‘I Gave It My All’ Says Cafe Coffee Day Founder VG Siddhartha In Letter
Cafe Coffee Day founder VG Siddhartha wrote to the board of Coffee Day Enterprises Ltd. about failing to “create a profitable business model and succumbing to the situation after tremendous pressure from lenders” in a letter that surfaced a day after he went missing.
“I would like to say I gave it my all. I am very sorry to let all the people that put their trust in me. I fought for a very 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,” the letter said.
On Wednesday, the body of Siddhartha was found on the banks of the Netravati river near Mangaluru, five kilometres from the bridge where his driver last saw him around 36 hours ago.
The letter, given to Manguluru police by Siddhartha's relatives, said that there has been “tremendous pressure” on him from lenders, a private equity partner and harrassment by tax officials. “This was unfair and has led to a serious liquidity crunch,” the letter said.
Karnataka Congress leader DK Shivakumar said the letter was sent on July 27 and that he also received a call from Siddhartha on July 28, requesting a meeting.
Siddhartha asked the board to continue running the business with new management and took sole responsibility of mistakes. “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.”
Shares of the company fell 20 percent amid concerns about the future. The board of Coffee Day called an emergency meeting to review the letter and discuss course of action. “The board has also sought the assistance of local and state authorities, who are doing their utmost, and relevant officers of the company are cooperating with the authorities as requested,” it said in a media statement.
The board is confident that the professional management of the company and each of the entities in the Coffee Day Group and their respective leadership team, will ensure continuity of all business operations consistent with past behaviour.Coffee Day Enterprises Board Statement
The board also said it is formulating steps to ensure business remains unaffected from the ongoing events.
Siddhartha and other founders of Coffee Day pledged have pledged over 75 percent of their holdings as collateral, according to filings. The debt burden had prompted him to start selling assets earlier this year. It included offloading his 20.4 percent stake in Mindtree Ltd., which led to the eventual takeover of the IT firm by Larsen & Toubro Ltd.
Private equity firm KKR & Co. said that it continues to hold 6 percent stake in Coffee Day Enterprises, while expressing sadness on the news of Siddhartha’s disappearance.
We believe in VG Siddhartha and had invested in the company about 9 years ago. We sold approximately 4.25 percent (of our total holding of approximately 10.3 percent in the company) in February, 2018 on the stock exchange and have not sold any shares before or after.KKR & Co. Statement
What The Income Tax Department Said
The Income Tax Department was quick to issue a response. It said the authenticity of the note is not known and the signature on the letter does not tally with Siddhartha's signature in his annual reports. It added that the investigation into Siddhartha and Cafe Coffee Day is “based on the unearthing of a credible evidence of financial transactions done by the CCD in a concealed manner”.
The taxman also said Siddhartha had also admitted unaccounted income of Rs 362 crore and Rs 118.02 crore for Coffee Day Enterprises Ltd. in a sworn statement. “The Income Tax department has acted as per the provisions of Income Tax Act.”