Why did the Coffee King commit suicide?

Bengaluru: ‘In a dire situation, I feel we’ll somehow get out of it. As an entrepreneur, you just can’t afford to lose hope. Your body better be like a shock absorber ...” These were the words of VG Siddhartha, founder-chairman of Cafe Coffee Day to a Indian media outlet in an interview in 2016. Three years later, his apparent suicide has left the country in shock. Called Coffee King, Siddhartha launched in 1996 India’s largest coffee retail chain and was, as many of his friends recall, a simple, unassuming man who often stood in queue, incognito, in his own coffee retail outlets, ordering an espresso and making a quiet exit.

His body was found in Karnataka’s Netravathi river yesterday early morning near the area where he had got down from his car on Monday and told his driver that he was going for a walk.

“Two fishermen found Siddhartha’s body early this morning about 500 metres away from the road bridge from where he allegedly jumped into the river on Monday night,” a Mangaluru Police Commissioner Sandeep Patil said.

If you want to build a business for a year, grow vegetables; if you want to build a business for a decade, grow fruits; if you want to build a business for generations, hand it over to professionals.

- V.G. Siddhartha, Founder-chariman of Cafe Coffee Day

The body was identified from the gold ring on the right hand finger, the digital watch that was still strapped to the left hand and the shoes that Siddhartha was wearing when he is believed to have jumped off the road bridge. A purported letter written by him indicated that pressure from banks, investors and tax authorities drove him to end his life.

His body was taken to Chattanahalli, his village, in Karnataka’s Chikkamagaluru district yesterday afternoon, and the last rites performed at one of his coffee estates by evening, a family source said.

Siddhartha is the elder son-in-law of ruling Bharatiya Janata Party leader, S.M. Krishna, who was also former chief minister of Karnataka (1999-2004) when he was with the Congress party. Siddhartha is survived by his wife and two sons.

Coffee Day Enterprises has named S.V. Ranganath as Interim Chairman.

What went wrong with cafe coffee day?

Coffee Day Enterprises, the holding firm of Coffee Day, had a total debt of around Rs65.50 billion (Dh3.49 billion) as on March 2019. Coffee Day Enterprises Ltd had seen net loss widening to Rs6.77 billion in the fiscal year ended March 31, 2018, from Rs222.8 million loss in the previous year. The group’s coffee business, which includes some exports, reported revenues of Rs177.7 billion in the financial year 2017-18 and Rs181.4 billion in financial year 2018-19. This despite revenues climbing 59 per cent to Rs1.22 billion.

Besieged from all sides, his core business of coffee too, was badly hit. A 13-year-low coffee price in the international market dragged Indian prices also to multi-year lows despite lower domestic production. Indian coffee exports too are expected to be down 10 per cent this year.

The mountain of debt was among Siddhartha’s greatest challenges as working capital requirements could not be met.

Earlier this year in March, he had sold his entire 20.32 per cent stake in his Bengaluru-headquartered IT services firm, MindTree, to engineering major, L&T, for around Rs320 billion, which helped pare down the debt from Coffee Day Enterprises’ balance sheet.

In fact, Siddhartha was looking to sell stakes in most of his businesses to pare down his debt.

He was also in talks to sell Coffee Day Enterprises, where he held 32.75 per cent stake, to Coca-Cola for as much as $1.45 billion (Dh5.33 billion).

Could siddhartha have found a way out of his debt trap?

The MindTree sale had vastly improved Siddhartha’s financial condition. He was also reportedly in talks to sell his real estate venture Tanglin Developments Ltd to New York-based private equity giant Blackstone Group, which if it had come through, would have further cut his debt.

His apparent suicide has therefore has left many questions unanswered.

According to media reports, Siddhartha’s problem was to try and meet his short-term rolling debt. He was reportedly in talks with a lender for a loan of about Rs 160 billion, a deal that sources did not materialise, putting extreme pressure on him. Many in the industry are perplexed at his decision to end his life as his financial assets were vastly more substantive than his debts.

The reluctant coffee king’s rise to success

Siddhartha wanted to be an investment banker and had little interest in his family’s coffee business. But a chat with the owners of German coffee chain, Tchibo, got him to set up Cafe Coffee Day. He decided to open his own chain of cafes in a country that had no formative cultural grounding in cappuccinos. He opened Cafe Coffee Day’s first outlet on Bengaluru’s upscale Brigade Road in 1994 with a tag line ‘A lot can happen over a cup of coffee’. It’s now the largest chain of coffee shops in India, a nation of tea drinkers, with 1,750 cafes in more than 200 cities, including outlets in Prague, Vienna and Kuala Lumpur. Coffee Day went public in 2015.

There are currently 200 exclusive retail outlets selling his brand of Cafe Coffee Day powder all over South India.

Coming from a family that has a 140-year history of growing coffee, Siddhartha, initially dabbled in stock trading and wanted to work as an investment banker in Mumbai after completing his Master’s degree in Economics from Mangaluru University.

In 1984, he launched his own investment and venture capital firm Sivan Securities in Bengaluru and began investing the profits from his start-up to buy coffee plantations in Karnataka’s Chikkamagaluru district.

Around this time, he also began taking interest in his family’s coffee business. In 1993, he set up a coffee trading company called Amalgamated Bean Company (ABC) with an annual turnover of over Rs60 million and over the years it increased to more than Rs2.5 billion.

A. P. Srivatsan, founder director of Bengaluru-based firm, Collaborant Incubators, who met Siddhartha on some occasions, told Gulf News: “In the period 2001-2003, my company worked with Cafe Coffee Day on creating vending machine solutions. I met Siddhartha a few times, though my primary interaction was with his team. One thing that he said which stands out in my mind is: ‘If you want to build a business for a year, grow vegetables; if you want to build a business for a decade, grow fruits; if you want to build a business for generations, hand it over to professionals.’ He didn’t visualise a company with an international footprint, he wanted to provide employment to the rural backward people. And CCD will survive this crisis because that’s how Siddhartha built it.”

A woman who hails from the same village as Siddhartha told Gulf News: “His family estate is in Chetanahalli and he was born in Thekkodu in Mudgere taluka. His father Gangayya is said to have started out with 50 acres of coffee plantation. It was Siddhartha who had the vision to create an international brand with coffee grown in this humble village. He wanted to eradicate poverty, provide employment to rural youth and he did just that. Poor students who came to him for help were never turned away. And this is why his legacy will thrive forever.”

The income tax raid

In September 2017, the Income Tax Department first raided premises of Cafe Coffee Day and found Rs65 billion in concealed income from the documents seized.

The Income Tax department has denied charges of harassment during their probe against Siddhartha. In a statement issued in Bengaluru, it said that to protect the interests of revenue, the department did the provisional attachment of shares. And that it is a norm in cases of large tax evasion. The action was based on credible evidence gathered in the search operation that was undertaken against the Cafe Coffee Day group in 2017.

The statement further alleged that Siddhartha fetched Rs32 billion from the sale of Mindtree shares, but ended up paying only Rs460 million out of the total Rs3 billion minimum alternate tax payable on the deal.

IT officials have maintained that Siddhartha had admitted to stockpiling income after raids were conducted against him and his business concern. And in a sworn statement, he admitted to an unaccounted income of Rs36.21 billion in his hands and Rs11.80 billion in Coffee Day.

The statement claimed that the promoter filed his IT returns, but without mentioning the unaccounted income in the sworn affidavit.

The suicide note was not fake

In the wake of Siddhartha’s disappearance and his letter that was widely circulated on social media, India’s IT officials had pointed out that the signatures of the entrepreneur available with them (on CCDs annual report) differ from those on the letter.

Countering the department’s claim, Coffee Day Enterprises Ltd confirmed the authenticity of the letter Siddhartha wrote to the company’s board of directors on July 27.

“The board also reviewed a copy of the letter purportedly signed by Mr V. G. Siddhartha, dated July 27, 2019, and has shared a copy of the letter with relevant authorities,” the city-based firm said in a regulatory filing on the Bombay Stock Exchange (BSE).

It also admitted that the note or letter circulating on social media was the last Siddhartha wrote to the board.

A psychology expert’s viewpoint:

Dr Dayal Mirchandani, a psychiatrist based in Mumbai with more than three decades of experience in the field, attempts to throw light on why successful individuals succumb to despair. “It’s hard to say what is on the mind of a person who is committing suicide; we are speculating here. There may be multiple stressors in various aspects of business. Some of the possibilities that come to mind are that in such difficult circumstances, successful people fear loss of face more than loss of money. This may be true especially of those who [have set benchmarks] and have been put on a pedestal. When faced with a crisis, they may be unable to see a way out. This happens in a state of depression when the individual gets tunnel vision, so although there may be alternatives, they feel death is the only way out. And it is hard for close family and co-workers to suspect this because even as they plan and strategise suicide, they appear carefree and cheerful. However, it needs to be stressed that this is a difficult time for the people left behind; family and co-workers. They key issue here is not just how the business will hold up, but how the individuals affected will move through the crisis. Their emotional health and healing should be top priority.”

Timeline:

Monday July 29: Siddhartha goes missing in the evening hours. Earlier in the day, he had left the city of Bengaluru by car and was headed to Sakleshpur in Hassan district where he has a house near one of his coffee estates. En route, he changes his mind and reportedly asks his driver, Basavaraj Patil, to drive him towards the town of Mangaluru. En route, he asks Patil to stop the car near a bridge that spans a river near Ullala. He informs his driver that he is going for a walk. After waiting for over an hour, Patil calls Siddhartha’s son, Amartya, informing him of his father’s disappearance.

Tuesday, July 30: A missing person’s report is filed at 12.45am and police begin search operations.

Wednesday, July 31:  Two fishermen find Siddhartha’s body early in the morning about 500 metres away from the spot where he was last seen walking towards the bridge.

— With inputs from Sandhya Rajayer, Bengaluru-based writer; and Nilima Pathak, Correspondent, New Delhi