Deccan Chronicle Holdings Ltd (DHCL), the cash-strapped owner of the Indian Premier League (IPL) team Deccan Chargers, on Thursday rejected a bid for the cricket team, saying the price offered was “not acceptable”.
“Only one bid was received and BCCI (Board of Control for Cricket in India) found he (bidder) was eligible. However, DHCL rejected, saying the price was not acceptable,” said N Srinivasan, president of BCCI, the national governing body for all cricket in India.
He refused to reveal the bidder’s name, but people aware of the development said it was the Andhra Pradesh-based PVP Group. Potluri Vara Prasad, chairman and managing director of PVP Ventures Ltd, was present in the bidding meeting. He, however, refused to comment on the auction.
Sources said the bid amount was Rs 900 crore. Deccan Chronicle and the bankers wanted bank guarantee, which was not part of the original bid and this was not acceptable to PVP, which then walked out of the meeting. The renegotiation is up to the BCCI and the franchisee, they said.
However, Srinivasan, when asked what the next step would be, said: “It is between them (DCHL and the bidder), and the franchise will continue.” A special working committee meeting of BCCI will be held tomorrow in Chennai.
A representative of the PVP group said it had a confidential meeting with DHCL after both sides failed to reach any conclusion in the bidding process, and the outcome of it would be revealed by BCCI.
The group is under the scanner of the Central Bureau of Investigation (CBI) for its association with Jagan Mohan Reddy, son of former Andhra Pradesh chief minister Y S Rajasekhara Reddy, who died in a helicopter crash in 2009. Jagan is facing probe in disproportionate asset cases.
PVP’s Prasad, hailing from Vijayawada, Andhra Pradesh, is an entrepreneur, film financier, producer, philanthropist and educationalist. The PVP group has several business units, including PVP Ventures which is into the real estate and media and entertainment business. He’s the promoter of and holds substantial investments in Picturehouse Media Ltd, an organisation at the forefront of providing capital for the entertainment industry.
DCHL acquired the IPL franchise for $107 million in 2008 (around Rs 590 crore today).
The fate of the team was linked to both the performance of the franchise and the mother brand (IPL). Overall, IPL as a brand has seen its value going down from a high of $4.13 billion in 2010 to $2.92 billion in 2012. According to a report by the UK-based Brand Finance, DCHL was ranked sixth among eight IPL franchises, with a brand value of $38.76 million in 2011, up from $34.44 million in 2010.
According to reports, debt-trapped DCHL had mortgaged assets of the team to banks to raise funds, even though, according to IPL norms, the teams and their assets could not be mortgaged. Bankers say the current rules do not prevent them from having the right on revenues earned by DCHL through sponsorship and ticket sales. It is to be noted that the group borrowed around Rs 3,200 crore from 28 lenders. The company has also reportedly failed to clear payment for the players.
DCHL issued a tender on September 6, saying it would sell Deccan Chargers. The new owner is expected to shoulder a part of the team’s financial liability.
According to a report from the Department of Financial Services, part of the Union Finance Ministry, the debt of the company is around Rs 5,000 crore. Only two private sector banks and one financial services firm had the right on DCHL’s revenues as collateral against their loans, added reports.
There were also a few legal disputes occurred in the previous days related to the auction. At least one lender went to court with a winding up petition against DCHL, while Tata Capital Financial Services, to whom the company has to pay around Rs 101 crore, received a permission from the Bombay High Court to attend the auction process on Thursday.
The court, in a petition by Tata Capital seeking protection of its interest while the auction amount is disbursed, mandated that the sale proceed from the auction has to be deposited with ICICI Bank, which should not be disbursed without prior permission of the court. According to the order, five per cent of the auction money has to be paid to BCCI. The court has also appointed a Court officer to supervise the auction.
Another petition filed by the team’s earlier chief executive Tim Wright to stay the auction process since it owes him dues was rejected by the Andhra Pradesh High Court.
DCHL has been looking to sell its stake for the past two years and has recently appointed Religare Capital to structure a deal, but did not find a suitable buyer.
The team made a turnaround as the champions of IPL 2009, winning nine of the 16 matches it played. Losing out slowly in the game, it came to the eighth position of the total nine teams in IPL in 2012. In January 2011, DCHL merged its wholly-owned subsidiary Deccan Chargers Sporting Ventures, which owned stake in the cricket team, with itself.