VG Siddhartha, the founder of India’s largest coffee chain Cafe Coffee Day (CCD) and also owns Asia’s single-largest coffee estate, is reportedly missing since Monday evening.
Siddhartha, the son-in-law of former Chief Minister of Karnataka SM Krishna, got off from his car near a bridge across the Nethravathi River in Mangalore. His driver raised an alarm when he did not return even after an hour.
While the search operations are on, a letter has now surfaced that Siddhartha, the founder of CCD wrote to the Board members before he went missing. In the letter, Siddhartha apologises for not being able to create a profitable business model. He also alleges several pressures which he is not being able to manage anymore and harassment by Income Tax officials. Siddhartha, in his letter, says that he fought long and hard, but has finally decided to give up.
Cafe Coffee Day was started as a retail chain in the year 1996 by BG Siddhartha, the son in law of former Karnataka CM SM Krishna. With an initial investment of Rs. 1.5 crores, the first outlet of CCD was opened by Siddhartha in Bangalore, Brigade road. Cafe Coffee Day has around 1,700 cafes, 48,000 vending machines, 532 kiosks and 403 ground coffee selling outlets across the country.
While speculations about the business model and the various pressures that could have contributed to Siddhartha missing are being fuelled, one recalls that Cafe Coffee Day and VG Siddhartha were in trouble with the tax sleuths 2 years ago.
In September 2017, after 4 days of raids, the Income Tax sleuths had uncovered over Rs. 650 crores of undisclosed income. The raids were conducted in multiple locations in Mumbai, Bengaluru and Chennai, including Siddhartha’s hometown of Chikmagalur in Karnataka.
According to reports, the raids had concluded with VG Siddhartha admitting that Cafe Coffee Day had an undisclosed income of over Rs. 650 crores.
An informal PR release by the Income Tax Department had said, “The detection of undisclosed income is expected to be much higher since there are a number of other issues, including violations of other statutes on which there is no disclosure, but relevant evidence has been found. These will be pursued effectively with vigour, energy and imagination”.
A team of I-T sleuths had also cracked down on Coffee Day Square in Bengaluru, the headquarters of Cafe Coffee Day, and Siddhartha’s residence in Bengaluru’s upscale locality of Sadashivanagar. In Chikkamagaluru, another team carried out raids in the Coffee Day Global Limited office, two of his coffee estate offices, a residential school office and the Serai Resorts.
A day after the income tax raids, the Cafe Coffee Day shares had dropped by 9%.
Earlier this year, the Income Tax department had attached around 46 lakh shares in Cafe Coffee Day held by VG Siddhartha against the tax demand for the undisclosed income. Initally, shares in Mindtree held by CCD and Siddhartha were attached, but those were released and the promoter’s shares in CCD were atatched instead.
These facts become pertinent to remember since several people are charting out Siddhartha’s disappearance to ‘tax terrorism’. In his letter as well, Siddhartha talks about how he was being “harassed” by tax officials.
While harassment by officials of the IT department is not new, the reports have indicated that Siddhartha himself had agreed to the undisclosed income of Rs. 650 crores. The tax sleuths had suspected that the amount could be far more than that.
In his letter, Siddhartha had also written, “I would like to say I gave it 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”.
He had further added that he faced tremendous pressure from other lenders led to “me succumbing to the situation.”
He had also said, “I sincerely request each of you to be strong and to continue running these businesses with new management,” said VG Siddhartha in his letter to the Board of Directors and his Coffee Day family, adding that “every financial transaction” is his 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,” Siddhartha wrote in the letter.
