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Deccan Chronicle: Now, Fraud and Forgery

The Deccan Chronicle (DHCL) story isn’t just about a default, it seems. It has gone into the zone of fraud and deceit, if you go by an article in DNA. Karvy stock broking, the depository for the promoters’ shares, has claimed that they have been victims of forgery. First, they were misled into "unpledging" 5 crore shares of DHCL with Future capital, when the Deccan promoters said they had cleared their dues with Future.

Karvy then transferred the freed shares to be pledged to IDFC. But the Deccan promoters told Future Capital that they had provided Karvy MORE shares to top-up their pledge margins, and supposedly forged a letter from Karvy confirming this.

Future also faxed a copy of a letter purported to have been issued by Karvy on May 28 which confirms that an additional quantity of 1.7467 crore shares of Deccan Chronicle have been topped up in each of the accounts, so the total quantity of shares in their depository accounts covered under the NDU-POA stands at 11.2851 crore.

Karvy now says it never issued any such letter, and claims it is a forgery. It says that a notice questioning the discrepancy was sent to the account holders on July 17, but elicited no response.

Firstly, it’s silly of Karvy to unpledge shares based on the Deccan promoters statement that they had cleared dues with Future capital. What’s the phone for? Can you not call and confirm with Future Capital that such a thing has actually happened? But this kind of thing happens in the markets, it seems – things run on trust and reputation.

Second, SEBI needs to investigate further. I’ve heard more rumours – that the company borrowed cash in the last few days of the quarter to show "cash on the balance sheet", money that was paid back in a few days. The cash doesn’t exist of course – otherwise they would never have defaulted on their debt.

So – IFCI’s taking DHCL to the cleaners (winding up petition), IDFC has lost money on NCDs, the Deccan Chronicle MD has resigned, and they’ve defaulted on debt. The story will get worse.

Stock’s been lower limited for a while; it’s at 13.3 today and going strongly towards zero. My thoughts: Do not buy. Do not think of how well Wockhardt has done in a year and attempt to compare.

  • YATIN SHAH says:

    Thanks for your mail
    I real whole your mail
    But i m very confident about that your last line
    My thoughts: Do not buy. Do not think of how well Wockhardt has done in a year and attempt to compare.
    I m very confident its game like wackhard and one of legend takeover this company like timesgroup
    Timesgroups get big business in south and also deccan chargers ipl team
    I think its few risk in 13.30rs chance to 50-100 rs in a year

  • Gautham says:

    Well said, Sir! Fully agree that’s it was ridiculous on part of Karvy to not have checked with Future Capital in the first place. And secondly, this is a case of fraud – so comparing Wockhardt to DHCL will be like comparing apples to peas.
    This event goes on to show, any amount of trust is not sufficient. And diligence should be exercised at all levels.

  • Praveen says:

    So when guys who run a Paper (Deccan Chronicle) do these things then where will be credibility of the news in their paper????

  • Krishnaraj says:

    Dear Deepak:
    The relevant mention of shares above were under “lien” and not pledged. They were possibly not pledged to avoid reporting of pledged shares to SEBI. Shares under lien does not give the right to the lender to sell the shares unlike shares under a pledge.
    Mr KV Ramana of DNA deserves a kudos for explaining the issue in such detail.
    Thanks for allowing me to post.
    Warm regards

  • Pramod says:

    I do not know if I am going a little too far but the history for Hyderabad/AP based companies is not good. Why there are so many companies involved in frauds from Hyderabad. I am not talking of Satyam alone. To take it further How many AP based companies have created value for share holders eventualy?