Coffee king Siddhartha's death exposes India's mounting debt crisis

Siddhartha's death marks a tragic turn for an admired member of India's business elite and an executive closely connected to the highest echelons of the political sphere.

Business Standard : Even before the body of coffee-chain tycoon V.G. Siddhartha was recovered from a river in southern India this week, the financial strains that appear to have led him to take his own life were beginning to emerge.

A letter purportedly written and signed by Siddhartha and sent to senior management of Coffee Day Enterprises Ltd. laid out in stark words his struggles with a “serious liquidity crunch” that in turn had led to "tremendous pressure" from lenders and an unnamed private-equity investor.

“I would like to say I gave it my all,” Siddhartha wrote. “I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I gave up.” He sent the note to the board on July 27. Two days later, the executive was reported missing after telling his driver he’d go for a stroll.

Siddhartha’s death marks a tragic turn for an admired member of India’s business elite and an executive closely connected to the highest echelons of the political sphere. Over the course of more than two decades, Siddhartha built a java empire that now boasts more than 1,700 stores -- ten times as many outlets as Starbucks Corp. in India -- as well as 54,000 vending machines, almost single-handedly introducing his tea-loving country to coffee shops and making his Cafe Coffee Day chain a household name.

Refinancing Loans

But what was less known was that for all his company’s scale and ubiquity, Siddhartha struggled with a mounting financial burden. A review of the public disclosures of Siddhartha’s personal debt reveals how he spent much of the two years before his death putting up ever more of his Coffee Day shares to refinance loans for ever shorter periods, at ever higher rates of interest.

At Coffee Day itself, short-term debt more than doubled in the financial year ended March. Siddhartha spent most of his last two weeks in Mumbai trying to raise funds to pay down debt, according to a person familiar with the matter. He had payments due in July and August, the person said. Coffee Day’s board held an emergency meeting on July 30, saying it’s confident that it can “ensure continuity of all business operations consistent with past behavior.”

The apparent suicide of the Indian entrepreneur has touched a nerve with the corporate elite of India, where business leaders face mounting strain from an economy-wide cash crunch and slowing growth. The anxiety laid out in Siddhartha’s letter, with multiple references to pressure from lenders and stakeholders, is an unwelcome scenario for Prime Minister Narendra Modi as he begins his second term with promises to turn India into an economic powerhouse, even as its commercial engine shows increasing signs of sputtering.

Cafe Coffee Day founder V G Siddhartha's body found from river: Report

Siddhartha, the founder of India's largest coffee chain, went missing on Monday night en route to the coastal Karnataka city of Mangaluru.

The body of Cafe Coffee Day founder V G Siddhartha has been found from the Nethravathi river, according to TV reports on Wednesday.

Siddhartha's body was found on the banks of the river near the Hoige Bazaar in Mangaluru, according to news agency ANI.

Siddhartha, the founder of India’s largest coffee chain, went missing on Monday night en route to the coastal Karnataka city of Mangaluru, with a letter purportedly written by him showing he was under "tremendous pressure" from lenders and one of the private equity partners (PEs). The letter also alleged "a lot of harassment" from tax authorities.

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A massive search operation involving teams of the National Disaster Response Force, Coast Guard, Home Guard, fire services and coastal police had continued throughout Tuesday. Search teams had scoured the waters under a bridge across the Nethravathi river near Mangaluru where the 60-year-old businessman was reportedly last seen.

The son of a coffee plantation owner, Siddhartha had created the Indian rival to Starbucks. Coming from a family that has a 140-year history of growing coffee, he initially dabbled in stock trading, before setting his foot in the coffee business.

After being inspired by a chat with the owners of German coffee chain Tchibo, Siddhartha decided to open his own chain of cafes in India. With the tag line 'A lot can happen over a cup of coffee', he opened Cafe Coffee Day's first outlet on Bangalore's upscale Brigade Road in 1994.

It's now the largest chain of coffee shops in India, with 1,750 cafes in more than 200 cities, including outlets in Prague, Vienna and Kuala Lumpur. Coffee Day went public in 2015.

In 1999, Siddhartha was roped in by IT veteran Ashok Soota when Subroto Bagchi, Rostow Ravanan and KK Natarajan were putting together IT firm Mindtree.

Business Standard