The Securities and Exchange Board of India (Sebi) is looking into the veracity of pledging of shares by the promoters of Deccan Chronicle Holdings Limited (DCHL), according to people privy to the development. This follows a criminal complaint filed by Hyderabad-based Karvy Stock Broking against DCHL promoters, alleging they had used forged letters to create a false picture of their holdings.
DCHL and Aviotech, a group firm, had borrowed about Rs 170 crore from Future Capital. As collateral for this loan, a lien was created on 60.4 million shares of the three promoters held in the accounts of Karvy Stock Broking, a depository. When Future Capital demanded more shares, DCHL promoters allegedly told Karvy the lien was terminated and asked them to free the shares. However, Karvy claims it later realised these claims were false.
On July 27, Future Capital informed exchanges it had secured a pledge of 112.8 million shares belonging to DCHL promoters. The promoters also pledged another 30 million shares (14.46 per cent stake) with Religare Finvest.
According to the first information report on the case, DCHL promoters had allegedly misled Karvy into believing the agreement with Future Capital was cancelled and that the shares were no longer encumbered. They then transferred a part of these shares to Religare Enterprises, another depository.
In a clarification to the BSE, DCHL on Thursday denied media reports that its promoters had pledged the same shares twice.
Meanwhile, the Hyderabad Police has registered a case against the promoters of DCHL, based on Karvy’s complaint. It is also planning to record the statement of Future Capital, the aggrieved party.
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“We have to record the statements of the company as well as of other parties to take the case forward,” a police official told Business Standard on Thursday. “If Future Capital files a civil case, Karvy will have to hold equal responsibility for the Rs 170-crore loan given to the Deccan Chronicle promoters,” he said.
While Karvy’s complaint is seen more as an attempt to get out of the possible mess, Future Capital’s silence over the allegations in the complaint is intriguing, according to officials. “We are trying to speak to all the parties, including Future Capital, to record their statements. If they do not respond, we will issue notices to them,” the police official said. Sources in Future Capital said the company had not taken any decision on the issue, and this development was unlikely to have any impact on its deal with Warburg Pincus.
In June, debt-ridden Future Group had sold 53.67 per cent stake in Future Capital Holdings to Warburg Pincus for an estimated Rs 560 crore.
After the deal, Warburg Pincus had made the mandatory open offer to acquire 17.7 million shares, or 26 per cent stake, in Future Capital Holdings at Rs 162 apiece. However, the open offer has been delayed, as it had not secured regulatory clearances. The offer was originally scheduled to open on July 25 and close on August 11.
Meanwhile the DCHL management on Thursday published a statement in the Deccan Chronicle newspaper, stating it had not been facing any large financial problem. It added the current woes were only due to a liquidity problem that resulted from the fall in the newspaper’s advertisement revenue. The statement did not mention Karvy’s allegations.
Shares of DCHL on Thursday touched a fresh all-time low, closing at Rs 13.3, down 4.66 per cent. DCHL shares have lost more than 40 per cent of their value in the past week. Shares of Future Capital Holding on Thursday closed 1.8 per cent lower at Rs 144.6.