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Café Coffee Day founder V.G. Siddhartha.
Café Coffee Day founder V.G. Siddhartha.

CCD probe gives clean chit to PEs

The probe report, however, added that even though PE investors and lenders were demanding repayments from Siddhartha, such reminders were legitimate and were not something beyond normal industry practices

An 11-month long investigation into the claims made in a suicide note purportedly written by Café Coffee Day (CCD) founder V.G. Siddhartha found that he may have felt “aversive behavioral stimulus because of persistent reminders from private equity investors and other lenders" to repay.

The probe report, however, added that even though PE investors and lenders were demanding repayments from Siddhartha, such reminders were legitimate and were not something beyond normal industry practices.

The investigators concurred with Siddhartha’s statement in the suicide note 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 high rates of return.

According to the investigation, Coffee Day Enterprises Ltd’s (CDEL’s) financial records suggested a serious liquidity crunch before Siddhartha’s suicide, which may have arisen because of the attachment of Mindtree Ltd’s shares (owned by Siddhartha then) by the income tax department, CDEL said in an exchange filing on Friday evening.

According to the probe conducted by retired DIG of Central Bureau of Investigation Ashok Kumar Malhotra and Supreme Court advocate M.R. Venkatesh of New Delhi-based Agastya Legal, a significant portion of the money borrowed by one of CDEL’s promoter entities, Mysore Amalgamated Coffee Estates Ltd, was spent only to buy back shares from private equity investors, repay loans, pay interest and fund certain “private investments".

“The personal assets/shares of Siddhartha were hypothecated/pledged for business loans of the company and its subsidiaries. He also gave personal guarantees for the company and its subsidiaries and also provided the personal guarantee of his family members," said the probe report.

CDEL, which has 49 subsidiaries, on 30 August initiated an investigation into the circumstances leading to the statements made in Siddhartha’s letter and to scrutinize the books of accounts of CDEL and its subsidiaries.

The investigative team agreed with Siddhartha’s last statement in the suicide note that “My team, auditors and senior management are totally unaware of all my transactions. The Law should hold me and only me accountable, as I have withheld this information from everybody, including my family."

Siddhartha’s body was found near the Netravathi river on 30 July 2019 morning, after he went missing a day earlier.

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