chronicle and The Asian Age, and Telugu daily Andhra Bhoomi—that Hyderabad-based DCHL has pledged to it. The last date for submission of bids for the trademarks is 27 August, and the bids will be opened the following day, the lender said in a notice.
“Due to the failure on the part of DCHL to repay the financial assistance provided to it, IDBI has decided to enforce the above-mentioned security by transferring, to the highest bidder, its rights/interest on the trademarks for a consideration," the notice said.
Senior management of DCHL wasn’t available at the company’s offices to comment on the matter, a person at DCHL’s corporate office said. M.S. Raghavan, chairman and managing director of IDBI Bank, could not be reached for more information.
A similar notice issued by the lender in February had been stayed by a debt recovery tribunal after other creditors of DCHL objected.
It’s only the latest attempt by creditors to turn the screws on the media firm, weighed down by ₹ 3,914 crore debt according to its January-March financial results announcement.
Troubles at DCHL surfaced in July last year when its then managing director N. Krishnan resigned. Analysts have traced the debt burden to expansion into unrelated businesses including an aviation venture, book store chain Odyssey and the Indian Premier League franchise Deccan Chargers, which was terminated last year after it failed to pay the franchise fee of ₹ 100 crore.
Non-banking finance company Indiabulls Housing Finance Ltd, which lent ₹ 93 crore to DCHL, recently took possession of the company’s printing press in the Kompally suburb of Hyderabad and DCHL’s head office in Secunderabad under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act.
The Sarfaesi Act allows banks and financial institutions to seize and auction properties—both residential and commercial—when borrowers fail to repay loans.
In May, Kotak Mahindra Bank Ltd seized the premises of another DCHL printing press in Kondapur locality of Hyderabad after the company allegedly failed to repay part of a ₹ 100 crore loan.
Official investigations into the loans have gathered pace in recent weeks.
The Central Bureau of Investigation (CBI) has booked a case of fraud against DCHL chairman Venkattram Reddy, vice-chairman and managing director Vinayak Ravi Reddy and vice-chairman P.K. Iyer, along with auditors C.B. Mouli and Associates after searching their offices and homes.
Simultaneously, the Enforcement Directorate is probing DCHL over money laundering allegations. And Hyderabad police have speeded up a probe into allegations of cheating and forgery levelled a year ago by Karvy Stock Broking Ltd, the registrar of DCHL’s shares.
On 18 July, a police team from Chandigarh arrested M. Sukumar Reddy, a former independent director on the company’s board, following a dispute over a bounced cheque filed by Religare Finvest Ltd. Sukumar Reddy was granted bail by a Chandigarh court but separate investigations are also underway by the economic offences wing of the Delhi Police on a complaint made by Religare Finvest for alleged failure to repay ₹ 100 crore.
A detailed questionnaire sent to an aide of Iyer on 7 August did not elicit a response at the time of going to the press. Kotak Mahindra and Indiabulls did not respond to emailed queries.
DCHL competes with HT Media Ltd, publisher of Mint and Hindustan Times, in some markets.
In its struggle to stay afloat, DCHL has found support from its workers union: when lenders took over office property, the union filed a case before the Andhra Pradesh high court asking to be allowed to work in order to ensure business is not affected.
“Our stand is that the paper should run under any circumstances," said G. Sanjeeva Reddy, chief patron of the DCHL employees’ union, representing 1,000 workers. “We are also legally fighting with the bankers to ensure the paper comes out without any interruption."
To its credit, despite all the disputes, DHCL has been prompt in paying salaries, and has ensured newspaper production has continued uniterrupted over the last 12 months. Deccan Chronicle newspaper is celebrating its 75th anniversary this year.
“So far, the management has been able to pay salaries to employees despite difficult conditions," said Sanjeeva Reddy, who is also national president of the Indian National Trade Union Congress (INTUC).
Ensuring continuous newspaper production is critical to maintaining confidence in advertisers and readers—the two main revenue sources for any newspaper.
But, according to N. Murali, board member and former managing director at Kasturi and Sons Ltd, which publishes the influential The Hindu newspaper, “It (Deccan Chronicle) is coming out every day but that alone is not enough."
Kasturi says the legal disputes and the newspaper’s “liabilities of nearly ₹ 3,500 crore are in public domain, having been reported widely in the media."
“All this is in the knowledge of the readers and advertisers as well," he said.
But advertisers don’t seem to have pulled back. Analysts say a steady flow of advertising revenue has helped shore up DCHL since allegations of debts surfaced following Krishnan’s resignation.
“Ads are coming into the paper; in fact, they are getting more ads now than before," said Koka Satyanarayana, business director of media planning and buying agency BPN. “If they were getting ₹ 100 worth of advertisements earlier, now they are getting ₹ 110 worth."
“Even today, everything is routine at the company—that is the talk in the market. Nobody knows how they are managing it," Satyanarayana said.
The advertising market for English newspapers in Hyderabad is worth ₹ 70-80 crore, according to Satyanarayana, and Deccan Chronicle’s share of it is approximately 30%. The total advertising market, including revenue from television commercials, is estimated at about ₹ 300 crore, Satyanarayana said.
Deccan Chronicle Holdings is in the midst of a restructuring exercise, demerging its profitable print business into a new entity, Land Interactive Media Ltd. But the move has been opposed by some creditors who have moved the AP high court. On 11 July the court stayed a company law board order that sought to restrain lenders from proceeding with legal action against DCHL.
DCHL is contesting the seizure of its two printing presses in the court, arguing it resulted in “interfering and preventing the printing and publication" of its newspapers. T. Urmila Reddy, mother of the Reddy brothers, has contested Indiabulls’ possession of her property in the AP high court, calling it “illegal" and “unjust".
But, after taking DCHL to court and debt recovery tribunals, lenders are pro-actively invoking the collateral pledged to them.
“The auction process is going on as per the Sarfaesi Act," said B.A. Prabhakar, chairman and managing director of state-run Andhra Bank. DCHL defaulted on a ₹ 200 crore loan to Andhra Bank but the three properties it pledged cover only ₹ 90 crore, Andhra Bank said. Two of the properties are in Thiruvallur district near Chennai and one is in Rajapura village in Bangalore urban district.
Lenders are also invoking pledged shares after the firm allegedly failed to repay loans, leading to the combined promoter shareholding falling from 73.83% in June 2012 to 32.66% as of June 2013. As a result, Religare Finvest today is the single largest shareholder in DCHL with a stake of 14.48%. DCHL is contesting the appropriation of shares by its lenders, vice-chairman Iyer said in the company’s financial results statement on 31 May.
The company has been dragged to courts by a number of financial institutions seeking to strip it of its assets. The litigants include 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.
Hong Kong-based newsprint supplier Adonis Ltd and Chennai-based print trader Photon Infotech Pvt. Ltd have also moved the AP high court.
Some lenders have accused the management of mortgaging the same assets with different companies, which they claim leads to legal tangles among creditors.
As the DCHL management, backed by its staff, tries to save the company, a question mark hangs over the future of the company’s printing presses after the seizure of the properties on which they were located. According to Ramesh Vaidyanathan, managing partner at Mumbai-based corporate law firm Advaya Legal, the DCHL workers union can move the courts if the seizure is likely to damage the interests of workers and results in changes in service conditions or retrenchment without compensation.
According to Sanjeeva Reddy of DCHL workers union, the management is scouting for alternative locations for its printing presses.
Should it receive an unfavourable judgement in the Kotak Mahindra case, the publisher may have to “move outside for printing", he said.