Mysore Amalgamated Coffee Estates Ltd. (MACEL), an entity belonging to late VG Siddhartha, owes ₹3,535 crore to the subsidiaries of the listed entity, Coffee Day Enterprises Ltd (CDEL). MACEL, an entity described as ön the “personal business side” of the late VG Siddhartha in the probe report, was paid advances by CDEL’s subsidiaries Of this, ₹842 crore was due to these subsidiaries by MACL as of March 31, 2019. The balance ₹2,693 crore is the incremental outstanding that needs to be addressed, says the report.
In August last year, CDEL had asked Ashok Kumar Malhotra, retired DIG of the Central Bureau of Investigation, to probe the purported letter written by founder-chairman of the company, VG Siddhartha before his death.
The report also said a significant portion of the money may have been probably spent to “buy-back” equity from PE investors, repay loans and to pay interest apart from funding certain other private investments which “are outside the scope of this investigation”.
The debt levels, which were approximately ₹7,200 crore as on March 31, 2019, have been brought down by ₹4,000 crore till date. At present, the debt is about ₹3,200 crore.
It said that MACEL, an entity on the “personal business side” of Siddhartha had a continuing business relationship with subsidiary companies of CDEL. MACEL was paid advances by subsidiary companies of CDEL. Steps are being taken by subsidiaries of CDEL to recover dues from MACEL. The board has authorised the chairman to appoint a former judge of either the Supreme Court or High Court to suggest or monitor actions for recovery of the dues. The personal assets/shares of Late Siddhartha were hypothecated/pledged for business loans of the company and its subsidiaries. He also gave personal guarantees for the company and provided a personal guarantee of his family members, the statement from CDEL said.
The report further went on to add that the investigation team is broadly in agreement to the statement made by late Siddhartha that he failed to create the right profitable business model despite his best efforts “as it was created largely out of high-cost borrowings and PE investments carrying a high rate of returns.”
“We are of the opinion that late Siddhartha may have felt aversive behavioural stimulus due to persistent reminders from the PE investors and other lenders,” the report said. However, such reminders and the followups by the PE investors and lenders are not something which is beyond normal industry practices and we believe that PE investors were acting as per accepted legal and business norms, it said.
The probe report pointed out that no documentary evidence was provided to the team to draw an inference that there may have been any advertent or inadvertent harassment from the Income-Tax Department. “In summation, all these created a serious liquidity crisis probably accentuated by macro-economic developments which restricted the ability of VGS to borrow further.”
Meanwhile, the wife of late Siddhartha in a letter to the employees of CDEL has said that she is resolutely committed to the future of Coffee Day as a going concern. “Coffee Day is a genuine Indian consumer story worth preserving,” she wrote in her mail.