VG Siddhartha’s total debt may have touched Rs 11,000 crore
Cafe Coffee Day founder VG Siddhartha, who committed suicide a few days ago citing financial stress, may have been forced to take the extreme step as he was under a massive debt pile.
Data retrieved from stock exchanges and the Ministry of Corporate Affairs reveal that the deceased founder of India’s first coffee chain may have accumulated a debt which peaked at over Rs 11,000 crore, reported Business Today.
Besides the liability of listed firm Coffee Day Enterprises Limited (CDEL), which reported a debt of Rs 6,547 crore on March 31, 2019, his group’s four private holding companies had outstanding pledges worth over Rs 3,522 crore as of the fiscal year 2018-19, show fresh data.
The four promoter companies of VG Siddhartha’s CDEL had morgatged shares worth over Rs 3, 522 crore to various lenders since 2014 in order to raise fresh loans, show data retrieved from company declarations.
It has also come to light that Siddhartha and two other CDEL directors had given personal guarantees towards loans to the tune of Rs 1,028 crore, which was raised by CDEL, shows the firm’s 2017-18 annual report.
While investigations are on, there is no clarity on how much of the private holding companies’ pledges were towards the loans raised by listed firm, CDEL.
At some point in time, the total debt pile of Siddhartha’s coffee empire at Rs 11,096 crore became too much for him to cope with, leading him to take the extreme step of committing suicide.
Siddhartha’s troubles amplified as shares prices of CDEL declined rapidly during the past one year, forcing him to pledge more shares in order to clear pending debts as lenders turned up the heat.
According to information from the stock exchanges, CDEL’s share price had dipped by 48 per cent from its peak of Rs 374.60 crore on January 22, 2018 to Rs 192.55 at closing on July 29, 2019-the day he committed suicide.
The total gradual erosion in market capitalisation of CDEL during the period was Rs 3,541 crore.
Siddhartha and his group entities held around 53.93 per cent stake in CDEL, out of which over 75 per cent was pledged as of June 30.
In his last letter, which he wrote before committing suicide, Siddhartha mentioned that he was unable to cope with the company’s mounting debt and he was facing extreme harassment by income tax authorities.
Fresh data related to the four promoter entities of Siddhartha – Devadarshini Info Technologies, Coffee Day Consolidations, Gonibedu Coffee Estates, and Sivan Securities – reveal that all of them had raised funds by mortgaging shares held in CDEL between 2014 and 2019.
These companies had a combined shareholding of 17.13 per cent in CDEL. While Coffee Day Consolidations, which has 5.81 per cent shareholding in CDEL, raised the maximum amount at Rs 1,533.57 crore followed by Devadarshini Info Technologies, which raised Rs 1,171 crore.
Out of its 5.87 per cent shareholding in CDEL, it had pledged shares to the tune of 83.08 per cent of its holding towards various loans and mortgages. Coffee Day Consolidations, on the other hand, had pledged shares to the tune of 95.94 per cent of its shareholding in CDEL.
The situation is no different in case of Gonibedu Coffee Estates, which holds 5.24 per cent shares in CDEL; it pledged shares to the tune of 78.94 per cent of its shareholding in the listed firm.
Meanwhile, Sivan Securities had pledged 99.9 per cent shares towards servicing pending loans.
All of the aforementioned private holding companies, which belonged to Siddhartha, had mortgaged shares to different private investors, including IDBI Trusteeship Services Limited, Standard Chartered Bank, Shapoorji Pallonji Finance Private Limited, Axis Finance Limited, The Hong Kong and Shanghai Banking Corporation Limited, Clix Finance India Private Limited, AK Capital Finance Private Limited, Kotak Mahindra Prime Limited, STCI Finance Limited, IFCI Limited and ECL Finance Limited.
Among the latest activity, Sivan Securities raised Rs 15 crore on April 11, 2019 against a pledge to state-owned IDBI Trusteeship. Earlier in March, Coffee Day Consolidations had raised a total of Rs 510 crore by mortgaging shares to Kotak Mahindra Investments and IDBI Trusteeship Services.
The private entities had raised funds or loans thrice in 2019, 17 times in 2018, four times in 2017, once in 2016 and four times in 2014.
In most of the cases, Siddhartha’s promoted companies had pledged shares held in CDEL. Apart from that, Siddhartha himself stood as a personal guarantor for loans taken to the tune of Rs 2,603 crore.
The top five lenders to Siddhartha, where he was a personal guarantor, include Axis Bank (Rs 360 crore), ICICI Prudential Asset Management Company (Rs 347.2 crore), Aditya Birla Finance (Rs 277.9 crore), Tata Capital Financial Services (Rs 163 crore) and DEG (Rs 141.6 crore).
He sold IT firm Mindtree for an amount over Rs 3,270 crore and made a profit of almost Rs 2,900 crore. However, CDEL had to pay off Rs 2,100 crore worth of loans to pare the debt to around Rs 4,400 crore.
