VG Siddhartha and two other directors provided personal guarantees worth Rs 1,028 crore for Coffee Day Enterprises' loans totalling Rs 2603 crore, says CDEL's 2017-18 annual report. These loans were availed from 25 lenders. Siddhartha, whose suicide rocked the corporate world in India, was one of the three directors of the listed company. The other two guarantors were company directors Bobbie H Karla and Harmit Karla.
As of March 2019, the total debt of Siddhartha's listed company Coffee Day Enterprises Limited's (CDEL) was reported at Rs 6,547.38 crore. In addition to this, the Coffee Day group promoter entities had mortgaged shares worth Rs 3,522 crore to various lenders between 2014 and 2019 to raise loans. Besides, these 4 promoter companies also raised-and repaid--loans of Rs 147.8 crore between 2012 and 2014.
Interestingly, VG Siddhartha had an outstanding loan worth Rs 446 crore from CDEL as of March 2018. The amount increased by 105 per cent since March 31, 2017, when the amount stood at Rs 217.2 crore.
His last letter before suicide on July 29 mentioned his inability to cope with pressure over onerous debt burden and his face-off with the income tax authorities as reason for "failing as an entrepreneur". The entire debt of listed company Coffee Day Enterprises, coupled with loans raised by group entities, throws light on the weak financials of Siddhartha's empire.As of March 31, 2019, of the total loans availed by CDEL, Axis Bank had the maximum exposure of Rs 360 crore. These loans were given on 'personal guarantee' at 10.65 per cent interest rate. In all, eight loans worth Rs 703.7 crore taken from various lenders were debentures at an interest rate of up to 14.5 per cent, while CDEL took four 'term loans' worth over Rs 1800 crore at an interest rate of up to 13.75 per cent. The top four financial institutions that lent money to Coffee Day Enterprises on 'personal guarantee' included Axis Bank (exposure Rs 360 crore); ICICI Prudential Asset Management Company (Rs 347.2 crore); Aditya Birla Finance Limited (Rs 277.9 crore); and DEG (Rs 141.6 crore).
VG Siddhartha's alleged suicide revealed the immense debt burden over the company he set up in 1996. From one store in 1996 to 1,752 by December 2018, the company became India's answer to multinational giants like Starbucks and Costa Coffee. But, in his letter, Siddhartha said his intention was never to "cheat or mislead" anyone, which indicates he was under pressure over the piling debt and weak financial health. The increasing pressure from equity investors and alleged 'harassment' by income tax left the group in significant liquidity crunch.
Despite these financial tangles, Siddhartha was not really in a position where he could not have paid up the debt. He sold 20.32 per cent stake in IT firm Mindtree for Rs 3,269 crore, raking in a profit of Rs 2,858 crore, which he used to pay off Coffee Day Enterprises' Rs 2,100 crore worth of loans and 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.