Cafe Coffee Day founder goes missing; pressure from PE firm, lenders seen as trigger
V.G. Siddhartha, chairman of Coffee Day Enterprises Ltd | Photo Credit: Reuters

VG Siddhartha, who built India’s largest coffee retail chain under the Café Coffee Day brand, has gone missing and may have committed suicide after apparently coming under pressure from lenders, investors and tax authorities.

Coffee Day Enterprises Ltd, which operates Cafe Coffee Day, said in a stock-exchange filing on Tuesday that chairman and managing director Siddhartha had not been reachable since Monday evening.

“We are taking the help of concerned authorities. [The] company is professionally managed and led by [a] competent leadership team, which will ensure continuity of business,” it said.

Later in the day, the company’s board held an emergency meeting to evaluate the situation and take “appropriate steps” to ensure business operations were unaffected.

Siddhartha was last seen near Mangaluru in Karnataka, and police are searching for him, media reports said.

The reports said he was last seen on a bridge over a river where he asked his driver to wait for him while he took a walk. When he did not return, the driver alerted the police.

The news triggered a steep slide in Coffee Day's shares, which slumped 20% to touch a one-year low of Rs 154.05 apiece on the BSE.

Siddhartha directly owned a 32.75% stake in Coffee Day Enterprises at the end of June, stock-exchange data shows. The total promoter stake in the company was about 54%.

The reasons for Siddhartha's disappearance weren't clear. However, in a letter purportedly written by him to the company’s board, he said that he was under pressure from a private equity firm as well as from lenders and income tax authorities. He didn’t identify the PE firm or the lenders in the letter.

The board acknowledged that it had received the letter but didn’t comment on its authenticity.

“I fought for a long time but today I gave up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend,” Siddhartha purportedly said in the letter.

He also said there was “tremendous pressure” from other lenders and “a lot of harassment” from income tax authorities when he was selling his stake in Mindtree Ltd. “This was very unfair and has led to a serious liquidity crunch,” he said.

Coffee Day is backed by private equity firms KKR, Rivendell PE (formerly New Silk Route) and Affirma Capital, which manages the portfolio of Standard Chartered PE. KKR owned a 6.07% stake in Coffee Day, Rivendell 10.61% and Affirma about 5.67% at the end of June, stock-exchange data show.

A Rivendell executive, who didn't wish to be named, said the firm had "no discussions regarding a buyback" and that it had "always been supportive of his [Siddhartha's] stewardship of the company".

A KKR spokesperson told VCCircle the firm was “deeply saddened” by the development. “We believe in VG Siddhartha and had invested in the company about nine years ago. We sold approximately 4.25% (of our total holding of approximately 10.3% in the company) in February, 2018 on the stock exchange and have not sold any shares before or after,” the spokesperson said.

A spokesperson for Standard Chartered Private Equity said: “We backed VG Siddhartha in early 2010 and have had a great relationship with him throughout. We sold approximately 1% equity on the exchange in April 2018. Since then, we haven’t sold anything and currently own approximately 5.7% in Coffee Day Enterprises.”

The development comes just months after Siddhartha sold his stake in IT services firm Mindtree Ltd to engineering and construction conglomerate Larsen & Toubro Ltd as part of efforts to repay his debt. He was also embroiled with the Income Tax department, which had previously halted the sale process.

Siddhartha was also reportedly in talks to sell a stake in Café Coffee Day, which competes with Starbucks and Barista, to global beverages giant Coca-Cola Co. The US company had bought Costa Coffee last year to beef up its portfolio of non-carbonated drinks.

In the letter, Siddhartha said Café Coffee Day was talking with international players like Coke and lTC for partnership in the vending machine business.

Siddhartha also listed the assets of the Coffee Day Group as well as his family and the tentative value of those assets.

Apart from the coffee retail chain, the assets included the group’s real estate properties, coffee plantations and a majority stake in logistics firm Sical. The assets, he said, outweigh the liabilities and can help repay everybody.

Leave Your Comment(s)