The Deccan Chronicle media group failed to furnish the bank guarantee for Rs 347cr towards its bad loan to Canara Bank by Thursday, as per the orders of the Debt Recovery Tribunal (DRT), based in Hyderabad. Instead, the group sought time, till 28 January to come up with its response. As per the DRT order on 26 December 2012, it should have submitted the bank guarantee by last Monday.
But, on Monday, the bank's counsel told the tribunal that some of the directors of the group's holding company, Deccan Chronicle Holdings Limited (DCHL) were yet to receive the notices and sought three more days, till Thursday. But, again on Thursday, the DCHL executives who appeared before the tribunal asked for four more days and the tribunal posted it for hearing on 28 January.
Canara Bank's corporate branch chief B.V. Satyanarayana, who filed the petition before the DRT, sought for confiscation of a list of 17 properties belonging to the media group, unless it furnishes a bank guarantee for the total outstanding of Rs 347cr (till 22 December, 2012). "We have the first charge on these properties," Canara Bank counsel K. Sai RamaMurthy told The Sunday Guardian.
The properties which the bank wanted to take immediate possession of are: A premises of DCHL in Visakhapatnam measuring 3,249 sq yards, a premises at Anantapur with 2,519 sq yards, a premises and a plot in Karimnagar with 3,600 sq yards, a building at Gundy with 43,560 sq feet and seven printing presses in Hyderabad, Chennai, Visakhapatnam, Karimnagar and Anantapur.
The Canara Bank, an old lender to the DC group, for over four decades, went out of its way to extend its credit limit of Rs 20 cr from its corporate branch in Secunderabad and lent about Rs 330 cr between August 2006 and March 2012. After failing to get any response to its several notices, the bank declared DC's loan account as a non-performing asset (NPA) on 8 September 2012.
The bank's counsel sought first charge on the properties listed in his petition after coming to know that DC had tried to "alienate" or "remortgage" or "create third party interest" on the assets so that it can avoid their attachment to the bank. Interestingly, some more banks like ICICI, Kotak Mahindra Bank, IFCI, Yes Bank and Axis Bank too have filed petitions before the DRT in Hyderabad.
DCHL's failure to furnish the bank guarantee before the DRT indicates its poor financial health, especially after its official announcement on Tuesday admitting a loss of
Rs 1,040.47 cr, for the 18 month period ending 30 September 2012. This is in sharp contrast to the Rs 162.58 cr profit it registered in the year ending March 2011.
In its mandatory filing to the bourses, a day before the deadline fixed by the NSE, DCHL mentioned some lenders had also initiated legal actions and winding up petitions for recovery of loans at different forums and declared the financial facilities extended to the DCHL as NPAs, thus triggering severe liquidity crunch. Many encumbered shares were taken over by stakeholders as collateral security.
Due to this, promoters' shareholding reflected in the depository reduced from 73.83% to 38.4% at the end of the second quarter. The company's fixed assets include tangible asset under development (brand) amounting to
Rs 2,905.31 cr and the liabilities include an amount of
Rs 3,987.5 cr to lenders as a result of restructuring of operations and "recast" of financial statements.
Now, DCHL's promoters, T. Venkattram Reddy, T. Vinayak Ravi Reddy and P.K. Iyer, have only 1.51 lakh each unencumbered shares, approximating to 0.07% and the rest of the shares are pledged with various lenders. The announcement hit the DCHL shares, which touched an all time low of Rs 4.79 by Friday.