At one time, in the not-so-distant past, Deccan Chronicle was considered to be among the best stock buys thanks to its stranglehold in the print media space of the South. It was talked of in the same hushed tones as the market leaders Hindustan Media Ventures and Dainik Jagran.
Today, with winding up petitions having been filed by its creditors amidst criminal charges of forgery and fraud, Deccan Chronicle has become a pariah and its shares have touched an all time low of 11.65% after tripping the lower circuit breaker. On 26th July, the shares were quoting at Rs. 22.90. The news was announced that its promoters had pledged 54% of the stock to Future Capital Holdings to tide over the financial difficulties and all hell broke loose. In just a few trading sessions, the stock has lost 50% of its value.
The Company did some emergent fire-fighting by sending out a statement that the problem was only one of “liquidity” and that it would tide over the crises soon. However, invesrtors are not buying the stock.
Deccan Chronicles’ woes are directly related to the gigantic debt of Rs. 2,000 crores that it has accumulated. As the debt was not serviced in time and certain NCD’s were not redeemed on the due date, Industrial Finance Corporation of India (IFCI) rushed to Court for a winding up petition against Deccan Chronicle Holdings. This was followed in quick succession by a police complaint filed by Karvy Consultants against the promoters of DCHL alleging that they had committed fraud and forgery with respect to certain pledged shares.
At the root cause of Deccan Chronicle’s woes is the huge investment it has made in the godforsaken IPL cricket team “The Deccan Chargers”. It paid USD 107 Million to acquire the franchise and has to incur huge recurring expenses. That has sucked away huge sums of cash with no corresponding monetary benefit.
Another area where Deccan Chronicle is burning cash is the Odyssey chain of book stores. With patrons preferring to buy books at a cheaper rate from Flipkart or indiatimes shopping, Odyssey is paying huge rent for the space in the malls but not getting customers to bite.
And as if that wasn’t enough, Deccan Chronicle has also entered into an aviation joint venture with Aviotech, a chartered flight service. Everybody knows that the aviation industry is the biggest cash squeezing machine available and can lay a company bare in no time at all (ask Vijay Mallya).
In retrospect, one can’t help feel sorry for Deccan Chronicle’s investors. It had such a good thing going. A monopoly in the South. A strangle-hold over advertisers. A cash machine. And it had to give it all up for a stupid cricket team! Of course, now even Deccan Chronicle has realized its mistake and decided to dump Deccan Chargers. But the asking price: Rs. 1,500 crores (1.5 Billion). Will there be a bigger fool who will bail out the lesser fool is the million (nay, billion) dollar question.