The Café Coffe Day (CCD) founder-chairman, VG Siddhartha, who was missing for the last two days, was found dead and his body was recovered today early morning [31 July 2019] from the Nethravathi River near Mangaluru – 350 kilometers from Bengaluru – following a massive search operation lasting approximately 30 hours. Siddhartha was in the news for the past several months due to his debt and tax liabilities. We also recently reported that Coca-Cola plans to acquire CaféCoffee Day. CCD was in talks with Coca-Cola to sell some of its equity, although Siddhartha intended to keep the controlling stakes with himself. The CCD and Coca-Cola deal was still in the negotiation phase.
To reduce his financial burdens, Siddhartha sold his 20.32% stake in two CCD affiliate firms (Coffee Day Enterprises Ltd. and Coffee Day Trading Ltd.). He also divested his shareholding in software services company Mindtree to Larsen and Toubro earlier this year for Rs 3,200 crore.
However, recent reports reveal that CCD shareholders had doubts about the CCD’s debt. The Mindtree deal was supposed to be a lifesaver for reducing the company’s debt but it didn’t turn out to be so. There were questions from investors on the relatively high debt as well the unusually high cash held by the company’s realty subsidiaries. While the questions about debt continued, the answers from CCD were apparently unconvincing.
Siddhartha mentioned in his last letter addressed to the Café Coffee Day board of directors and the Coffee Day family, that he gave up as he could not take any more pressure. He wrote, “I have failed to create the right profitable business model despite my best efforts. 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. There was a lot of harassment from the previous DG income tax in the form of attaching our shares on two separate occasions to block our Mindtree deal and then taking position of our Coffee Day shares, although the revised returns have been filed by us. This was very unfair and has led to a serious liquidity crunch.”
He took the responsibility for all the financial transactions and mentioned in the letter, “The law should hold me and only me accountable. My intention was never to cheat or mislead anybody, I have failed as an entrepreneur.” He enclosed a list of assets and the tentative value of each asset with his letter. According to him, the assets outweigh the company’s liabilities and can help to repay all debts.