NEW DELHI, NOV 5: DCM Financial Services, a Vivek Bharat Ram company, is facing a run on its fixed deposits. Worried depositors have already started lining up in front of the company's office here to claim their dues. The company recently informed its depositors that the repayment of deposits would be delayed temporarily. Attempts to contact senior officials of the company proved futile.

With outstanding deposits of over Rs 65 crore, DCM Financial has been reeling under a severe financial crunch. It has faced an exodus of middle and senior level personnel in recent months. The company is also alleged to have had difficulties in honouring its obligations in the inter-corporate deposit (ICD) market and has received legal notices. While the withdrawal of deposits was partly triggered by the CRB episode a few months back, the recent downgrading of the company's rating by ICRA, CARE and Crisil has added to DCM Financial's woes.

The company has faced difficulties in the ICD market and is understood to have received a couple of legal notices from creditors for cheques that bounced. The outstanding ICDs today stand at Rs 7-8 crore. The company is also facing problems in redeeming NCDs worth Rs 28 crore by April, 1998. The 18-month NCDs issued in October 1996 were privately placed, carrying a high coupon of 19.5 per cent. Annual interest outgo on these NCDs alone has been around Rs 5.4 crore. The NCDs carried a call option after 12 months and put options after 6 and 12 months. At the time of the issue of NCDs, it was projected that the debentures would be redeemed out of the cash flows by way of fixed deposits/loans to be mobilised. But with no fresh FDs being raised, the company will find it hard to meet its NCD redemption obligations.

The company's liquidity position has been under tremendous strain and it has had to delay payment of the 13.5 per cent final dividend declared for the financial year 1996-97. The dividend liability worked out to Rs 1.75 crore.

DCM Financial's liquidity position further worsened with a sharp fall in FD renewals, let alone fresh FDs, which resulted in delays in meeting its obligations. The company stopped FD renewals and fresh FDs in early October. The average outflow in the past couple of months has been around Rs 3.5 crore, which the company, in the absence of fresh FDs, is finding it hard to repay. Till now, the FDs were being serviced mainly through collections made from lease rentals. The outstanding FDs in the beginning of the year stood close to Rs 80 crore, which has now come down to around Rs 65-68 crore.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.