Business Today – August 25, 2019

Videocon Industries to fund its telecom subsidiary, a
cash guzzler. The failed telecom business eventually
hurt the entire business.
Siddhartha was funding his technology park sub-
sidiary Tanglin, step-down subsidiary Tanglin Retail
Realty Development, logistics arm Sical and also the
resort and hotel business. But revenues from these
businesses were not sufficient.
There have been various cases of multiple lay-
ers of subsidiaries being used to siphon off money. At
CDEL, there are several instances of money transfers
or deals that raise corporate gov-
ernance concerns. For example,
in 2017/18, CDEL extended a
loan of 356 crore to Coffee Day Hotel & Resort at zero interest. The Companies Act does not al- low this, but CDEL took shelter under an exemption clause in the Act, which allows zero interest for tourism, hotels and conven- tion centres. Similarly, there were some related party transactions. CDEL purchased raw coffee from Mysore Amalgamated Coffee & Estates for39 crore, while at the
same time it also sold raw coffee
to Kathlekhan Estate Pvt. Ltd for
35 crore. In another instance, CDEL loaned41 crore to related

company Dark Forest Furniture and also purchased

fixed assets (furniture) from it for `20 crore.

The locations of some of the subsidiaries also raise

doubt. CDEL has subsidiaries in places like Denver,

Cyprus, Austria, Czech Republic, and others. The re-

cent income tax raids and investigations would surely

look into these areas for any possible siphoning or

discrepancies.

Barring financial services and hospitality, other

segments like coffee business, office space leasing

and investments were all doing well. At the end of

2017/18, the PAT for six verti-

cals stood at `148.26 crore as

against `81.64 crore in 2016/17

and the net adjusted debt stood

at `3,323 crore. By the end of

June 2018, close to 50 per cent

of the promoter group share

and 39 per cent of Siddhartha’s

shares were also pledged.

Between July and Decem-

ber 2018, the liquidity squeeze

only increased for the group. By

December 2018, the promoter

group share pledging had gone

up to 79 per cent and 70 per

cent for Siddhartha. His talks

with PE investors to offload 20

per cent in Mindtree hit a road-

block after the tax department

Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19

30

40

50

60

70

80

Total of Promoter and Promoter

Group Pledged Shares (%)

V.G. Siddhartha's pledged shares (%)

PLEDGED SHARES IN

COFFEE DAY ENTERPRISES

Source: Ace Equity

30 I BUSINESS TODAY I August 25 I 2019

Coffee DevelopmOffice Space ent Integrated Multimodal Transport Financial Services Hospitality

Coffee Day

Global Ltd

Tanglin

Development Ltd Sical Logistics Ltd

PNX Logistics

Pvt. Ltd

Way2Wealth

Enterprises Pvt. Ltd

Coffee Day Hotels &

Resorts Pvt. Ltd

Tanglin

Retail Realty

Development Pvt.

Ltd

Sical Bangalore

Logistics Park Ltd

Way2Wealth

Securities Pvt. Ltd

Barefoot Resorts and

Leisure India Pvt. Ltd

Sical Multimodal

& Rail Transport

Ltd

Way2Wealth

Distributors Pvt. Ltd

Wilderness Resorts

Pvt. Ltd

Sical Mining Ltd Way2Wealth Capital Pvt. Ltd Karnataka Wildlife Resorts Pvt. Ltd

Sical Iron Ore

Terminal Ltd

Way2Wealth

Insurance Brokers

Pvt. Ltd

Sical Iron

Ore Terminal

(Mangalore) Ltd

Way2Wealth Brokers

Pvt. Ltd

Sical Adams

Offshore Ltd

Way2Wealth

Commodities Pvt. Ltd

Sical Infra

Assets Ltd

A COMPLICATED

STRUCTURE

Coffee Day Enterprises is the
holding company, but there
are many subsidiaries. An au-
ditor note by BSR &
Associates LLP, dated May
24, 2019, said they had not
audited the financial state-
ments of 40 subsidiaries in-
cluded in the consolidated
annual financial results.

COVER STORY > V.G. SIDDHARTHA