A week after Coffee Day Enterprises founder and Chairman VG Siddhartha was found dead, the board of directors of the company has appointed consultants Ernst and Young ("EY") to investigate into the circumstances leading to statements made in the letter purportedly written by Siddhartha, dated July 27, 2019. EY will also scrutinize the books of accounts of the company and its subsidiaries.
Police officials looking into Siddhartha’s financials say that the several holding companies of Coffee Day, in which he was a shareholder, had incurred a debt of Rs 3,500 crore in total. After Siddhartha went missing last week, a letter purportedly written by him emerged where he stated that he “failed as an entrepreneur” and that he was under tremendous pressure from lenders.
“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, transaction I had partially completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from other lenders lead to me succumbing to the situation. 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 serious liquid crunch,” he said in the letter.
The Board of Coffee Day Enterprises, which met after Siddhartha’s death, appointed SV Ranganath as the interim chairman of the Board and Nitin Bagmane as interim Chief Operating Officer (COO) of the company.
At the time, it announced the constitution of an executive committee comprising Ranganath, Nitin and R Ram Mohan (CFO) to exercise the powers previously vested with the chief executive officer (CEO) of the Company and the Administrative Committee constituted by the Board in 2015.
In its latest disclosure to the stock exchanges on Thursday, the company said, “The Board of Directors has decided it owes a duty to all the stakeholders of the Company, to ensure that the Company continues to have a strategic direction and a suitable way forward. To achieve this objective it was decided by the Board to appoint a person of eminence or a reputed firm as strategic corporate advisor/s to the Board.”
The company also said that Malavika Hegde, Siddhartha’s wife, was appointed as an additional member of the Executive Committee formed on July 31.
Siddhartha, who is the son-in-law of former Union Minister and BJP leader SM Krishna, went missing in Mangaluru on the night of July 29 near the Nethravathi river. His body was found on the bank of a river over 9 km away from the Nethravathi bridge on July 31. His last rites were performed in Chikkamagaluru.