Body of India Coffee Tycoon Found as Letter Hints at Debt Woes
(Bloomberg) -- V. G. Siddhartha, the man who founded India’s biggest coffee chain more than a decade before Starbucks Corp. entered Asia’s third-largest economy, has died, police said.
Siddhartha went missing on Monday after he went for a walk near a bridge close to the southern Indian city of Mangaluru. His body has been found, the city’s police commissioner Sandeep Patil said by phone on Wednesday. Patil didn’t elaborate.
Coffee Day Enterprises Ltd., a company Siddhartha founded, on Tuesday released a letter purportedly written by him to the board about “succumbing to the situation” because of pressure from lenders, one of the private equity partners, and harassment by tax officials. Coffee Day’s external media representatives on Wednesday said they couldn’t immediately comment.
The company’s shares plunged by the 20% limit in Mumbai. Siddhartha whose cafe network traces its roots to the IT hub of Bengaluru in 1996, didn’t return after telling his driver he was going for a walk on Monday.
Siddhartha and other founders of Coffee Day pledged about 76% of their holdings as collateral, according to filings. The debt burden prompted him to start selling assets earlier this year. In April, he sold a 20% stake in software services firm Mindtree Ltd. to engineering giant Larsen & Toubro Ltd. He was seeking a valuation of as much as $1.45 billion from Coca-Cola Co. to sell a stake in Coffee Day, the Economic Times newspaper reported last month.
“I gave it my all but today I gave up as I could not take any more pressure,” according to the letter dated July 27. The harassment by tax officials and pressure from lenders led to a “serious liquidity crunch.”
The company is taking help from concerned authorities, and its leadership team will “ensure continuity of business,” Coffee Day said in an exchange filing on Tuesday.
Shares of Sical Logistics Ltd., another company where Siddhartha’s family is a large investor, also plunged 20%. Sical had total debt of 11 billion rupees at the end of March, while loans at Coffee Day jumped 29% from a year earlier to 65.5 billion rupees, according to data compiled by Bloomberg.
Coffee Day went public in 2015, nearly two decades after opening its first cafe in Bengaluru, selling shares at 328 rupees apiece. A unit of private equity firm KKR & Co. owns 6.07% of the company, while Nandan Nilekani, co-founder of Infosys Ltd., has a 2.69% stake.
Coffee Day has about 1,700 outlets, 10 times more than Starbucks runs in the nation, according to the National Restaurant Association of India.
“We are deeply saddened by the developments and our thoughts are with his family at this time,” KKR said in an email. The fund sold 4.25% of its holding of about 10.3% last February and haven’t sold any shares before or since, according to the email.
Siddhartha, who began his career as an investment banker, had sleepless nights when Starbucks entered India, according to an article he wrote for the Outlook magazine in 2016.
He had a “miserable moment” when Coffee Days stock tanked at its debut, giving him “quite an ego blow,” he wrote in the column.
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