The death of V.G. Siddhartha, the founder of Bangalore-headquartered coffee chain Cafe Coffee Day – an Indian version of Starbucks – has sent shockwaves through corporate India, which is currently battling economic slowdown and worsening investment climate.
Siddhartha went missing on June 29 while heading to Mangalore, a town 230 kilometers away from Bangalore, in his car. According to his driver, he got out near the Netravati River, issuing instructions to drive further and wait for him, but he never returned. Latest reports state that his body was found nearly a kilometer downstream from where he’d last been seen.
Before taking the extreme step, the coffee chain owner had purportedly written a letter dated July 27 that alleged pressure from a private equity partner and harassment from tax authorities.
Addressing the board of directors and employees, whom he referred to as “Coffee Day family,” he stated that despite his best efforts he’d been unable to create a “profitable business model.”
“I fought for a long time, but today I gave up because I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend.”
The letter also stated, “There was a lot of harassment from previous DG [director general], Income Tax, in the form of attaching our shares on two separate occasions to block our MindTree deal and then taking position of our Coffee Day shares, although the revised returns have been filed by us. This was very unfair and led to a serious liquidity crunch.”
Siddhartha had recently concluded the sale of his 20% stake in IT serices provider MindTree to Larsen & Toubro after much delay.
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The Income-Tax department has denied charges of harassment and also doubted the authenticity of the signature in the letter, saying it did not match with what the department had in its documents. Officials claimed that the need to investigate Siddhartha and his company arose following a raid on a politician in Karnataka state. The raid on Siddhartha and Cafe Coffee Day were conducted based on “credible evidence” and officials did come across unaccounted income, they said.
Siddhartha was the son-in-law of S.M. Krishna, a prominent politician and former chief minister of Karnataka state. Krishna joined the ruling Bharatiya Janata Party in 2017, after being with the Congress party for nearly five decades.
Tax authorities said that Siddhartha fetched 32 billion rupees (US$465 million) from the sale of Mindtree shares, but paid only 460 million ($6.68 million) rupees out of the total 3 billion rupees ($43.57 million) minimum alternate tax payable on the deal.
Countering the Income Tax Department’s claim, The Coffee Day Enterprises confirmed the authenticity of the letter as coming from its founder. “The board also reviewed a copy of the letter purportedly signed by V.G. Siddhartha dated July 27, 2019, and has shared a copy of the letter with relevant authorities,” the firm said in a regulatory filing on the Bombay Stock Exchange.
Some of the biggest names in corporate India such as Kiran Mazumdar Shaw and Anand Mahindra have expressed shock over Siddhartha’s death.
Biotechnology giant Biocon’s Managing Director Kiran Mazumdar Shaw said it was a “shocking and sad end to a quiet n unassuming pioneer who started the coffee cafes business ahead of Starbucks in India.”
Posting Cafe Coffee Day founder’s letter, Shaw further tweeted that the private equity fund manager acted like a moneylender, which Shaw said seemed to have caused unbearable stress to Siddhartha and should be investigated.
Mahindra Group chairman Anand Mahindra tweeted that entrepreneurs must not allow business failure to destroy their self-esteem as it will be the end of entrepreneurship.
The co-founder of slide sharing site SlideShare, Amit Ranjan, said that it is a black-letter day for startups and entrepreneurship in India. Drawing parallels with Café Coffee Day founder’s case, Ranjan said that new-age startups are lucky to be funded by equity while the debt-driven businesses are far more harsh and stressful.
E-commerce company Snapdeal co-founder and CEO Kunal Bahl said he had met Siddhartha on a few occasions and found him to be an absolute gentleman. “How can someone get pushed so far to the edge in business, that they decide to take a fall themselves,” he tweeted. “I will always see his legacy as a very successful entrepreneur who brought coffee in our lives.”