Fudging the figures - The DC way

The problem with a public limited company is that you are answerable to your shareholders. Not everybody can rake up impressive numbers like the Ambani brothers do, year after year. As the old adage says - if you can’t beat them, then join them. That seems to be the adage of the Reddy brothers who run the Deccan Chronicle.

Here is an excerpt of an interview about on DC’s results with P K Iyer, ED of Deccan Chronicle Holdings on CNBC TV 18 :

The total sales for the previous quarter was about Rs 149 cr (ending Sept 06) and this quarter (ending Dec 06) it is about Rs 146 cr.

Can you believe that? DC, which generated a measly Rs 86 cr in turnover in the quarter ending March 06, has now almost doubled it turnover. But reality is otherwise.

All you have to do is to take the ad tracking figures from Hindu, Eenadu and Times and get the actual turnover of Deccan Chronicle. As per these figures, last quarter ending Dec 06, DC’s flagship Hyderabad edition has done no more than Rs 46 crore at full card rates. And if discounts that are liberally given by DC’s advertising department are taken into consideration then that figure would come down to around Rs 28 to 30 crore for the quarter ending December 06.

If you add the revenue from the other editions in AP, that figure would be another Rs 7 crore at the most, for the quarter ending Dec 06. In fact except Hyderabad, all other editions of DC (including Chennai) are running in huge losses. So much so, that they do not have editorial staff to run editions like in Vijayawada and Visakhapatnam.

Chennai is no better despite tall claims of the DC bosses. An analysis of DC’s Chennai edition shows that there are hardly any ads in DC that are generated from Chennai or the Tamil Nadu market. A majority of them goes into the Mahavishnu on Mount road — The Hindu and the Tamil publications.

All put together, DC’s ad revenues for the last quarter ending Dec 06 should not be more than Rs 80 to 85 crore. Only 8% of DC’s revenues comes from circulation so that means the total ad revenue would come to about Rs 132 crore (Rs 5 crore being other income as shown in the financial disclosures). So where does the remaining Rs 50 crore come from? Mr Iyer, can we have a clarification on that?

DC’s figures for the quarter ending Dec 06 are now un-audited, but will have to be audited sooner than later. But remember, auditors only see what is shown to them. Enron, Worldcom, Computer Associates are classic examples where the company fudged figures along with the auditors to keep their stock at a high level. Unlike in the US, we have no Sabrnes - Oaxley Act to counter this kind of fudging of figures.

Let SEBI appoint an independent body to go through the ads published for the last three months across all of DC’s editions. Once that is done, DC’s auditors will have to do a lot of explaining on how they allowed this kind of manipulation to go on. The cat will then be out of the bag. SEBI better go through DC’s books and do a clean up act, before we have another Eenadu kind of fiasco from coming into the limelight.