August 25 I 2019 I BUSINESS TODAY I 27A former investment banker who
did not wish to be named, said, “It
was not really the response Siddhar-
tha was expecting. He was quite dis-
heartened that the market could not
see his vision.”
According to the 2016/17 annual
report filed by the company, the gross
revenue from the coffee business in-
creased by 1,827 crore, contributing 51 per cent to the consolidated top line. The substantial increase in rev- enues came from setting up of new café outlets and deployment of new vending machines. Revenue from the retail division increased by 14 per cent from1,253 crore in 2015/16 to
1,423 crore in 2016/17. Café Coffee Day (CCD) by then had 1,682 cafes in 241 cities and 537 CCD Value Express kiosks, 415 Fresh & Ground Coffee re- tail stores, 41,845 vending machines in corporate workplaces and hotels. The company’s net debt, as on March 31, 2017, stood at2,972 crore
(including short-term borrowings
amounting to 541 crore). Data (Ace Equity), however, reveals that the company’s free cash flow was a nega- tive533 crore at the end of 2015/16.
In fact, by the end of December 2016,
the promoter group had already
pledged more than half (54 per cent)
of their holdings to raise money large-
ly for the construction business (Tan-
glin) and the hospitality business.
Many people, including Nandan Nilekani, warned
Siddhartha against over-leveraging, says a business
associate close to him. “He was very optimistic about
the market. What could one do?”
Stock markets had taught Siddhartha that pa-
tience was an essential virtue for an investor. But to
expect PE funds to stay invested for a long term was
a miscalculation on his part. In the fourth quarter of
2017/18, KKR’s shareholding had come down from
10-plus per cent to 6 per cent. (Interestingly, this was
bought by Malavika Hegde, Siddhartha’s wife.)
Things had come to such a pass that the total
debt became overwhelming. The overall liquidity
crisis in the banking system only added to Siddhar-
tha’s troubles – his cost of funds increased. By March
2018, Siddhartha had quit the board of Mindtree to
concentrate on CDEL. Former Mindtree Chairman,
Krishnakumar Natarajan, in an earlier interaction
with BT, had said that Siddhartha was finding it dif-
ficult to spare 10-12 days annually to Mindtree board
commitments.
Months before his reported suicide, Siddhartha
was looking at ways to refinance his existing debt and
also raise fresh money for day-to-day requirements.
People in the banking circles say he was often
spotted in Mumbai. His first big headache was a loan
of `800 crore that he took several years ago from
HDFC Ltd. That loan was coming up for repayment
early this year, which they paid up. The mortgage
player was in no mood to roll over or take fresh ex-
posure in any of his group companies, and the money
market was anyway tight. The bankers, mutual funds
and NBFCs were hit hard with several defaults. Sid-
dhartha, however, managed to convince Axis Bank
and Standard Chartered Bank to put in close to
`1,000 crore in his businesses. The additional money
did reduce his burden, but he was facing refinancing
pressure from several fronts. The fund raising had ac-
tually started a year ago as the cash flows from com-
panies was not sufficient. Sources say that Siddhar-
tha managed to raise fresh money from Yes Bank,
Karnataka Bank, Bajaj Finance, Shapoorji PallonjiWHAT ROLE DID
THE TAXMAN PLAY?T
HE LETTER REPORTEDLY typed and signed by V.G.
Siddhartha alleges harassment by B.R. Balakrishnan, the previ-
ous Director General-Investigations, Income Tax, Karnataka
and Goa Range. The company’s and Siddhartha’s shares in Mindtree
were attached and on two separate occasions, a Mindtree deal was
blocked. He alleged that the tax department took possession of
Coffee Day Global shares (CDGL) even though the company filed
revised tax returns. Siddhartha called it unfair and said it had led to
a serious liquidity crunch. The income tax department retorted to
claims in a press release after outrage on social media under #tax-
terrorism. The department said the search on a prominent politi-
cian’s case (D.K. Shivakumar) had led to credible evidence of con-
cealed transactions by CCD and after search operations on
Siddhartha’s company and other properties, he had admitted to not
revealing unaccounted money of around `480 crore. BT spoke to
another senior DG level officer who was earlier in Bengaluru. “He
(Balakrishnan) is a man who is credited with some successful inves-
tigations and known to run quite effective operations,” the officer
said. Explaining the procedure, he said search operations are either
conducted by an assistant commissioner or a deputy commissioner
level person. The search papers, however, would need authorisa-
tion from the Commissioner of Income Tax, and the DG briefs and
oversees the processes. While Balakrishnan may have been over-
seeing the investigations, Siddhartha should have taken legal steps,
instead of ending his life, the tax official said.COVER STORY > V.G. SIDDHARTHA