Coffee Day Private Equity Players, Independent Directors Under SEBI Scanner
Role of some private equity players, their nominees on Coffee Day Enterprises Ltd., and some independent directors, has come under the scanner of Securities and Exchange Board of India in the wake of a crisis at the leading coffee chain operator due to disappearance of its founder and chief VG Siddhartha.
Sources said the regulator is also looking at trading pattern in the company shares and the disclosures made by the company to check any lapses.
Besides, the role of the company’s audit and other board committees and their members is also under the regulatory scanner, sources said.
There are concerns that private equity players do not make sufficient disclosures about their investment pacts and the same is also not disclosed by the respective companies which receive such funds, officials said.
Siddhartha went missing on his way to Mangaluru from Bengaluru on Monday evening, prompting the authorities to launch a massive search on Tuesday.
Days before his disappearance, Siddhartha on July 27 in a letter to the company board and employees had said he was under pressure from one of the private equity partners to buyback shares.
Global buyout major KKR, which holds around 6 percent in Coffee Day Enterprises currently, said it is “deeply saddened” by the disappearance of Siddhartha.
KKR mentioned that it had invested in the popular coffee chain nine years ago and part-exited the investment last year.
Siddhartha in the letter has also alleged that that there was a lot of harassment from the previous Directorate General of Income Tax in the form of attaching “our shares on two separate occasions to block our Mindtree deal and then taking position of our Coffee Day shares, although revised returns have been filed by us”.
After the news of Siddhartha’s disappearance broke, eminent business leader Kiran Mazumdar Shaw tweeted, “It seems to indicate that the private equity fund manager acted like a money lender and seems to have caused unbearable stress - needs to be investigated.”
Shares of Coffee Day Enterprises Ltd. dropped 20 percent on Tuesday, eroding Rs 813 crore from its market valuation, after reports surfaced that its Chairman and Managing Director VG Siddhartha has gone missing.
The scrip tumbled 19.99 percent to Rs 154.05—its 52-week low as well as its lower circuit limit—on the BSE.
On the National Stock Exchange, shares plummeted 20 percent to its lowest trading permissible limit for the day as also its one-year low of Rs 153.40 apiece.
Led by the massive drop in its share price, the company’s market valuation dived Rs 812.67 crore to Rs 3,254.33 crore on the BSE.