1. Corporate Debt Restructuring Of Deccan Chronicle
STRATEGIC FINANCIAL MANAGEMENT – TERM V
Shubhangi Saraf – C049
Saurabh Dhole – D023
Swati Muchchal – D038
Vamsi Krishna Reddy – E062

2. Store offering consumer lifestyle products
The Business
Deccan Chronicle Holdings Limited (DCHL) is the publisher of largest circulated English Newspaper in South India – ‘Deccan Chronicle
A circulation of over 1.45 Million Copies per day across Andhra Pradesh, Tamil Nadu, Karnataka and Kerala 
Mumbai, Delhi, Kolkata and London
Delhi, Mumbai, Hyderabad, Bangalore and Chennai
Primarily in the state of Andhra Pradesh
DCHL also operates the following divisions (which earlier were operated through wholly owned subsidiaries and since merged with the company with effect from ):
 Store offering consumer lifestyle products
 Hyderabad team of IPL

3. History 1938: started in AP as partnership concern
1976: T Chandrashekhar took over operations
1994 : Asian Age launched
2004: Financial Chronicle launched
2005: Odyssey acquired as subsidiary
2008 : Deccan Chargers launched as subsidiary
2010: Both the subsidiaries bought under Deccan Chronicle Holdings Ltd.
2012 : June, first default
2012: October, license cancelled by BCCI

4. Industry Reasons for Growth Facts
Printing ink industry: the volume & value are increasing by %, the average price not increasing
Rise in population & literacy
Readers are exercising choices; leading to increased habit of reading 2 newspapers among current readers
Companies to increase Media Ad spend
Facts
India is the second largest publisher of newspapers in the world
The total circulation of newspapers : 5,79,53,373.
Industry has grown at a CAGR of 13% over the last five years
INR 174 billion industry in 2011 despite deceleration
Pressures on Print
Battling for a place in the media mix
Electronic media
Rush and time pressure
Natural “preference for print” eroding – TV viewing time, Internet, etc..
Combine traditional advantages with new flexibility, speed, quality.
Technology
Faster turnaround
Shorter runs
No more “buy and store”
Less cost!
Low inventory levels

5. Financials Income Statement Balance Sheet March 2012 Rs. Crs
Sales Turnover
210.16
Operating profit
30.39
Net Profit
6.08
Interest payments
18.93
Dividend -
Earnings per Share
.29
March 2011
Rs. Crs
Share Capital
48.69
Reserves
Debt
313.12
Net Block
863.88
Net Current Assets
666.55

6. Operational Strategies Industry Forces At Play
The Business
Operational Strategies
Capturing the southern states
Kochi and Coimbatore first
Thiruvananthapuram is next
Deccan Chargers – Brand Enhancement
Store Consolidation for Odyssey
Amalgamating Subsidiaries
Diversifying into Aviation
Industry Forces At Play
Growing economy
Higher literacy
High income levels
Rising input costs
Technology
Revenue Streams
Financial Strategies
No Dividend – Buyback and Liquidity conservation
Debt Restructuring
Advertising constitutes about
93% of revenues
Rise in advertisement tariffs by 20%

7. Weakening Of The Business
Interest Coverage Ratio
Operating Profit Margin
Cash Flow
Lost money during FY04-05
Cash Flow from Operations jumped during FY08-11
High Cash Outflow from Investing activities
High Cash Inflow from Financing Activities during FY04-08
High amounts of debt taken

8. July 4
CARE downgrades Deccan Chronicle short-term debt to "D" (default)
After it defaulted on a set of NCDs due on Jun 29 or so.
Rs. 32.
July 29
CEO Resigns. Rs. 18.
Defaulted on more debt payments
Salaries to the Deccan Chargers team have not been paid.
Aug 2
DCHL promoters may have double-pledged their shares to cover very large loans.
Sep 12
Company applied for CDR
Canara Bank conducting a forensic audit which might reveal irregularities in fund use and any multiple liens on the same assets.
Sep 13
DCHL rejects the Deccan Chargers bid by PVP capital of Rs. 900 cr. Only bid for the tender.
DCHL's lenders demanded a bank guarantee for Rs. 450 cr. which was not forthcoming from the buyer,
Sep 14
BCCI Cancels the Deccan Chargers contract. DCHL has no team left to sell.
DCHL files petition against BCCI in HC
HC asks DCHL to give bank guarantee of Rs. 100 cr or else BCCI’s decision will hold.
Seems the bankers and promoters are hand in gloves in screwing up the company. As per the results filed by the company for Sep-11 the o/s debt was around 800 crs. Now everybody is saying the debts are in excess of Rs 5000 crs. Which mean that the company has raised debts in excess of Rs 4000 crs in the last six months. Seems all the banks and institutions were sleeping at the time of approving new loans and disbursing the same. In fact as per the charges filed with ROC it seems that post March-12 the company has raised Rs 1800 crs. Would be interesting to know where all the money has gone

9. Exposure Levels Private Sector Banks Public Sector Banks NBFCs
Total Exposure = Rs 5000 Crores
PSU Banks’ Exposure = Rs Crores
HDFC’s timely exit from Deccan Chronicle’s books
ICICI, Axis and Canara Banks classify as NPA
While for most others it is still ‘Standard’

10. Non Convertible Debentures
Ratings Downgrade
Non Convertible Debentures
250 NCDs due on the 29th of July
5 Yr, 8% Bonds
Fails to pay up despite repeated requests
Two commercial papers issued on the 10th and the 15th
CARE downgrades its debt to ‘D’ (Default)
Pramerica
Rs. 500 Crores raised from institutional investors
But only Rs. 300 Crores was retired
1.3% = Liquid Fund
3.3% = Ultra Short-Term
6.2% = Credit Oportunities Fund
4.8% = Dynamic Monthly Income
5% = Pramerica Dynamic Fund
Despite a Cash/FD balance of Rs 372 crores on its books, it still failed to honour its obligations. DCHL has not offered any explanation regarding this.

11. STOCK PRICE CHART

12. Questioning CARE Accusations High debt levels because of high ratings
Short-term Debt moved from A1+ to A4 in a month’s time
Ratings intact despite poor numbers
Defence
Ratings based on market position and balance-sheet
Profits consistently positive
High amount of cash in its books

13. WINDING UP PETITION IFCI
On 27 July, IFCI had filed the winding up petition against DCHL in the AP High Court following a default by the media firm.
IFCI had subscribed to Rs 25 crore of NCDS issued by DCHL last year that promised Rs 27.8 crore on redemption.
DCHL failed to pay the amounts on the due date and the cheques issued by them were dishonoured by the banks.
IFCI feared that the entire networth of the media firm may erode shortly on account of huge liabilities, making it commercially unviable and insolvent.
COMPROMISE PROPOSAL
DCHL submitted compromise proposal to IFCI, urging it to withdraw the winding up petition
The DCHL promoters proposed to clear the outstanding dues of around Rs 18 crore in four monthly instalments starting from October
RESPONSE
"Of the total amounts of Rs 27.8 crore, we could recover only some Rs 10 crore so far through the legal proceedings and the balance is now being proposed by DCHL in four installments from October. We will withdraw the winding up petition only after receiving the last instalment," IFCI executive
"Based on this compromise deal, IFCI has moved the Debt Recovery Tribunal at Delhi with a compromise petition to withdraw the case. As a result, the winding up petition at AP High Court and Company Law Board have now become infructuous.“
- Counsel of DCHL B. Chandrasen Reddy
CALCULATE SOLVENCY RATIOS.. AS THAT WAS A MAJOR CONCERN FOR IFCI!!

14. IPL TEAM
Deccan's move into buying the franchise of the Deccan Chargers - which seemed like a good investment initially given the rising team valuations and hype created - came back to haunt the company later.
Huge debt and no financial clarity or transparency over financial health
People cautious of buying the team
Particulars
Rs.
Capital Invested in DCSVL
500mn
Liabilities
4.2bn
Turnover
566mn
Loss in DCSVL
418mn
Source : Annual Report, 2010

15. IPL TEAM Auction Only bid of Rs 900 crore from Potluri Vara Prasad
Owners and lenders rejected it
Differences over the terms of payment.
Contract termination
By BCCI on 14 September for failing to comply with a deadline to pay overdue player fees.
DHCL filed petition against this decision
Bombay HC Decision
An irrevocable and unconditional bank guarantee of Rs 100 crore to the BCCI 
Pay the undisputed outstanding dues of hotels, transportation etc of players
Sold the team
Kamla Landmarc Real Estate for an undisclosed amount on October 12
But failed to furnish the bank guarantee by the deadline(October 13)
Hyderabad franchise was terminated from the IPL
Sun TV
Won the bid by BCCI
Pay Rs crore a year over the next five years
Substantially higher than the Rs 42 crore that Reddy's Deccan Chargers paid.
However, its only half of the Rs 170 crore paid by Sahara Pune Warriors when they joined IPL in 2010
Other bidder PVP Ventures, offered Rs crore for the IPL team

16. Corporate Debt Restructuring
What?
Relief to distressed borrowers
Why?
To support continuing economic recovery
A helping hand to fundamentally viable businesses
Avoid NPAs, loss-provisioning and protect bottom-line
Increase ability of borrower to meet obligations
Fair and equitable debt repayment to creditors
Ensuring safety of money lent by Banks & FIs
How?
Extending loan tenures
Putting interest payments on hold
Skipping payments
Converting debt into equity
Issuing fresh term or working capital loans
2001
Corporate Debt Restructuring was evolved
2003
Working Group setup
February, 2003
Guidelines for CDR revised

17. CDR –The Three-Tier Structure
Standing Forum and Core Group - Representative general body for FIs and banks
Lay down policies and guidelines
Monitor progress of the restructuring
Empowered Group - EDs of ICICI Bank, IDBI Ltd, SBI as standing members. ED level representatives of institutions exposed
Decide on individual cases
Cell
Make the initial scrutiny of the proposals
CDR Cell will proceed to prepare a detailed Rehabilitation Plan

18. CDR –Failure Two Committee sittings with no result
Sep 12
Sep 26
CDR –Failure
Two Committee sittings with no result
Canara Bank was engaged to do the forensic audit of the company
Reason for financial trouble
only companies in trouble because of reasons beyond the management's control could be admitted. Lenders such as IFCI and Karvy have accused the DCHL's management of inadequate corporate governance
Financial viability
The financial viability is established and there is a reasonable certainty of repayment from the borrower
While the private sector lenders were keen on admitting the Hyderabad-based company into the CDR cell, public sector banks, rattled by a spate of investigations in recent months and probes by the Central Vigilance Commission, were not for referring it to CDR for fear of attracting corruption charges
consent of at least three-fourth of the lenders is required to draw a debt restructuring programme for a particular company

19. Loan from Future Capital
Fraud Accusations
KARVY filed a complaint that DCHL resorted to financial fraud invoking provisions under Sections 420 (cheating), 406 (criminal breach of trust), 458 (wrongful restraint) and 471 (passing off forged documents as genuine).
Loan from Future Capital
Loan of about Rs. 170 crores
Promoters take an NDU-POA
Hence, can’t dispose off shares without FC’s consent
On June 1, 2012
“Contract with Future Capital – terminated”
Shares shifted to Religare Enterprises
KARVY never demanded an official letter
Breach of
Trust
FC receives a confirmation letter from KARVY
KARVY confirms it sent no such letter

20. Present Status Deccan Chronicle has exited CDR forum
Major lenders have withdrawn their support to the company’s entry into the corporate debt-restructuring cell
Banks like Axis bank, Canara Bank, ICICI Bank have classified DCHL as NPA
GE Capital makes moves to take away Deccan Chronicle Holdings Ltd print machines
Tata Capital Ltd one of the lenders, dragged DCHL to court earlier this month seeking to recover dues of Rs. 101 crore.
Shares of Deccan Chronicle Holdings Ltd plunged to its new low of Rs 5.24
Shares of DCHL have lost at least 72% since January, while Sensex, has risen 20.14% in the same period
Exchanges shift Deccan Chronicle to trade-for-trade segment

21. Present Status
DCHL hasn’t published its balance sheet for the year ended March 2012 and has sought an extension till September.
Private banks have given big-ticket loans in the past six-nine months, largely on the strength of the March 2011 balance sheet of the company,  despite lack of clarity in the company’s latest financial details and the end-use of funds
Canara Bank has said that banks were operating on the basis of a multiple-lending model, not a consortium model.
The result of audit by is awaited to determine the future course of action
Options for DCHL are :
Converting Debt into Equity
Dilute its stake by Equity Issue
Promoter’s pumping in money to guarantee the bank about repayment
Sell Non-Core assets
Hive off the non-core businesses