Home Economy and Finance Data reveals Cafe Coffee Day owner VG Siddhartha may have been under debt of up to Rs 11,000 crore: Report

Data reveals Cafe Coffee Day owner VG Siddhartha may have been under debt of up to Rs 11,000 crore: Report

As per the Business Today report, the latest revelations validate Siddhartha's purported confession in his last letter regarding the debt burden and lenders' pressure he could not cope with.

Data collected from stock exchanges and Ministry Of Corporate Affairs’ filings have unfolded that VG Siddhartha’s debt pile up may have been up to Rs 11,000 crore, a report in Business Today said. However, it is a mystery still as to where such large funds were deployed and how.

As per the Business Today report, though the Coffee Day Enterprises, reported a debt of Rs 6,547 crore as on 31 March 2019, fresh data from Siddhartha and the promoter group’s four private holding companies reveals that they had outstanding guarantees worth Rs 3,522 crore as on fiscal years 2018-19.

Via Business Today

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According to the CDEL’s annual report 2017-18, Siddhartha, along with two other Coffee day Enterprise limited (CDEL) directors had given personal guarantees towards loans worth Rs 1,028 crore raised by Coffee Day Enterprises. CDEL is a listed firm and had four promoters.

Moreover, data collected from companies’ declarations revealed that the company had mortgaged shares worth over Rs 3,522 crore to various lenders since 2014 to raise loans. However, it is still not clear as to how much of private holding companies’ pledges were towards loans raised by CDEL, or, whether most of it was towards loans in a personal capacity.

Listed firm CDEL’s stocks had fallen by 48 per cent from its peak of Rs 374.60 on 22 January 2018, to Rs 192.55 at closing on 29 July 2019, the day when Siddhartha’s committed suicide, resulting in an erosion of Rs 3,541 crore in market capitalization.

Siddhartha and his group entities held 53.93 per cent stake in Coffee Day Enterprises, of which 75.70 per cent was pledged as of 30 June.

It is now being speculated that the falling share prices, which requires promoters to make up the gap through more assets else, lenders rush to invoke the pledged shares and an enormous debt of Rs 11,096 crore must have forced the coffee giant to take such extreme steps.

Siddhartha’s last letter before alleged suicide mentions debt burden:

The above revelations validate Siddhartha’s purported confession in his last letter regarding the debt burden and lenders’ pressure he could not cope with. In his letter dated 29 July, Siddhartha mentioned his inability to cope with the company’s debt and his face-off with the income tax authorities as reason for “failing as an entrepreneur”.

However, in his letter, he had listed all his assets worth nearly Rs 18,000 crore as enough to pay off all the liabilities. “I have enclosed a list of our assets and tentative value of each asset… our assets outweigh our liabilities and can help repay everybody,” he had said in his last letter.

Latest data from four promoter companies, Devadarshini Info Technologies, Coffee Day Consolidations, Gonibedu Coffee Estates, and Sivan Securities, reveals they raised funds by mortgaging shares held in the listed company Coffee Day Enterprises between 2014 and 2019.

Via Business Today

These four companies had combined shareholding of 17.13 per cent in CDEL. Coffee Day Consolidations Private raised the maximum Rs 1,533.57 crore followed by Devadarshini Info Technologies’ raising Rs 1,171 crore. Gonibedu Coffee Estates raised Rs 775 crore while Sivan Securities raised Rs 42 crore.

  • Devadarshini Info Technologies holds 5.87 per cent shares in CDEL and pledged shares on various loans and mortgages amounting to 83.08 per cent of its holding.
  • Coffee Day Consolidations has 5.81 per cent shares in CDEL and pledged shares amount to 95.94 per cent.
  • Gonibedu Coffee Estates holds 5.24 per cent shares in CDEL and pledged share amount to 78.94 per cent.
  • Sivan Securities holds 0.21 per cent share in CDEL and pledged shares amounts to 99.9 per cent.

What were these companies up to:

These four private holding companies had mortgaged shares to different private investors. The investors included companies like, IDBI Trusteeship Services Limited (likely on behalf of a consortium of banks), Standard Chartered Bank, Shapoorji Pallonji Finance Private Limited, Axis Finance Limited, the Hong Kong and Shanghai Banking Corporation Limited, Clix Finance India Private Limited, AK Capital Finance Private Limited, Kotak Mahindra Prime Limited, STCI Finance Limited, IFCI limited, and ECL Finance Limited.

While Sivan Securities raised Rs 15 crore on April 11, 2019, against the pledge to state-owned IDBI Trusteeship, Coffee Day Consolidations raised Rs 200 crore on March 22, 2019, and Rs 310 crore on March 28 by mortgaging shares to Kotak Mahindra Investments and IDBI Trusteeship Services, respectively.

Year-wise funds raised by these firms:

  • 3 times in 2019
  • 17 times in 2018
  • 4 times in 2017
  • once in 2016
  • 4 times in 2014

In most cases, these group companies had pledged shares held in the listed company Coffee Day Enterprises.

Moreover, according to CDEL’s annual report, the loans for which VG Siddhartha stood guarantor were worth Rs 4,124.18 crore. The top five lenders include Tata Capital Financial Services- Rs 1,804.05 crore, Axis Bank- Rs 360 crore, ICICI Prudential Asset Management Company- Rs 347.2 crore, Aditya Birla Finance- Rs 277.9 crore, and DEG- Rs 141.6 crore.

However, to cut down his debts, Siddhartha not only sold IT firm Mindtree for over Rs 3,269 crore, raking in a profit of Rs 2,858 crore, but Coffee Day Enterprises even paid off Rs 2,100 crore worth of loans to pare debt to around Rs 4,400 crore. His company was profitable too. CDEL collected revenue of Rs 4,264 crore in fiscal 2018-19 with a PAT of Rs 128 crore, which was the third successive year of profitable operation.

After 36-hours of intense search to rescue Cafe Coffee Day owner VG Siddhartha, his body was finally found in the backwaters of the Nethravati river at Hoige Bazaar, Mangaluru on July 31. VG Siddhartha had gone missing near the Netravathi bridge here on July 29. The identity of the body has been confirmed by his relatives based on the ring on his finger, phone, watch and shoes.

In the letter to the directors of Coffee Day Enterprises, the entrepreneur had apologised for ‘letting down’ people and cited pressure from private equity investors and harassment by tax authorities.

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