In an explosive revelation, data swept from stock exchanges and Ministry Of Corporate Affairs' filings has unraveled that deceased Cafe Coffee Day promoter VG Siddhartha may have been under an enormous debt pile of up to Rs 11,000 crore, even though it's a mystery where such large funds were deployed and how. While listed firm Coffee Day Enterprises reported a debt of Rs 6,547 crore on 31 March, 2019, fresh data from Siddhartha and promoter group's 4 private holding companies reveals they had outstanding pledges worth Rs 3,522 crore as of fiscal 2018-19.
Besides, Siddhartha, along with two other CDEL directors, had given personal guarantees towards loans worth Rs 1,028 crore raised by Coffee Day Enterprises, the listed firm, according to CDEL's 2017-18 annual report. Four promoter companies of coffee king VG Siddhartha's Coffee Day Enterprises Limited (CDEL) had mortgaged shares worth over Rs 3,522 crore to various lenders since 2014 to raise loans, data collated from companies' declarations has revealed.
It's still unclear how much of private holding companies' pledges were towards loans raised by CDEL. Or, whether most of it was towards loans in personal capacity. But at some point the peak debt of Rs 11,096 crore may have become unmanageable for the coffee king forcing him to take the extreme step of jumping to death on July 29, 2019. Especially, since falling share price requires promoters to make up the gap through more assets. Else, lenders rush to invoke the pledged shares.
Listed firm Coffee Day Enterprises stock had fallen by 48 per cent from its peak of Rs 374.60 on January 22, 2018 to Rs 192.55 at closing on July 29, 2019, the day of his suicide - resulting in an erosion of Rs 3,541 crore in market cap. Siddhartha and his group entities held 53.93 per cent stake in Coffee Day Enterprises, of which 75.70 per cent was pledged as of June 30.
THE LAST LETTER'S TRUTH
These revelations confirm Siddhartha's purported statement in his last letter regarding the debt burden and lenders' pressure he could not cope with. His letter before his alleged suicide on July 29 mentioned his inability to cope with the company's debt and his face-off with the income tax authorities as reason for "failing as an entrepreneur".
However, he listed all his assets worth nearly Rs 18,000 crore as enough to pay off all the liabilities. "I have enclosed a list of our assets and tentative value of each asset... our assets outweigh our liabilities and can help repay everybody," he says in his last letter.
New data from four promoter companies -- Devadarshini Info Technologies, Coffee Day Consolidations, Gonibedu Coffee Estates, and Sivan Securities - reveals they raised funds by mortgaging shares held in the listed company Coffee Day Enterprises between 2014 and 2019. These companies had combined shareholding of 17.13 per cent in CDEL. Coffee Day Consolidations Private raised the maximum Rs 1,533.57 crore followed by Devadarshini Info Technologies' Rs 1,171 crore.
Devadarshini Info Technologies holds 5.87 per cent shares in CDEL, and pledged shares on various loans and mortgages amounting to 83.08 per cent of its holding. Coffee Day Consolidations has 5.81 per cent shareholding in CDEL, while its pledged shares amount to 95.94 per cent. Similarly, Gonibedu Coffee Estates holds 5.24 per cent shares in Coffee Day and its pledged share amount to 78.94 per cent. Sivan Securities has pledged 99.9 per cent shares and its holding in Coffee Day Enterprises is at 0.21 per cent.
WHAT WERE THE COMPANIES UP TO?
These private holding companies had mortgaged shares to different private investors, including IDBI Trusteeship Services Limited (likely on behalf of a consortium of banks), 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.
Most recently, Sivan Securities raised Rs 15 crore on April 11, 2019 against pledge to state-owned IDBI Trusteeship. Coffee Day Consolidations raised Rs 200 crore on March 22, 2019, and Rs 310 crore on March 28 by mortgaging shares to Kotak Mahindra Investments and IDBI Trusteeship Services, respectively. Year-wise, these firms raised funds thrice in 2019: 17 times in 2018: four times in 2017: once in 2016: and four times in 2014. In most cases, these group companies had pledged shares held in the listed company Coffee Day Enterprises.
As regards loans for which Siddhartha stood guarantor, according to CDEL's annual report, loans worth Rs 2603 crore were taken on personal guarantee. The top five lenders 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).
Meanwhile, Tata Capital Financial Services has said that its exposure has been completely repaid. "Currently, Tata Capital Financial Services Ltd, a subsidiary of Tata Capital Ltd, has no exposure to Coffee Day Enterprises Limited (CDEL) or to any of the companies within the Cafe Coffee Day group," a Tata Capital Financial Services spokesperson told BusinessToday.In.
ICICI Prudential Mutual Funds, in a statement, clarified that currently none of the schemes of ICICI Prudential Mutual Fund had any exposure to any of the Cafe Coffee Day group companies. "In the past, the investments of the scheme of ICICI Prudential Mutual Fund debt instruments issued by Cafe Coffee Day Group companies were primarily secured by pledge of shares of Mindtree Ltd. All these investments were repaid in full and on time," the company said.
VG Siddhartha not only sold IT firm Mindtree for over Rs 3,269 crore, raking in a profit of Rs 2,858 crore, but Coffee Day Enterprises even paid off Rs 2,100 crore worth of loans to pare debt to around Rs 4,400 crore. His company was profitable too. Coffee Day Enterprises reported revenue of Rs 4,264 crore in fiscal 2018-19 with a PAT of Rs 128 crore, its third successive year of profitable operation.Also read: VG Siddhartha made a profit of Rs 2,858 cr from his Mindtree stake sale to L&T