Last year, Café Coffee Day founder had to pay a huge price for borrowing heavy sums with exorbitant interest rates. This and much more is revealed by the probe report that has not yet made public.
After slipping into a quicksand of financial crisis as he repeatedly borrowed high cost finds from banks and private firms, late VG Siddhartha pledged several personal assets including some that were owned by other family members. The whole fiasco reached to a point where the return was almost not guaranteed. He also failed to procure an investor to save his company. The BusinessLine has accessed the 15-page executive summary of the investigation report.
The report has documents of various transactions that were not a part of another detailed report that was submitted to the stock exchanges on the 24th of July. The report of 24th July had said that the Mysore Amalgamated Coffee Estates Limited, the entity owned by Siddhartha, owes over 3,500 crores to CDEL subsidiaries. The report traces the entire investment journey of Siddhartha until the auditors failed to raise the red flags. The report also says,
“The silence of every watchdog that refused to bark emboldened him to carry on with his business model, while simultaneously silencing all his critiques, both within the company and outside.”
Debt Kept Increasing
Almost every asset of Siddhartha and close family members had been pledged to facilitate borrowings. When one loan became too tight gripped, he looked towards other borrowings to clear off the previous loans. This led to a debt-driven model of the survival of his business. The report said,
“Siddhartha began to sink deeper into the proverbial quicksand eventually to get buried by the hydraulic pressure of debt and his own promises. In retrospect, Siddhartha was the hero and villain of the piece.”
Siddhartha was reportedly hopeful for an investor who would value his business and buy the holdings in order to bail him out of the debt but the investor never came. There were reports that a major soft drink chain was keen on taking over Café Coffe Day for 1 billion dollars but the deal fell through at the last minute.
Source: BusinessLine
