Deccan Chronicle uses BIFR to play hide & seek with lenders

In 2009, when Deccan Chargers, owned by Deccan Chronicle Holdings, lifted the cup in the second season of Indian Premier League (IPL) under its Australian captain, Adam Gilchrist, in South Africa, no one could imagine the company would go bust within three years.

A well-known media brand, Deccan Chronicle's fall was quick and took its lenders by surprise. The IPL team was terminated in 2012 by the Board of Control for Cricket in India after the company breached contract norms.

Company blames bankers
In a recent filing, the Hyderabad media company, now under the Central Bureau of Investigation (CBI)'s scanner, said it had applied to the Board of Industrial and Financial Reconstruction (BIFR) in September, seeking protection from lenders. This was after the company said it had not accounted for interest on the borrowings and blamed its lenders as they had neither confirmed the balances nor provided the basis for appropriation of non-cash assets.

However, the company said it had calculated the interest on the dues for the quarter ended September, at Rs 130 crore based on simple interest rate. Its total income for the quarter stood at Rs 81 crore, far less than the interest liability for the period, and a net loss of Rs 4.74 crore. This comes against the backdrop of a Rs 4,300 crore in loans the company had taken from 24 lenders.

The slide
The company's slide began in 2012, after it started defaulting on loans. It did not give any details on what went wrong with its business as bankers turned uneasy with increasing defaults.

It was only when the company defaulted on redemption of unsecured non-convertible debentures to IFCI in June 2012 that the lenders swung into action.

THE GREAT FALL

• 2004: Deccan Chronicle Holdings goes public to raise Rs 160 crore
• 2008: Enters Indian Premier League with Deccan Chargers team
• 2011: Net profit falls by 37 per cent to Rs 162 crore adding to cash flow issues
• July 27, 2012: Informs BSE about pledging of 54 per cent of the promoters stake with Future Capital. IFCI files winding-up petition against the company in Andhra Pradesh High Court on loan default
• July 31: Karvy files complain against Deccan Chronicle promoters for alleged cheating and forgery
• September: Losses mount to Rs 1,040 crore for 18 months ending September 2012
• September: Canara Bank commissions forensic audit

2013

• May 17: Canara Bank files complaints with CBI, alleges financial irregularities
• August 1: The company share touches an all-time low of Rs  1.87
• September 18:  Company seeks relief under the sick company status from BIFR

On February 22 this year, eight months after the first signs of the crisis came to light, the management finally admitted it had current liabilities of Rs 4,217 crore as in September 2012. In addition, it reported a Rs 1,040-crore net loss for the 18 months ended September 2012, sending shock waves across the lending community and the company's investors. It's still a mystery how banks lent such huge sums to Deccan Holdings. "Normally, a second lender has to obtain a no-objection certificate (NOC) from the first lender before sanctioning a loan to the same client. This was not followed by any of these banks for reasons best known to them," an industry observer said on condition of anonymity.

Among Deccan Holdings' lenders, ICICI Bank has the largest exposure at Rs 490 crore, followed by Axis Bank at Rs 400 crore and Canara Bank at Rs 360 crore. Canara Bank commissioned a forensic audit of the company's books to ascertain how much money had been borrowed and for what purpose. The bank later filed a complaint with the CBI.

Since the default has come to light, the lenders have used various means to secure their money. Says State Bank of Hyderabad's managing director, M Bhagavanth Rao, "We had to do this because the loan was not backed by any security."

Andhra Bank, with an exposure of Rs 200 crore, recently seized the company's properties under the The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. S K Kalra, executive director of Andhra Bank, said, "We could do it because the bank had exclusive charge over these properties, unlike in other cases where several lenders have been claiming the first charge over the same set of assets."

Meanwhile, the good news is the company's core media business is still running. Sources say the management has been operating new accounts in a new set of banks to run the business. Employees have got a salary hike, too.