The shares have continued their free fall for the sixth consecutive trading session, saved only by the circuit breaker. The shares have touched an all time low of Rs. 10.10 today, down a mammoth 65% in just one month’s time. The free fall in the stock price is probably because panicky lenders are dumping the pledged shares to recover what they can.
Meanwhile, rumors are rife that Deccan Chronicle owes its lenders an astounding sum of between Rs. 2000 crores to Rs. 3,500 crores. How did a company with a net worth of only Rs. 1,280 crores and outstanding debt of Rs. 313 crores as of March 2011 manage to raise such large sums of money? More importantly, what were these funds used for? Deccan Chronicle’s net assets were only Rs. 900 crores. No doubt, a large part of the funds would have found their way to the accursed IPL cricket team called Deccan Chargers. And now, even the BCCI is hot on the heels of Deccan Chargers, demanding that they clear out their dues to their players. According to news reports, Deccan Chronicle mortgaged its franchise rights to the lenders, an act not permitted by the IPL rules. The Governing Council has taken a strict view of the matter and demanded that Deccan Chronicle sort out the mess with 14 days. If Deccan Chronicle does not fall in line, it stands a risk of the franchise being terminated in the same way that the Kochi franchise was terminated. Imagine the loss then as Deccan is expecting to sell the franchise for a whopping $1500 Million!
The Q1 FY 2013 results are nowhere in sight. The Company has officially obtained sanction for extending its financial year from 31st March to 30th September. This is a clear indication that all is definitely not well with the financial results.
Deccan Chronicles’ financial problems caught everyone by surprise. It suddenly came to light when IDFC filed a winding up petition in the Andhra Pradesh High Court against Deccan, claiming non-payment of debts worth about Rs. 450 crores. This was followed in quick succession by Karvy filing a criminal complaint alleging that Deccan’s promoters T Venkattram Reddy, T Vinayak Ravi Reddy and PK Iyer had committed fraud and forgery by pledging the same shares with multiple lenders.
Meanwhile, Deccan Chronicle’s unfortunate shareholders, who had bought the shares hoping it would do well owing to its stranglehold over the print media in the South, have all but given up on the stock. The lenders, however, cannot afford to give up just yet.