Investors sold shares in the Hyderabad-based media group, which is battling allegations of forgery and cheating, despite assurances from its chairman that the company has enough assets to face the "liquidity crisis."
"DCHL would like to clarify that the real issue is a liquidity crisis that has arisen due to significant reduction in ad spend by domestic and multinational companies in India," Deccan Chairman T. Venkattram Reddy had said yesterday.
Deccan is also "actively engaging" with lenders to find a solution, Reddy added.
The company's promoters have pledged shares with other companies, including consumer and mortgage loan provider Future Capital Holdings, to raise funds, according to exchange statements.
"This is a story of an extremely good brand, a cash rich company, well known in Hyderabad that expanded in the south and then finally moved in areas that did not concern them... They moved into IPL and retail book chains," Ambareesh Baliga, chief operating officer at Way2Wealth told NDTV Profit.
Reddy has tried to soothe investors saying that the "value of its fixed assets comprising land and buildings as well as plant and machinery at multiple locations, and the value of the Deccan Chargers IPL (cricket) team far exceed the company's debt."
However, Baliga told NDTV Profit that it is not a question if net worth can support the debt or not.
"The question is short term liquidity and it has its own issues," Baliga said.
Last week, IFCI had filed a petition in the Andhra Pradesh High Court contending that DCHL is unable to discharge debts of its creditors and may become insolvent. IFCI has urged the High Court to order winding up of the company under the relevant sections of the Companies Act, 1956.
"The larger picture is that they still have a brand value and it can be a punt like Kingfisher Airlines... If a buyback happens, the stock may see some gains," Baliga told NDTV.
(With inputs from Thomson Reuters)