The Stock That Fell 23.83% In Just Three Days

It’s a big day today for both, cricket fans and investors. While cricket fans are skewed in their interests over who would now own the IPL team of Deccan Chargers, investors are gaining hopes on the debt-ridden Deccan Chronicle Holdings Limited (DCHL) to marginally improve their situation through the sale of Deccan Chargers. The company has been surrounded by dozens of petitions revolving around defaults and non-repayment of debt levels estimated at Rs 5,000 crore.

The share prices of DCHL have been on a roller-coaster ride with the number and gravity of developments. Over the three trading days of September 10, 11 and 12, 2012, the share prices of DCHL have fallen by 23.83 per cent. The stock has declined -69.05 per cent till date from the beginning of this year. With rapidly changing dynamics, here’s a concise report on the issues that the company faces and how they are panning out with time.

How Much Debt?

DCHL, the promoter of the IPL team Deccan Chargers and the company that runs four newspapers namely, Deccan Chronicle, Asian Age, Andhra Bhoomi and Financial Chronicle, has in its filing with the Registrar of Companies (RoC) said that it has a debt of Rs 1,500 crore. This however turned questionable on account of the number of creditors, assets mortgaged, shares pledged and issues over non-repayment. A finance ministry official recently said in a statement that the actual debt of the company would be around Rs 5,000 crore, which is more than three times the amount DCHL claimed to have.

Debt Restructuring

Canara Bank has been recently appointed for conducting a forensic audit on the accounts of DCHL. A meeting was held on Wednesday, September 12 by the Corporate Debt Restructuring (CDR) cell to admit the company for debt restructuring but banks may hold their decision till the results of the forensic audit are known. Moreover, there was no consensus reached because there is no majority creditor in this case with 60 per cent of the creditors of DCHL forming about 75 per cent of the value of debt.

Creditors And Cases

Among the various creditors of the company, a few have filed complaints against DCHL for non-repayment of debt. IFCI recently moved the Debts Recovery Tribunal in Delhi, Company Law Board and Andhra Pradesh High Court over the company’s failure to redeem non-convertible debentures worth Rs 25 crore. IDFC too approached the Debt Recovery Tribunal in Hyderabad for recovery of dues. There was also a criminal suit filed by Karvy Broking against the promoters of Deccan Chargers, alleging forgery and misinterpretation. These charges include breach of trust for concealing facts, misinterpretation of information, introducing forged documents in the name of Karvy Stock Broking Limited and a deliberate attempt to defraud. Deccan Chargers.

Though Deccan Chargers goes on sale today, the proceeds that the company gets from this transaction would be deposited with ICICI Bank after paying 5 per cent to BCCI. This has been a directive of the Bombay High Court following the suit filed by Tata Capital for the recovery of Rs 101 crore which was provided to DCHL as loan which it failed to repay. Former Deccan Chargers’ CEO, Timothy Wright, had made a plea to the Andhra Pradesh High Court to stay the auction of Deccan Chargers. This though got rejected on Wednesday, September 12, 2012.

Timothy Wright

Former Deccan Chargers’ CEO, Timothy Wright, had in February 2009 approached the High Court of Justice, Queen’s Bench Division, London for taking action against DCHL for breach of contract. On July 16, 2012, the London court issued an order to DCHL to pay Wright a sum of 10.55 million pounds along with an interest of 8 per cent till the date of payment. Wright has now filed an execution petition in the Civil Court of Secunderabad for the execution of this UK passed order. The date for the petition to come up for hearing has been fixed on October 3, 2012. While Wright has sought the sale of assets for recovery of this amount (though the assets are already mortgaged to other banks and financial institutions), DCHL claims British courts have no jurisdiction in this matter.

Overall, the company is surrounded by issues, petitions and suits. Due to the amount of activity around the company, the stock prices will continue to remain vigorously dynamic. The fate of the company though will form a clearer picture only once the results of the forensic audit are released.