They say bad news travels fast, but if I may put in my two cents; I’d say tragic news travels even faster. And it’s probably this very reason that the tragic news of the disappearance of founder-owner of CCD and serial entrepreneur VG Siddhartha has made its way to every nook and corner of the country.
This shocking disappearance has its origins in a deep rooted problem to do with the system, the very system which businessmen and entrepreneurs are forced to deal with on a daily basis. While most such people do not have the resources or the clout which Mr. Siddhartha possessed and therefore are victims of it; here was a man that had both and yet succumbed to its pressure, and fearing the worst, may have taken the drastic step of ending his life.
Mr. Siddhartha is believed to have gone missing after he got off from his car near the Nethravathi River near Manglore and did not return more than an hour later. Speculations are rife over whether the 60 year old jumped into the swollen river and ended his life.
VG Siddhartha is the founder-owner of the popular coffee chain store Cafe Coffee Day. He and his family also own 12,000 acres of coffee plantations in his native state of Karnataka and have a thriving export business going. He also has his hands in an array of other businesses ranging from investment consulting to the furniture business. A feather in this serial entrepreneur’s cap was that he owned 20% stake (which he recently sold) in Mindtree, a bellwether of the Indian IT sector. Other than his business acumen, he also was presumed to be well connected in the political system, as he was the son-in-law of former Karnataka Chief Minister SM Krishna.
So, what could make a man, who was so well entrenched into the business and political environment take the most drastic of steps?
A letter addressed to the board of directors and shareholders of CCD written by the business tycoon himself and dated 27th of July gives us an idea.
The letter very courteously apologises to all concerned persons for letting them down and also puts the blame on himself for not being able to create the right profitable business model. He also shouldered the responsibility for every financial transaction and said that his team, auditors and senior management were not accountable. However, going forward, the bona fide reason for his action comes to light. The letter goes on to say that tremendous pressure from one of his private equity partners to force him to buy back shares had led to a liquidity crunch, and that unnecessary harassment from the income tax department that was seeking to attach his shares and block the deal to sell his stake in Mindtree led to his fateful decision.
To provide you with a background, Mr. Siddhartha’s flagship company CCD had began to make losses and debts started mounting up, which amounted to roughly ₹ 3,300 crore by 2018. It was to clear this debt that he sold his stake in Mindtree (which he remained invested for 20 years) to Larson & Toubro earlier this year. Add to that, recently, US based beverage giant Coca-cola was in talks to buy his CCD chain for a valuation of ₹ 8,000 – 10,000 crores.
In 2017, the Income Tax Department conducted raids on 25 properties of Mr. Siddhartha and were believed to have unearthed ₹ 650 crores in concealed income. This demand is disputed till date. And, even while VG Siddhartha’s assets were sufficiently more than his liabilities, the department insisted on attaching his shares and holdings in Cafe Coffee Day and Mindtree, thereby causing a hindrance for the sale to L&T, and worst, causing him a massive liquidity problem where he found himself unable to repay his lenders, and according to his letter, it was this liquidity crunch that made him succumb to the situation.
Our only question to the department is that why didn’t they take cognizance of the fact that Mr. Siddhartha had the assets to cover any liability arising from tax demands, and why did they then freeze his bank accounts and attach his shares and disrupt his ability to do business. His companies employed 50,000 employees; did they not factor that in?
In our opinion, this would lead to a massive investigation against those responsible, and we believe it would reach all the way up to the PM, who would be forced to provide answers. And, as the case unfolds, the country would get an ugly glimpse into how the system puts pressure on businessmen and entrepreneurs to meet the unrealistic tax targets set for them by the government.
In the meantime, while our best wishes and prayers are with Mr. VG Siddhartha and his family, and we hope by some miracle he is found safe and sound, logic would dictate otherwise.