The imposing white mansion with walls like ramparts on Road No 3, Banjara Hills, one of Hyderabad's most exclusive residential areas, appears deserted, with even the security guard's post abandoned. Knocking at the gate repeatedly brings a guard scurrying from across the road who affirms the house is empty. "It belonged to someone at that English paper… Deccan something," he says in Telugu, adding that he was not employed by the former occupants. The previous owner happens to be P K Iyer, vice-chairman of Deccan Chronicle Holdings, who has an arrest warrant against him.
Earlier this month, Iyer's boss and the chairman, Tikkavarapu Venkattram Reddy, was arrested by the Central Bureau of Investigation, or CBI, in Hyderabad, along with his brother and vice-chairman, T Vinayak Ravi Reddy, on charges of defrauding Canara Bank and causing it losses of over Rs 350 crore, according to the first information report, or FIR, filed by the investigating agency.
This is a fraction of the over Rs 4,000 crore the company owes multiple lenders. The arrest on February 14 marked the culmination of a downward spiral for the owners of Deccan Chronicle Holdings who, at one time, seemed unstoppable.
It was bought by Reddy's father, the late Chandrasekhar Reddy, in 1977 when the then owners could not repay the debts that had piled up.
Reddy Sr. went on to become a Congress MP and his elder son was introduced into the newspaper business early on. When he took over as the editor-in-chief after his father's death in 1993, Reddy hired PNV Nair, a contemporary of Vinod Mehta, in the hope of boosting circulation. Through a combination of exposes and bold, eye-catching headlines, Nair took Deccan Chronicle 's circulation to above 100,000 and made it the biggest circulated English daily in Hyderabad, also making it a darling of advertisers. Its strength was classifieds, which made the paper extremely profitable.
Those who have worked with Reddy say he hardly interfered in news selection. Nair recalls that he had once got exclusive footage that exposed Sai Baba's so-called miracles and he had been in a bit of a quandary because he knew that the Reddy brothers were close to him - the 'godman' had even visited their residence when their father was unwell. But he went ahead and published the story, knowing it was important. The next day, Reddy called to say he had done the right thing.
Reddy had also bought a stake in The Asian Age, launched by journalist MJ Akbar, who was later appointed editor-in-chief of Deccan Chronicle as well. Incidentally, the other stakeholder in The Asian Age was Vijay Mallya, then at the height of his flamboyance. Many say Reddy drew up ambitious business plans as he was dazzled by Mallya. This is in the realm of conjecture but the similarities cannot be dismissed outright.
In 2004, Deccan Chronicle Holdings rolled out its big plan with a successful IPO, followed by the publication of new editions. The following year, the paper launched in Chennai, challenging The Hindu in that venerable paper's home turf: Reddy soon claimed that Deccan Chronicle had hit a circulation of 300,000 in Tamil Nadu, though this figure was disputed by rivals. Deccan Chronicle also launched editions in Karnataka and Kerala and plans were being drawn to re-enter Mumbai by scaling up The Asian Age in the city.
Coupled with this was rapid diversification into other businesses, most of which were unrelated to newspapers. The move was ironical because when Reddy had taken over the paper from his father, he had exited around 20 businesses on the grounds that they were too diverse.
Among the new acquisitions was bookstore chain Odyssey for Rs 61 crore, which he planned to expand. Reddy told Business Standard in 2005 that the stores stacked goods from companies that were also his key advertisers, so if they agreed to exclusive advertising deals with the paper, he would give them the best display space in the stores.
Reddy didn't stop there. He bought the Hyderabad franchise of the Indian Premier League (IPL) from the Board of Control for Cricket in India, or BCCI, in 2008 for $107 million. Deccan Chargers finished at the bottom in IPL's inaugural edition in 2008 but claimed the title in 2009, under the leadership of Adam Gilchrist. Then came chartered flight operations (Aviotech) and a cargo airline (Flyington Freighters). He also launched a financial daily, Financial Chronicle.
|THE STORY SO FAR|
The similarities between Reddy and Mallya were not restricted to business. There are various accounts about the lavishness of Reddy's lifestyle, including his fondness for fancy cars, horses, fine Scotch whiskey and imported cigars. According to a luxury car dealer, who requested anonymity, the Reddys' car collection included Bentleys, a Lamborghini, Porsches and a Bugatti, though this could not be confirmed with the family which did not respond to emails for this report.
The Reddys and their trusted colleague, Iyer, to whom both the brothers "gifted" shares in 2007 so that he became an equal partner in the company, also enjoyed credit running into crores at luxury automobile dealerships. This meant that if they went to the showroom and liked a particular model, they could drive out with it immediately. Reddy inherited his love for horses from his father, and has instituted a race in his name at the Hyderabad Race Club, the Chandrasekhar Reddy Memorial Cup, which was held this year as well.
But both detractors and well-wishers agree that however much the promoters might have spent to sustain this lifestyle, it still does not add up to the debt of over Rs 4,000 crore that Deccan Chronicle Holdings accumulated on its books in a short span of time.
A look at the Deccan Chronicle Holdings's finances over the past 10 years suggests 2010-11 was significant. That was the year the company, which had seen significant growth in profits and sales every year since it got listed in 2004, reported its first decline in both. The same year it merged subsidiaries Deccan Sporting Ventures and Odyssey India with itself.
Interestingly, in 2010-11, Reddy's family also became more entrenched in the newspaper, with his wife, Manjula, being appointed senior features editor and daughter, Gayatri Reddy, features editor, at monthly salaries running into lakhs. His son, Vijay, who has a BSc degree in business studies, was appointed vice-president, at a monthly salary of Rs 1.5 lakh, the same year. Brother Ravi Reddy's daughter, Anjana Reddy, was also a vice-president at Deccan Chronicle Holdings, but now runs a celebrity memorabilia venture.
In 2012, the promoters' high-profile gamble, Deccan Chargers, had its worst year. The team not only got kicked out in the group stage, but some of its players also got involved in a messy spot-fixing scandal. On May 17, E Venkatram Reddy, chief operating officer of Deccan Chargers, wrote: "My dear Chargers and Chargers Fans… I assure all of you we will bounce back from these adversities." Despite the reassurance, the "bounce back" didn't happen. In September, BCCI terminated the franchise after Deccan Chronicle Holdings rejected the sole bid of Rs 900 crore from PVP Ventures. The franchise was finally bought by Sun Network's Kalanithi Maran for Rs 85 crore, and renamed Sunrisers Hyderabad.
Meanwhile, rivals that had failed to dislodge Deccan Chronicle from its perch in Andhra Pradesh began churning out articles documenting the Reddy family's indebtedness. Curiously, much of it did not reflect in the quarterly numbers or other filings by the company. It became clear that the Reddys had taken several off-balance sheet loans by pledging their promoter shareholding in Deccan Chronicle Holdings. As the share price started falling, from Rs 90 in April 2011 to Rs 36 in December the same year, the creditors sold these shares in the market, which created a vicious cycle.
The promoter holding, which was 66 per cent in early 2011, has now come down to around 15 per cent, while as many as six directors resigned from the company's board in 2012 alone.
As the claims of the lenders multiplied, tongues started wagging, exacerbated by Deccan Chronicle Holdings delaying the publication of audited accounts for 2011-12. By August 2012, the share price had plummeted to below Rs 10. The company extended its financial year from March to September 2012 and the annual report was published in early 2013.
The report had some interesting revelations. Deccan Chronicle Holdings said that it could not achieve the expected growth in advertising revenues and added that it was going into a restatement of assets and liabilities. An intangible asset of Rs 3,700 crore came into the books, which it said was the value of its brands, according to a valuation expert. It also said the company was scaling down Odyssey from 80 stores to just eight and Rs 65.9 crore was "written off". It attributed the loss of Rs 1,040 crore in the financial year, against a profit of Rs 162 crore in the previous year, to new launches in other parts of south India. The company also admitted for the first time that it had liabilities of Rs 4,217 crore, more than six times the Rs 559 crore it had stated in March 2011, according to an earlier report in Business Standard. This was the last time Deccan Chronicle Holdings filed its annual report.
By this time, the lenders had initiated steps to recover their dues. A messy dispute with Hyderabad-based Karvy Computershare over pledged shares also broke out. Karvy declined to comment for this article. But it is known that it filed a police complaint against the promoters, alleging forgery, criminal breach of trust and misrepresentation. Indiabulls Housing Finance seized property given as collateral, including Iyer's house, for failure to repay loans of Rs 100 crore.
Reddy and his brother were arrested in February by CBI, which had registered an FIR in July 2012 accusing them of a criminal conspiracy to cheat Canara Bank. The bank's executive director, PS Rawat, declined to comment on the development, saying the matter was sub-judice. The promoters are currently lodged in the Chanchalguda Central Jail in Hyderabad and await bail.
The newspaper continues to be published, though a media analyst says the industry now perceives it as a "has been". Its readership, according to IRS 2013, has declined to 337,000, though the newspaper's website claims circulation of 1.45 million copies across south India. An email to its editor, AT Jayanti, requesting a meeting for details on the paper's operations remained unanswered. Meanwhile, the Deccan Chronicle Holdings share price had fallen to Rs 3.
Nair, the paper's former editor, says he feels sorry for what has happened to Reddy and the paper. "Nobody can believe they have such huge debts. It is total mismanagement." But not everybody is as charitable. KN Ravindhar, the grandson of one of the founders of Deccan Chronicle, says he is not surprised at the arrest. In a curious twist, the founder's descendants too have filed a case against Reddy for having taken possession of the land and building of Deccan Chronicle illegally, alleging that only the business and title had been sold to his father in 1977.