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Curious case of CCD founder: V G Siddhartha was under heavy debt burden

The group diversified and forayed into real estate, hospitality, logistics in recent years

Debasis Mohapatra  |  Bengaluru 

V G Siddhartha
V G Siddhartha

As the search for Coffee Day founder VG Siddhartha continues, the mystery behind the entrepreneur going missing has become murkier with the emergence of a letter addressed to the company board. Though the genuineness of the letter is yet to be established, Siddhartha has allegedly pointed out the pressure from private equity firms for early exits.

Coffee Day Enterprises, the holding firm of Coffee Day, had a total debt of around Rs 6,550 crore as on March 2019. Sources in the know said that debt level of the entity had drastically reduced after Siddhartha's stake sale in Mindtree.

In March this year, he had sold his entire 20.32 per cent stake in the Bengaluru-headquartered IT services firm to engineering major, L&T for around Rs 3,200 crore, which had been utilised to pare some debt from Coffee Day Enterprises' balance sheet. Industry experts said that the Mindtree stake sale to L&T despite opposition from its founders could be linked to the desperateness of Siddhartha to reduce the company's debt, which was taking a toll on the working capital need of the firm due to high-interest outgo. Recently, reports also suggested that the Coffee Day Group was in talks with global beverage maker Coca-Cola for selling a slice of its equity at an enterprise valuation of around Rs 10,000 crore.

(CCD), set up in August 1996, has grown to include 1,750 stores across India with 60,000 vending machines as of now. It also has outlets across Europe as well as in Malaysia, Nepal, and Egypt. The group's coffee business, which includes some exports of the bean, reported a revenue of Rs 1,777 crore in FY18 and Rs 1,814 crore in FY19.

Other than the coffee retail chain and his investment in tech firms, the Coffee Day Group has diversified in its bid to emerge as a business conglomerate. The group forayed into real estate through its wholly-owned subsidiary called Tanglin, which develops technology parks and Special Economic Zones for the IT industry. Its logistics arm, Sical, provides end-to-end solutions in port handling, road, and rail transport areas. The group has also ventured into hospitality through Coffee Day Hotels & Resorts. Way2Wealth is a leading financial service provider from Coffee Day's stable.

Though the total enterprise value of the group is yet to be ascertained as most of them are privately held but some reports had suggested that private equity major Blackstone was in talks to buy a majority stake in Siddhartha’s real estate venture Tanglin Developments for around Rs 2,800 crore. Tanglin has a tech park - 'Global Village', which is a 4-million-sq ft tenanted office space located on a 120-acre campus in Bengaluru, and counts Accenture and Mphasis among its tenants, besides having the headquarters of Mindtree.

"With rising competition from new retail chains and capital intensive nature of some of his businesses, Siddhartha was under pressure. But, the group has better financial health than many other debt-laden conglomerates," said a person familiar with the businesses of Coffee Day Group.

First Published: Tue, July 30 2019. 12:16 IST
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