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Siddhartha Was Upset With I-T Dept Blocking Mindtree Shares, Says CCD Board Member Amid Hunt for Coffee King

In a letter reportedly written by Siddhartha to the board of directors and his CCD family before he went missing, he said he had 'failed to create the right profitable business model despite my best efforts'.

Deepa Balakrishnan | CNN-News18deepab18

Updated:July 31, 2019, 7:25 AM IST
Siddhartha Was Upset With I-T Dept Blocking Mindtree Shares, Says CCD Board Member Amid Hunt for Coffee King
File image of VG Siddhartha.

VG Siddhartha, the founder of India's largest coffee chain Cafe Coffee Day who also owns Asia's single-largest coffee estate, has been missing from Mangalore since Monday evening after leaving for the city from Bengaluru the previous night. Siddhartha, who was en route a business trip to Sakaleshpur, was last seen near Ullal bridge over the Netravati River.

In a letter reportedly written by Siddhartha to the board of directors and his CCD family before he went missing, he said he had “failed to create the right profitable business model despite my best efforts”. He added, “I would like to say I gave it my all. I am very sorry to let down all the people that put their trust in me. 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….”

One of the board of directors of Coffee Day Enterprise spoke to CNN-News18 on the condition of anonymity. Here are the edited excerpts:

Was there any indication at all of such a thing happening?

There was absolutely no indication on his part. In fact, if you look at the actual balance sheet of Coffee Day Enterprises, the debt portion had come down drastically after Siddhartha sold his Mindtree shares. (He sold his entire 20 per cent equity stake in consultancy firm Mindtree to engineering and construction company Larsen & Toubro Ltd for Rs. 3,300 crore in March this year). The bulk of the portion that had gone at the time of the Initial Public Offering (IPO) in 2015, had gone for debt reduction. Subsequently, these Mindtree shares also went for that.

If you look at the details provided by rating agencies, the total amount of outstanding Non-convertible Debentures (NCDs) is about Rs 250 crore. For a 900 crore EBIDTA (Earnings before Interest, Taxes, Depreciation, and Amortization) company, a debt of Rs 250 crore is no big deal.

Was there any huge private debt?

I have no idea if there are other private transactions that were made outside the company -- we can only comment about the company’s balance sheets -- whether it has assets to take care of the debt, which in this case, was not an issue at all. What Siddhartha did in his personal capacity, nobody knows.

But he was good with finance management, so it is surprising to see this day…

He was excellent with finance management and he was an entrepreneur in the true sense of the word - he built this business, he knew this business inside out. Entrepreneurs like him are critical for a country’s economy as they play a huge role in wealth creation and generating employment.

So, what could have led to this?

I am as baffled as you are. As far as Coffee Day Enterprises is concerned I don't see any problem, but at the same time, there are issues of making disclosures to the exchanges, because that was the listing requirement. So whatever formality is there has to be done.

Yes, he was in talks with Coca-Cola to sell his flagship chain, along with another equity company. But those were just talks. Like I said, the Mindtree exit reduced debt portion of Coffee Day Enterprises substantially and brought it all within manageable limits.

The best way to check on this is through rating agencies. They would have done the accounts, their assessment is more valid as they are an external agency and hence, would conduct the exercise impartially.

His wife is also a Board member?

Yes, his wife is also a Board member.

And his son is also with the company?

No I'm not aware. I've met his son a few times but I am not aware if he held any position in the company.

So, Siddhartha was running the show?

Yes, Siddhartha was all in all.

What are these talks of harassment by Income Tax officials about?

My understanding is that at the time the Income Tax notice was slapped on him, he had said that he will pay it, after which he said he will appeal to the High Court as per the law. He had given it in writing that he will clear his dues. But the officials blocked the Mindtree shares. At that time he had said, “There are so many assets, so many thing that you could’ve blocked. Why just Mindtree, when we were on the verge of the transaction taking place?” This according to me, appears to be the issue.

Subsequently, the I-T higher ups had cleared it because Siddhartha had given in writing: “We will make good every paise whatever tax man says -- even though our auditors feel we are not entitled to pay -- we will pay and then we will appeal.” Siddhartha was not the kind of person who would overstep authority. He would always comply, keep the law on the right side and then go for an appeal -- as with any other citizen.

On the face of it, it does look like suicide?

Unless we get some feedback or some information on that, this is a surmise and I hope that it is wrong.

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