Sole bid for Deccan Chargers rejected

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.