Corporate Dec 18, 2012
The fate of Deccan Chronicle looks even more uncertain now.
As if a forensic audit, multiple winding up court petitions and Rs 4,000 crore of debt wasn't enough, the Hyderabad-based publisher's employees have now threatened to strike work in a dispute over pay and four independent directors have also resigned.
On Monday, the company accepted the resignation of four independent directors Sukumar Reddy, G. Kumar, V. Suresh and P. Siddhartha and also announced the appointment of V. Lakshmana Charya, Venkateswarlu Malapaka and S. Suresh as Additional Directors who will serve as Directors in the capacity of being Non Executive-Independent.
While, Kumar, a chartered accountant, was heading the audit committee of the company in addition to the remuneration committee, Sukumar Reddy, a realtor, and Suresh, another chartered accountant, were also part of the audit committee. The company, however, did not give any reason for the resignations of the independent directors particularly at a time when the audit and accounts of the company are under scanner.
According to a report in the Economic Times, the employee union served a strike notice over the payment of bonus on 1 December. But despite negotiations, the company's management has still not resolved the issue.
Deccan already has five winding petitions against it in Andhra Pradesh High Court. The companies which have filed petitions include IFCIL, ICICI Bank and Hong Kong based Adonies Group. Now, there are two more entities, which are likely to file petitions for receivables to the tune of Rs 200 crore.
According to a CNBC-TV18 report, DCHL owes Tata Capital and GE Capital over Rs 100 crore each and are likely to file winding up petitions soon.
Another Mint report points out that Royal Sundaram Alliance Insurance has also filed a winding up petition against DCHL for non-payment of dues worth Rs 11.2 crore.
"The petition said Deccan Chronicle Holdings had become "commercially insolvent" and asked the court to appoint an official liquidator "to take charge of all its assets, affairs, business, papers, income, properties, book of accounts, vouchers, documents, and bank accounts", the report said.
The financial distress in DCHL came to light when the company defaulted on redemption of nonconvertible debentures held by IFCI and the multiple charges allegedly created by it over the shares already pledged to Future Capital. The promoters of the media company are facing criminal charges of forgery, fraud and concealment after they had pledged 54 percent of shares to Future Capital.
The financial woes just kept piling up as the promoters began acquiring non-core assets like like cricket the Indian Primary League (IPL) team Deccan Chargers and the Odyssey book houses. Further ventures like Financial Chronicle and acquisition of Asian Age, too did not pay off. Even the air cargo business in which the promoters of Deccan Chronicle were seeking to invest, did not take off.
Their IPL team Deccan Chargers was terminated after the promoters failed to present a bank guarantee of Rs 100 crore to the cricket board.
Plans to restructure the loans to Deccan Chronicle were put on hold in October after the lead lender to the group ICICI Bank withdrew the proposal. The total exposure of the lenders to the company is about Rs 5,000 crore. Banks are currently awaiting the forensic audit report of Deccan Chronicle. If the auditors establish a case of fraud in their report, the company will not go into debt restructuring.
Deccan Chronicle's market value has plunged by more than 85 percent this year and the stock is a mere penny stock trading at Rs 6 on the bourses.
Any infusion of equity to bail out the company depends on how the bankers would work out a plan with future investors. But with no clarity on the debt size and the likely stand of the bankers, any potential investor is going to be tough to find.
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