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Coffee Day family to sell personal assets to repay VG Siddhartha’s biz ‘anomalies’


The family of the late Coffee Day founderV G Siddhartha has put most of their personal assets, including 10,000 acres of plantations, for sale to repay lenders and to address the fallout of the investigation into the entrepreneur’s suicide last year, said multiple sources.

“Active discussions are going on with potential buyers for nearly 40% of the plantations business, while the search is on for (buyers of) the remaining holdings,” said one of the sources briefed on the matter. A complete sale of plantations may fetch Rs 1,500-2,000 crore, they added, and talks are on with family offices for the sale. But an economic downturn and the possibility of a fire sale could result in “the sale at the right price a tough one”, said this source. The fact that Siddhartha had pledged some of these assets to raise personal loans is likely to make the transactions more complicated, sources said.

While pledging estates to a large private lender, the Coffee Day founder, who is survived by wife Malavika Krishna and two sons, had pegged the value of plantations at Rs 35 lakh per acre. “The actual price is much lower in the current reality,” one of the people cited earlier, and speaking on the condition of anonymity, added.

The board of Coffee Day Enterprises (CDEL) is likely to consider the investigation report being finalised by a former CBI top official Ashok Kumar Malhotra in the coming weeks, which may highlight “certain balance sheet anomalies” as the cause for Siddhartha’s suicide, sources said. The investigation report, commissioned by the board of directors, may point towards a series of related party transactions involving CDEL and private entities of the late founder over the past few years, said a source familiar with the matter. The report is likely to throw up a financial gap in the balance sheet of as much as Rs 2,000-2,500 crore triggered by such transactions, or inflated business figures over the years, said these sources.

The family is also in talks to sell stakes held by Siddhartha in a few private enterprises — such as a pharma platform RL Finechem — to unlock more liquidity.

“The promoter family was not involved in the business at the time of founder V G Siddhartha’s unfortunate demise. They stepped in to assume responsibility of the large and diversified business on the fifth day of the tragedy, while still in a state of shock,” said a Coffee Day Group spokesperson, while adding that priority is to keep the business running and save 30,000 jobs with the group.

“The promoter family and management are fully cooperating with the investigation…The family owns coffee plantations, which command the best prices in the coffee-growing regions. They will sell some of them to clear debt, and also because of their reluctance to manage such large holdings.”

The investigation report is long delayed as it involved combing through the finances of 40-odd group entities, including the personal holding units, which had an estimated debt of Rs 3,500 crore. Siddhartha went missing near Nethravati river in south Karnataka on July 29, 2019 and a subsequent police report confirmed the businessman had committed suicide after recovering his body. In a purported letter by Siddhartha to the board, he had cited pressures from a private equity investor to buy back shares and harassment by the tax department.

As of now, the investigation findings do not point towards any other extraneous pressure which could have led to Siddhartha’s death, said one of the sources mentioned earlier. After the founder’s demise, CDEL has announced plans to divest many of its assets to pare down debt of Rs 4,970 crore. A deal to sell its technology park to Blackstone Group is expected close in the coming weeks, bringing down debt to Rs 3,200 crore.

The company has also been in talks with buyout firms like TPG Capital, KKR and Bain besides strategics for stake sale in the mainstay coffee retailing business, as reported by TOI on November 15. CDEL subsidiary Coffee Day Global operates around 1,200 cafes and more than 56,000 vending machines nationally. CDEL is also in talks to sell Sical Logistics, which could help bring down debt by another Rs 1,650 crore.

Source:- Economic Times