Monday, 30th October 2017

E- paper

Café Coffee Day founder V.G. Siddhartha missing

The owner of the company that runs the country’s largest coffee chain, has been battling creditors and the tax dept since last year

By K.M. Rakesh in Bangalore
  • Published 31.07.19, 3:35 AM
  • Updated 31.07.19, 3:56 AM
  • 5 mins read
V.G. Siddhartha (Twitter: @ANI)

V.G. Siddhartha, the founder of the Café Coffee Day chain, disappeared mysteriously on Monday night even as a letter purportedly written by him two days ago surfaced in which he accused an unnamed private equity investor and federal tax sleuths of hounding him.

Quoting Siddhartha’s driver, police said he was last spotted on Monday night on a bridge over a river near Mangalore, a port city about 350km from India’s tech hub.

Siddhartha, 58, had asked his driver to wait for him on the Netravati Bridge while he took a walk. When he did not return after an hour, the driver alerted the police.

Siddhartha is the son-in-law of former external affairs minister and Karnataka chief minister S.M. Krishna, who left the Congress to join the BJP in 2017.

The owner of Coffee Day Enterprises, the company that runs the country’s largest coffee chain, has been battling creditors and the tax department after being sucked into an investigation that had allegedly unearthed evidence of unaccounted income last year.

In May, Siddhartha sold a 20.3 per cent stake in Mindtree, a mid-tier technology company, to Larsen and Toubro for Rs 3,211 crore to pay off the company’s debts. But that didn’t solve his troubles.

In a letter — not authenticated by the company or the authorities — that Siddhartha purportedly wrote to the board of directors of Coffee Day Enterprises, the businessman said he “could not take any more pressure from one of the private equity partners” that had been forcing him to buy back shares in the company.

He claimed that he had been harassed by the income tax department which had first confiscated his shares in Mindtree, effectively blocking the deal with L&T. These shares were later released but the tax department went on to attach over 2.5 crore shares in Coffee Day Enterprises that were held by him and his entities.

But the most intriguing bit was his admission that he alone was responsible for all the mistakes and financial transactions that he had concealed from his family, his team, auditors and senior management in the company.

“The law should hold me and only me accountable,” the letter said while expressing regret that he had “let down all the people that had put their trust in me”.

The board of Coffee Day Enterprises held an emergency meeting during the day to assess the developments.

Expressing deep shock over Siddhartha’s mysterious disappearance, the board said it was “evaluating and assessing the situation, formulating appropriate steps to ensure business operations are unaffected”.

The statement added that the company was co-operating with the authorities.

The income tax department scurried for cover after the accusations became public — first questioning the authenticity of the signature appended to the letter and then contending that it had acted in accordance with law to protect the interests of the revenue department.

Siddhartha’s letter appended a list of assets that he tentatively valued at Rs 17,590 crore which, he claimed, “outweigh our liabilities and can help repay everybody”.

The tax department has made a provisional tax claim of Rs 650 crore — which seemed too small to justify the extreme step. Some reports suggested that Siddhartha had been barred by the tax department from selling assets to pay off his dues, precipitating a liquidity crunch.

The disappearance

The Café Coffee Day founder had disappeared after getting off his car on the bridge on the Netravati river. His driver suspected that his boss may have leapt into the river which is in spate. Divers searched the river through the day but failed to find Siddhartha.

In his complaint to the police, Basavaraj Patil, the 27-year-old driver, said he had first picked up Siddhartha on Sunday morning from his home. He drove his boss to the head office on Vittal Mallya Road and then returned home at 11am.

According to the driver’s complaint, Siddhartha then asked him to prepare for a short trip to Sakleshpur in Hassan district.

On reaching Sakleshpur, 220km from the city, Siddhartha asked the driver to head to Mangalore, another 120km away.

En route, he asked the driver to stop on the bridge around 7pm and said he wanted to go for a short walk and make a few phone calls.

When he didn’t return at 8pm, the driver alerted Siddhartha’s son Amartya in Bangalore who, in turn, asked him to call the police.

The accusations

The letter attributed to Siddhartha read: “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 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 partly completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from other lenders led to me succumbing to the situation.”

It wasn’t clear who he was referring to.

Four private equity firms have invested in Coffee Day Enterprises: Kohlberg Kravis and Roberts (KKR), the global investment firm, which holds a 6.07 per cent stake through KKR Mauritius Pte Investments Ltd; Rivendell (earlier known as New Silk Route) which holds 10.61 per cent through NLS Mauritius LLC; and two other firms — Marina West (Singapore) Pte Ltd (4.62 per cent), and Marina III (Singapore) Pte Ltd (1.04 per cent) — that manage the portfolio of Standard Chartered.

The mea culpa letter said: “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.”

Investors were jittery as the letter mentioned hidden transactions, with the news coming at a time when India’s banking sector is already wrestling with mounting bad loans. Coffee Day shares closed at Rs 154.05 on the Bombay Stock Exchange after hitting their lower circuit during the trading day.

The origins

Siddhartha belongs to a family from Chikmagalur that has been growing coffee for more than 130 years. The family owns 12,000 hectares of coffee plantations.

He started Café Coffee Day, even before global major Starbucks thought of entering India, with an outlet on MG Road in the city in 1996. The chain has 1,722 cafes in over 200 cities and towns in the country.

On Tuesday, politicians from all parties thronged the home of Siddhartha’s father-in-law, Krishna.

Congress lawmaker Raje Gowda said Siddhartha had recently expressed to him his anguish over the state of the Indian economy. “I met him on Friday at his office…. He told me that the current economic situation was not good and entrepreneurs were finding things difficult,” Gowda said.

Senior Congress leader D.K. Shivakumar, who was among the first to visit his neighbour Krishna at his bungalow in Sadashivanagar in Bangalore on Tuesday, revealed that Siddhartha had spoken to him on phone on Sunday and wanted to meet him.

“He called me on Sunday morning saying he wanted to meet me. But I was in Kanchi (Tamil Nadu). So, I told him we could meet tomorrow or the day after. I even instructed my private secretary to set aside some time,” said Shivakumar who has been close to Siddhartha for decades.

Biocon MD Kiran Mazumdar Shaw demanded an investigation. “It seems to indicate that the Private Equity fund manager acted like a money lender n seems to have caused unbearable stress — needs to be investigated,” Shaw tweeted.