Sole bid for Deccan Chargers rejected; BCCI likely to allow more time to DCHL

Insearchindia.com Team

(UPDATED 13 September 2012 11:43 pm)

  (13 September 2012 4:24 pm)

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 how the financially-distressed company can master its debt crisis.

The ailing Hyderabad-based media company, however, can gasp for breath till the BCCI takes the hard decision of terminating its IPL contract with DCHL. The BCCI is likely to allow DCHL more time to find a buyer for the Indian Premier League (IPL) T20 cricket franchisee, a source familiar with the development said.

PVP Ventures, a film production company, had put in a bid of Rs 9 billion for purchase of Deccan Chargers but the franchisee owner refused to accept it saying the offer to pay the price in installments was not acceptable.

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."

According to industry sources, Deccan Chronicle’s decision to reject the payment terms was prompted by lender banks, which wanted the prospective buyer to pay the entire purchase consideration upfront. 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 BCCI’s working committee is meeting on 15 September to decide on Deccan Chargers. The BCCI is unlikely to resort to any hasty action that includes cancellation of the franchisee licence of Deccan Chronicle and is instead expected to decide on giving more time to Deccan Chronicle to sell the IPL team, according to a source.

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.