A CaseStudyonDeccanChronicleHoldingsLimited: A TragicStoryofaPublisher SecondEditionofJIDNYASA : ThirstforKnowledge2014 A CaseStudyonDeccanChronicleHoldingsLimited: A TragicStoryofaPublisher WhyFDIinRetail? A StudywithReferencetoSelectStakeholders A CaseStudyonDeccanChronicleHoldingsLimited: A TragicStoryofaPublisher Prof.SwatiKhatkale (AssistantProfessor,SymbiosisSchoolofBankingManagement) Abstract and converted into a daily. In 1976, congress While celebrating its platinum jubilee (75 years of politician and businessman T Chandrashekhar establishment), Deccan Chronicle Holdings Limited Reddy acquired the company. T C Reddy had a (DCHL) faced a gamut of problems. DCHL, one of variety of businesses like bottling plants, aluminum the top English Newspaper Publishing House in foil, hotels etc. His son, Mr. VenkattaramReddy took Southern India, recently ventured into other over as the chairman of the family business at the age businesses like IPL franchise -Deccan Chargers & of 21. He had Diploma in Printing Technology and Life Style Retail-Odyssey . Mismanagement and was well versed with printing & publishing business. unrelated diversification led to default on its non- But he was more known for his extravagant style of convertible debentures. It faced legal action from having expensive cars, fine cigars and keen interest banks & other financial institutions for non- in horserace bidding. His brother, Mr. Vinayak Ravi repayment of debt and misrepresentation of balance Reddy was co chairman of the company. Mr. sheet. Kotak Mahindra Bank even took actual Vankattaram Reddy's wife, Manjula Reddy worked possession of its Hyderabad based Kodapur plant as senior features editor and their daughter Gayatri under SARFASIAct 2002. This case goes into depth Reddy as features editor. Their son T Vijay Reddy to find out the causes of financial distress. It also was the Vice President (finance) of the company. illustrates various options available to bankers & other financial institutions to recover its loan. This case can also be used in the class for finding out options left for a defaulted company to get back its profitability. Deccan Chronicle Holdings Limited Deccan Chronicle Holdings Limited (DCHL) was established as a printing & publishing company in 1938. It started publishing its flagship English newspaper Deccan Chronicle as weekly newspaper Figure1:DeccanChronicleNewspaper 21 SecondEditionofJIDNYASA : ThirstforKnowledge2014 Volume1ofJIDNYASA : ThirstforKnowledge2014 WhyFDIinRetail? A StudywithReferencetoSelectStakeholders Vinayak Reddy's daughter Archana was marketing million per day. It ventured into the arena of financial head of the company. newspapers in April 2008, by launching Financial Chronicle. Financial Chronicle was published from Core Business Operations Hyderabad, Chennai and Bengaluru. In the same year DCHL made an alliance with International As the name suggests, Deccan Chronicle's Herald Tribune to publish business section of operations dominated in Southern part of India. It Deccan Chronicle. Thus Deccan Chronicles grew published various newspapers & magazines namely leaps & bounds with time. Deccan Chronicle (English Daily), Financial Chronicle (English Financial Newspaper), Andhra Bhumi (Telugu Newspaper),AsianAge etc. In 2012, Diversification of Business Deccan Chronicle was the fourth largest English With the growth, DCHL started diversification by newspaper in India. Deccan Chronicle was venturing into other businesses. On 5th September publishing thirteen editions from Hyderabad, 2005, DCHL acquired 100% shares of lifestyle retail Chennai, Bengaluru, Viishakhapatnam, Vijaywada, chain Odyssey by paying Rs 61.2 crore in cash. Rajamundry, Nellore, Karimnagar, Coimbatore, Odyssey was having a chain of retail stores selling Kochi, Thrivantapuram, Kozhikode and Anantpur. gifts, toys, stationary, books, music, multimedia etc. The circulation of newspaper in Hyderabad was the The deal was considered highly overpriced as the top highest around 5 lakh daily. It was followed by other line of Odyssey was only Rs 20 crore in 2005. The newspapers like The Hindu (5 lakhs), The Times of price was more than 3 times of the turnover of India (2.5 lakh- 3 lakh) and The New Indian Express Odyssey. DCHL expanded Odyssey from 12 stores (0.5 lakhs). According to a media consultant K in 6 cities to 46 stores in 13 cities in Andhra Pradesh, Satyanarayana Deccan Chronicle dominated local Tamilnadu, Maharashtra and Karnataka. In spite of advertising in English print media in Hyderabad the expansion, the Odyssey recorded losses. It with 60% share. reported net loss of Rs 11.57 lakhs in 2010 against profit of Rs 2.03 crore in 2009. Expansions On January 24th 2008, DCHL sported a new business On 1st April 2003, it merged with another publishing of Indian Premium League (IPL) franchise. DCHL house – Nandi Publishers Private Limited. In the bought Hyderabad cricket team of IPL, Deccan year 2003-04, it expanded its business by developing Chargers for $107 million (around Rs 589 crore). a colour printing centre in Hyderabad. All this The team was able to bring international cricketers increased its publishing capacity from 3,15,000 on the board likeAdam Gilchrist,Andrew Symonds, copies per hour to 4,35,000 copies per hour. In 2004, Chaminda Vaas, Herschell Gibbs & Shahid Afridi. DCHL brought its Initial Public Offer (IPO) in the The team did not perform well in first season and market. The IPO was 9.3 times oversubscribed, scored last. In the next session, it won the title. But in raising 179 crores for the company. DCHL acquired 2012, once again it stood the last. Asian Age Holdings in May 2005. It was a publisher DCHL also expanded its wings into Aviation of English newspaper, The Asian Age, printed from Industry by starting Aviotech. Aviotech commenced Delhi, Mumbai, Kolkata and London. Soon in 2007, its business in the arena of chartered flight services to Deccan Chronicle's circulation reached average 1 grab untapped private business aviation business in 22 SecondEditionofJIDNYASA : ThirstforKnowledge2014 A CaseStudyonDeccanChronicleHoldingsLimited: A TragicStoryofaPublisher WhyFDIinRetail? A StudywithReferencetoSelectStakeholders India. Aviotech ordered 10-12 airplanes from Sukhi 2012, it even delayed the mandatory disclosure of Civil Aircraft. According to Kapil Arora of Earnest annual financial statements and published it only & Young “Chartered Flight services are in very after September 2012. The financial statements in nascent stage in India and any volume & profits 2012 showed a net loss of 1040 crores against last can be seen only after 5 to 8 years.” With civil year's profit of 162 crores. An year ago in 2011, the aviation sector facing various difficulties of rising company's balance sheet reported a strong liquidity fuel cost, depreciating Rupee, high taxes, high position with a debt of only Rs 313 crore and cash airport costs; there is very thin hope that Aviotech position of Rs 264 crore and receivables of 258 will churn any profits in the coming few years. crores. Still the CEO & chairman of the company stated the problems rose due to liquidity crisis, “The real issue is a liquidity crisis that has arisen due to Financials: significant reduction in ad (advertisement) With increased diversification & expansion, the firm spending by domestic and multinational could not sustain its profitability. DCHL reported companies in India.” Astonishingly the debt losses of Rs 166.24 crore inApril- June 2012 quarter increased more than 10 times within a year to 3902 from net profit in the same quarter in the earlier year. crores in 2012 from 313 crores in 2011. In the suspicious situations after default, managing Table1:Quarterly Results director N. Krishnan resigned from the company on 25th July 2012. In December 2012, three more board Particulars Quarter Ended of directors resigned. Jun.2012 Jun.2011 % Var. Sale of Deccan Chargers Sales 145.43 201.84 -28 DCHL failed to pay Rs 100 crore to BCCI resulting OPM% -44.23 18.48 -339 expulsion of Deccan Chargers. Therefore DCHLhad PBDT -153.34 31.47 PL to sell Deccan Chargers to Sun TV at a price of mere Rs 425.2 crores on October 25th 2012. During the PBT -166.24 18.02 PL distress, the sale price of Deccan Chargers was even NP -166.24 12.18 PL less than its acquisition cost of 589 crores. Source: Moneycontrol.com The Rating DCHL's troubles increased when Deccan Chargers' Since 25th July 2008, Deccan Chronicle Holdings ex CEO, Tin Wright sued the company in a London Limited had an investment grade A1+ rating of Court for breach of contract. DCHL faced huge CARE. On 1st July 2012, it paid Rs 300 crore debt but compensation payment of £10.53 million to Tin failed to pay Rs 150 crore non-convertible Wright. debentures to institutional investors like Pramerica Mutual Fund and Canara Bank. Pramerica Mutual The Default Fund invested money of 1.3% of its liquid fund, The Company defaulted on the payment of Non- 3.3% of ultra-short term bond fund, 6.2% of credit Convertible Debentures (NCD) on July 2, 2012. In opportunities fund, 23 SecondEditionofJIDNYASA : ThirstforKnowledge2014 Volume1ofJIDNYASA : ThirstforKnowledge2014 WhyFDIinRetail? A StudywithReferencetoSelectStakeholders Reasons of Failures According to various analysts & newspapers, the acquisitions of DCHL went soar. According to the Karvy brokers “money raised for the media company went into other areas for example Rs 50 crore went to Aviotech from Rs 170 crore raised from Future Capital. ” V Sundar Raja, founder, www.sundartrends.in