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BCCL targets clean balance sheet; pays off Rs 570 cr of loans

19-March-2009
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BCCL targets clean balance sheet; pays off Rs 570 cr of loans

At a time when many would rather hold on to cash, media major Bennett, Coleman and Company Ltd (BCCL) has engaged in a debt cleaning act. Industry sources informed that the company had cleaned off a whopping Rs 708 crore of debt from its balance sheets. A senior media analyst explained, “Even for a company the size of BCCL, this is too much debt to have, and BCCL officials had said in the past that they were not too comfortable with the debt amounts that had built up over the last year.”

BCCL’s CEO Ravi Dhariwal stated that the matter was too internal for him to offer any comments. Industry sources, however, further broke down the debt amount. Between January 2009 and February 2009, BCCL has paid off Rs 570 crore of loans. Of this, Rs 395 crore were paid off in normal course, and a significant amount of Rs 175 crore were paid off ahead of schedule.

Sources informed that BCCL has no working capital finance at present. To put things in perspective, a media analyst explained, “Working capital finances are largely taken for costs that would generate revenue in the near future, for instance, newsprint, where you may need funds for three or six months. Usually, large media companies operate at Rs 50–60 crore of working capital funds at any given point. You take a longer term loan when you are expanding, for instance putting a printing plant or something on those lines.”

BCCL has also paid off Rs 138 crore of buyers’ credit for newsprint, the overall amount is said to be at Rs 370 crore.

Investments sold to raise cash

It is also learnt that earlier in the year, BCCL had got busy in raising cash and a sum of Rs 1,100 crore was raised by selling investments through its various assets including investments from Private Treaties. Despite contacting, BCCL officials have not given any confirmation on these amounts, but sources close to the situation have divulged these.

An industry source elaborated, “BCCL has been busy in raising money and this would have helped them in cleaning off these debts. There were some areas where the company invested heavily and this would have worked in adding to the overall debt figure. BCCL had invested a huge sum in the Virgin Radio deal.”

The deal for Virgin Radio, that was later renamed Absolute Radio, is believed to have put a significant dent in the BCCL books. Media sources said that the experience had even discouraged BCCL to invest in international expansion for some time.

In an earlier conversation with exchange4media, however, Dhariwal had said, “There always would be businesses that require investments at present, and even at a time like this, we would not sacrifice the long term plans of the company. We would continue to put money on digital, participate in the new phase of a radio wholeheartedly, invest in a market like Chennai, and so on. In the meantime, we had to correct some of the short term costs and that we have done. We do not want to slow down our growth plans.”

BCCL’s move to pay off its loans has come simultaneously with its initiatives of cutting costs across the various expenses of the company. While the paying off of loans is a positive development, the one question that arises is why was BCCL in such a hurry to clean off its debts that even saw it making advance payments of its loans. At least BCCL officials are not offering any answers for now.

Also read:

We have addressed cost build-ups; now we have to increase revenues: Ravi Dhariwal

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