A letter purportedly written by VG Siddhartha, the founder of the Café Coffee Day chain and son-in-law of BJP leader SM Krishna, who went missing in Mangaluru on Monday night, has emerged. The letter dated July 27 was addressed to the Coffee Day Board of Directors and employees.
The letter states that he “failed as an entrepreneur” and that he is “solely responsible for all mistakes". He purportedly goes on to state that his intention was “never to cheat or mislead anybody”. The letter goes on to note that he was under tremendous pressure from lenders.
In the letter, addressed to the Board of Directors, Siddhartha allegedly wrote, “After 37 years, with strong commitment to hard work, having directly created 30,000 jobs in our companies and their subsidiaries, as well as another 20,000 jobs in technology company where I have been a large shareholder since its founding, I have failed to create the right profitable business model despite my best efforts.”
TNM spoke to SV Ranganath, a board member of Coffee Day Enterprises and Mangaluru police commissioner Sandeep Patil. While Ranganath did not receive a copy of the letter, the commissioner only said that it was still under investigation. The letter has still not been confirmed by anyone working with the company.
Saying that he gave it his all, he purportedly continued, “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, 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.”
VG Siddhartha went missing on Monday. He got out of his car near a bridge across the Nethravathi river in Mangaluru. His driver panicked when he did not return in an hour, and called his son. The son found that Siddhartha’s mobile was switched off. The Dakshina Kannada police have been searching for Siddhartha since last night. A dog squad found the tracks had stopped in the middle of the bridge. Police also said that a man had jumped off the river, and they suspect it could have been Siddhartha.
The first CCD outlet was opened in 1996 and since then, the popular coffee chain has grown to 1750 stores across India and has 60,000 vending machines. Outside of India, it has a presence in Vienna, the Czech Republic, Malaysia, Nepal and Egypt.
As on March 31, 2019, the total debt of Coffee Day Enterprises stood at Rs 6,547 crore, which is nearly 2.5 times the net worth of Rs 2,529 crore.
Apart from coffee retailing, the Coffee Day Group has dealings in logistics, technology parks (SEZ and STP scheme), financial services and investments in technology and software companies.
Early signs of VG Siddhartha looking to pare down debt desperately started with him looking to sell his stake in Mindtree. Siddhartha was one of the earliest investors of Mindtree and held 20.42% stake. Reports at the time suggested that he was looking to sell this stake to pay back Rs 300 crore to income tax authorities.
In March, Siddhartha made about Rs 3,200 crore by selling the 20.32% stake held by him and two CCD affiliate firms (Coffee Day Enterprises Ltd and Coffee Day Trading Ltd) in software services company Mindtree Ltd to Larsen and Toubro Ltd (L&T) in March.
After this, there were media reports that Coffee Day was in talks to sell a substantial stake to beverage giant Coca Cola and was eyeing a valuation of Rs 8,000 to Rs 10,000 crore from the stake sale.
In September 2017, the Income Tax department had conducted a search-and-seize operation at 25 locations of CCD and its group companies in Karnataka, Mumbai and Chennai. The I-T department had then stated that Siddhartha had concealed an income amounting to over Rs 650 crore. THE income Tax department had seized various documents from his house and office. The officials were looking into a number of violations of various statues and had said that they had found ample evidence of concealed income. The corporate office of the amalgamated bean company, which runs CCD's retail outlets, were searched. They found a number of documents on properties, business transactions and other dealings, which the department has been probing since September 2017.
Full letter here:
To our Board of Directors and Coffee day family,
After 37 years with strong commitment to hard work, having directly created 30,000 jobs in our companies and their subsidiaries as well as another 20,000 jobs in technology company where have been a large shareholder since its founding. I have failed to create the right profitable business model despite my best efforts.
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, a 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 a serious liquidity crunch.
I sincerely request each of you to be strong and to continue running these businesses with a new management. I am solely responsible for all mistakes. Every financial transaction is my responsibility. My team, auditors and senior management are totally unaware of all my transactions. The law should hold me and only me accountable, as I have withheld this information from everybody including my family.
My intention was never to cheat or mislead anybody. I have failed as an entrepreneur. This is my sincere submission. I hope someday you will understand, forgive and pardon me.
I have enclosed a list of our assets and tentative value of each asset. As seen below our assets outweigh our liabilities and can help repay everybody.
Regards,
V.G Siddhartha