Wednesday, February 20, 2013

Readers Digest - Bankruptcy

Readers digest is published by RDA Holding Company in America. This is the second time ,Readers Digest magazine announced its bankruptcy under Chapter 11 in American Court.. So, HCL which has agreed for complete digitisation of Reader Digest magazine will be in loss of Rs.1900 Crores. This contract is a long term contract agreed for 7 years between HCL and America's RDA Holding Company. But because of the declining sales and falling advertising revenue brought heavy loss for this magazine, Readers digest announced its bankruptcy now. The company filed for bankruptcy in US Bankruptcy court. It may get some financial aids and pressure of interest on Loans debts will get reduced. Now, RDA company has loan problems approximately Rs.5,400 crores. Since it has announced bankruptcy , there is a doubt of whether it will settle the amount of Rs.23 crores for which already services are done by HCL . Similarly RDA has to settle an amount of Rs. 5 Crores to Wipro also. If this situation continues , HCL will have a loss of Rs. 1900 crores loss without being the contract implemented.

Announcing bankruptcy in some cases is a kind of escapism. Right?