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MUMBAI:
Deccan Chronicle Holdings Ltd (DCHL) rejected the sole offer
it received at the Thursday’s bidding for sale of its
IPL franchise Deccan Chargers, raising a major question mark
over the financially-distressed company's plans for mastering
its debt crisis.
The
ailing Hyderabad-based media company will have to discover
a new escape route soon to stop the BCCI from taking the hard
decision of terminating its IPL contract with DCHL. The working
committee of India's cricket board meets on 15 September to
decide on the fate of Deccan Chargers.
PVP
Ventures, a film production company, had put in a bid of Rs
9 billion for purchase of Deccan Chargers but sources say
the franchisee owner refused to accept it saying the offer
to pay the price in installments was not acceptable without
providing bank guarantees.
According
to the sources, PVP Ventures had offered a payment of Rs 4.50
billion in cash while the remaining half would be in the shape
of convertible debentures. Deccan Chronicle’s decision
to reject the payment terms was prompted by lender banks.
The banks, which met in Mumbai on Wednesday to considering
easing the terms for repayment of loans granted to Deccan
Chronicle, had deferred any decision till the next meeting
on 26 September.
The
bidding was conducted under the auspices of the BCCI, the
owner of IPL, but only PVP Ventures submitted its bid. Videocon
Industries CMD Venugopal Dhoot and a little known R.N. Sports
Club had expressed their interest in buying Deccan Chargers
but appear to have decided against bidding for the IPL team
at the last moment. Dhoot had told Indiantelevision.com that
his bid could be around Rs 7 billion.
The
BCCI in a statement said the bid that was received by Deccan
Chronicle met its eligibility and suitability criteria. "The
bid was then reviewed by Deccan Chronicle Holdings Limited
which, in its discretion and with no role being played by
BCCI, rejected the bid on the basis of the payment terms offered
by the bidder."
BCCI
President N Srinivasan told reporters after the bidding process,
"We found that they (PVP Ventures) were acceptable. However,
the owners of Deccan Chargers rejected the bid."
The
BCCI will have to consider several factors, including the
financial implications, before resorting to any hasty action
that includes cancellation of the franchisee licence of Deccan
Chronicle. GroupM ESP managing partner Hiren Pandit feels
the BCCI can make the offer lucrative by offering some flexibility
in the bid conditions. "It will help if the location
of the franchise can be changed. Ahmedabad, for instance,
has more revenue potential than Hyderabad," he said.
The
suggestion to offer the buyer an option to shift the franchise
base from Hyderabad to a new city like Ahmedabad will, however,
mean shutting the door to an existing revenue stream. "If
they want to have a new city franchise, they can always add
an IPL team. It is in their best interest to continue with
the Hyderabad franchise and then when they decide to have
one more team, they can start afresh to get the best commercial
terms," an industry observer said.
Deccan
Chronicle Holdings, which has a profitable publishing business
with newspaper brands such as Deccan Chronicle and Financial
Chronicle, is in a financial mess having amassed huge debt
(unconfirmed reports put the total debt at closer to Rs 40
billion) and is in dire need of funds to pacify angry lenders.
The
rejection of the sole bid at a decent price came as a shock
as a price of around Rs 7 billion, including assumption of
any liabilities, was considered to be a fair valuation.
The
price of Deccan Chronicle shares fell after the news that
the company has rejected the sole bid broke at around 3 pm,
after being higher than Wednesday’s closing price for
most of the day on hopes of fund flow from sale of the IPL
team. The company’s shares closed at Rs 10.84, down 1.72
per cent from Wednesday’s close and almost 80 per cent
down from its 52-week high.
Deccan
Chronicle had last week issued a tender inviting bids for
buying the Hyderbad IPL team, under the aegis of BCCI. As
per the tender notice, bidders were required to enter into
a new franchisee agreement with BCCI. The purchase consideration
would be paid into a bank account as decided by the lending
banks, with 5 per cent payable directly to the BCCI.
The
winning bidder would have acquire Deccan Chargers on an "as
is where is" basis, which means that the new buyer had
to use the name Deccan Chargers and also clear any liabilities.
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