Biyani takes over Rs 170-cr loan to push Warburg deal

The loan, given by Future Capital to news publisher Deccan Chronicle, had become the bone of contention in the deal

Kishore Biyani has taken over Rs 170 crore Future Capital loan to facilitate the acquisition of group's finance arm by the US private equity giant Warburg Pincus.

Two months back the private equity player agreed to buy 53.67% stake in Future Capital from its promoters for Rs 560 crore and then follow it with the mandatory open offer to minority share holders for 20 per cent additional stake. However, the Rs 170 crore loan that the company lent to Hyderabad based news publisher Deccan Chronicle (DCHL) became the bone of contention.

Future Capital in an announcement to exchanges today said that promoter group will take over Rs 170 crore loan exposure at book value.

“This is to facilitate Warburg Pincus deal for Future captial,” said a senior executive of Future Group who did not wish to be identified. “The loan will be assigned to a promoter group entity,” he said.

Future Capital announced a few days back that the mandatory open offer for 20% share to be made by Warburg Pincus has been postponed due to delay in regulatory approvals.

“Deal got into a tricky situation,” said a banker familiar with the developments. “If Future Capital was compelled to acquire the pledged shares then it would have effectively owned 54% of Deccan Chronicle, the news publishing company,” he said.

As per FDI norms a foreign player can not own more that 26% in an Indian news publishing company. So if Warburg Pincus had acquired Future Capital with this loan which had pledged shares as guarantee then it could technically own more than 26% in a news publishing house.

There have also been doubts raised about the validity of the shares pledged with Future Capital as depository service provider Karvy Stock Broking has filed a complaint with the Central Crime Station in Hyderabad alleging that promoters of Deccan Chronicle tricked them during an exercise to pledge shares and raise funds. It also claimed that same shares have been pledged with different entities by the promoters.

Also, according to the declarations before the Registrar of Companies in Hyderabad, DCHL promoters have mortgaged several immovable properties with YES Bank and borrowed around Rs 194 crore.

The mortgaged properties include a house in the posh Banjara Hills area, a pent house at Gachibowli and shops at Kukatpalli in Hyderabad, some lands in Medak and Kadapa districts, flats at Alwarpet in Chennai and properties in New Delhi, Vijayawada and East Godavari districts.

Shares of DChit a lower circuit to touch a record low of Rs 12.65 on the BSE during intra-day trade on Friday. However, they recovered to close 1.88 per cent higher at Rs 13.55 on a report that DB Corp is is in talks to acquire Deccan Chronicle's print business. DB Corp shares gained 6.90 per cent, or Rs 13.70, to close at Rs 212.20. However, in a clarification to BSE after market hours, DB Corp denied having arrived at any agreement for acquisition for print business of Deccan Chronicle.