The promoters of Deccan Chronicle (DCHL) are trying hard to convince shareholders that their current troubles are just a matter of a “liquidity crunch”. But there’s no denying the air of desperation among the Reddys. They are trying to figure out which assets can be sold and for what price. Everything in the business is either pledged twice over or heavily under debt. “They are willing to borrow double what they already owe just to get out of this current mess,” says a market analyst who tracks the Hyderabad-based media company (whose newspaper, incidentally, has successfully staved off the Times of India in the city).
But selling off assets isn’t going to be easy. Take its IPL team, Deccan Chargers. Its shares have been pledged (despite BCCI rules), the players haven’t been paid and the price expectation is ‘absurdly high’, as per market sources. In fact, rumours abound of various suitors waiting in the wings for DCHL—all have come to naught—and there’s also speculation in Hyderabad that other Reddy clan members will come to promoter Venkat Ram Reddy’s rescue.
All this just goes to show that DCHL and its promoters are in a tough spot. They face pending cases of fraud and forgery, the Enforcement Directorate is investigating them for fema violations and round-tripping of funds to Mauritius, there are also pending court cases in the Debt Recovery Tribunal and Andhra Pradesh HC. IFCI has already made a case that the company be wound down in order to pay back its principals. And the Bombay HC has put a stay on the company leasing or selling any of its property in Lower Parel, Mumbai.
According to analysts, the downfall has come due to unprecedented spending. Many say the trouble began when Ram Reddy met P.K. Iyer, who holds an equal share in DCHL to the two Reddy brothers. The company’s expansions into aviation, the IPL and retail have all failed. The Hyderabad-based newspaper’s expansion into Chennai, Bangalore and Kochi has also not paid off. Still, as one Reddy industrialist put it, “He’ll definitely get a lifeline...because it is in the banks’ interest that Ram Reddy be given time to repay his loans.”