PVP Capital sues Deccan Chronicle promoters on aviation business defaults
In a fresh blow to Deccan Chronicle Holdings, one of its lenders PVP Capital has served a winding up notice to the group's nascent aviation business.
HYDERABAD: In a fresh blow to cash-strapped Deccan Chronicle Holdings, one of its lenders PVP Capital has served a winding up notice to the newspaper group's nascent aviation business for non-payment of dues.
This is the first time that a lender has sued DCHL's aviation business-Flyington Freighters-though several creditors have dragged the promoters to courts across the country on issues related to its media and cricket businesses.
Flyington Freighters is a closely held entity of the promoters of DCHL, which has been on life support for most of this year and owes its creditors at least Rs 5,000 crore. It had planned to enter the airline cargo business by developing an air-cargo hub in Hyderabad.
While Canara Bank, the lead banker of the lenders' consortium for DCHL, is doing a forensic auditing of the Hyderabad-based company's accounts to check for any discrepancies, companies like Karvy Stock Broking and state-run IFCI have charged the top management with fraud and forgery.
Flyington had in July 2006 reportedly agreed to buy four Boeing 777F cargo planes for about $1 billion (about Rs 5,500 crore now). But subsequently after getting a better offer from rival Airbus, it placed orders worth $2.4 billion with the European planemaker for 12 A330-200F aircraft.
However, Flyington could not commence operations because of excessive delays in getting the aircraft from Airbus, according to a complaint it filed with India's Competition Commission in April last year. In the complaint, Flyington accused Airbus of adopting discriminatory and onerous conditions for aircraft financing. PVP Capital-a part of the PVP Group-agreed to lend Rs 20 crore to Flyington and extended a loan of Rs 5 crore for which the promoters of DCHL stood as guarantors, said the person quoted above.
"We have served winding up notices and notices for cheque bounce," said PVP Group chairman Prasad V Potluri. "We will explore all the available options to recover our money."
PVP Group, one of the leading financiers and producers of movies in the south, had offered to buy Deccan Chronicle's cricket team for Rs 1,000 crore in September. However, the deal did not go through and subsequently the Board for Control of Cricket in India terminated Deccan Chronicle's ownership of the franchise in October. Chennai-based media conglomerate Sun Group later won the rights to the franchise after a fresh bidding process.
The DCHL promoters-Chairman Venkattram Reddy, his brother Vinayak Ravi Reddy and vice chairman PK Iyer-defaulted on payments of Rs 6.25 crore related to Flyington as on October 23.
Through an agreement dated July 25, the promoters had deposited the original share certificates of 80 lakh equity shares with PVP Capital. While Venkattram Reddy and his brother pledged 26.66 lakh shares each, vice-chairman Iyer pledged 6.66 lakh shares. Also, senior DCHL executive N Krishnan and Deepak Parasuraman, the managing director of Flyington Freighters, pledged 10 lakh shares each.
After the promoters failed to honour the cheques they issued, PVP Capital served notices to them under the Negotiable Instruments Act on November 3. Phone calls, emails and messages to the DCHL promoters remained unanswered.
As on March 2011, Flyington had Rs 10 crore of paid-up equity, Rs 92.73 crore of share application money and Rs 25.84 crore of liabilities. The company is yet to submit its latest balance sheet for March 2012 with the regulatory agencies.
After touching a new year-low of Rs 5.60, the Deccan Chronicle stock gained 5% to close at Rs 6.09 in Muhurat trading on Tuesday on BSE, the day that saw the exchange's benchmark Sensex losing 51 points to 18,618 points.