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Jan 22, 2013, 10.54 PM IST | Source: CNBC-TV18

Poor earnings: Re-winning trust tough for Deccan Chronicle

A day before NSE can carry out its suspension order on Deccan Chronicle holdings stock for failure to comply with the listing agreement, the company is playing cachup. Several disclosures made by the company will give its lenders and investors more sleepless nights, reports CNBC-TV18’s Sajeet Manghat and Ashmit Kumar.

A day before NSE can carry out its suspension order on Deccan Chronicle holdings stock for failure to comply with the listing agreement, the company is playing cachup. Several disclosures made by the company will give its lenders and investors more sleepless nights, reports CNBC-TV18’s Sajeet Manghat and Ashmit Kumar.

Also read: Promoters' stake reduces to 38.40% in Deccan Chronicle

Hyderabad based media company, Deccan Chronicle has an uphill task ahead of it. It is to convince shareholders, regulators and lenders to trust it. The restated audited results for the last financial year and the audited financial results for the 18months ending September 2012 submitted by DCHL make some staging revelations.

As Auditors CB Mouli & Associates point out, DCHL's restated results for period ending March 2012 show. He says revenues are lower by Rs 370.99 crores, expenditure is up by Rs 572.40 crores and profits have been reduced by Rs 943.39 crores. Also, DCHL's sales for the period stand at Rs 548.82 crores against the earlier reported Rs 869.40 crores.

So, the company actually suffered a loss of Rs 774.12 crores, instead of the profit of Rs 60.68 crores reported earlier. In addition, for the 18 months ending September 2012, the company has posted revenues of Rs 843.41 crores, an EBITDA loss of Rs 308.28 crores, and a net loss of Rs 1040.41 crores. The restated numbers also show that net worth has eroded over 99 per cent from Rs 1280.14 crores to a paltry Rs 10 crores at the end of September.

However, what lenders and investors will find more worrying is the debt on DCHL's books. The company says its borrowings rose 4 times with Long term borrowing at Rs 165.38 crores and short term borrowing at Rs 4042.16 crores at September end.

That puts total borrowing at Rs 4207.54 crores, against Rs 928.46 crores in March 2011. Finance cost for this borrowing has been pegged Rs 733.88 crores. Further the Auditor has also drawn attention to the fact that the company has not made any provision for accrued and unpaid interest, since it is in negotiation with the lenders. DCHL is also under litigation of allegations that the title of promoter’s shareholding has been pledged to multiple lenders.

The company says Promoter shareholding fell from 73.8 per cent at the end of June 2012 to 38.4 per cent by the end of September. Some lenders invoked their pledge. So, the new shareholders are Religare with 15 per cent, Indiabulls with 3 per cent and IDFC with 2 per cent. Now for the sliver of not-so-bad news, fixed assets have jumped 4 times from Rs 926.71 crore as of march 2011 to Rs 3870.33 crore at the end of September 2012.

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