A damning probe report has revealed a Rs 2700 crore hole in Coffee Day’s books and the person at the centre of the scam is the late VG Siddhartha who committed suicide over a year ago.
In other words, Siddhartha seems to have transferred huge tranches of money from Coffee Day books to a company that he privately held.
An investigation into the suicide note left behind by Siddhartha and a detailed scrutiny of Coffee Day’s accounts has revealed this gap of Rs 2,693 crore in the balance sheet of Coffee Day Enterprises.
The report also revealed that Mysore Amalgamated Coffee Estates Limited (MACEL) – the private enterprise once held by Siddhartha -- owes Rs 3,535 crore to the subsidiaries of Coffee Day Enterprises as on July 31, 2019.
However, according to the Consolidated Audited Financial Statements of the company, MACEL owed only Rs 842 crore to subsidiaries as on March 31, 2019, thus revealing a gap of Rs 2,693 crore that indicates a scam.
MACEL is a private coffee trading firm that was owned by Siddhartha and his father.
The report suggests that the missing Rs 2,693 crore may have been transferred by Siddhartha to his company, possibly to pay back PE investors, repay loans or even fund his other private investments.
Since this was outside the scope of the investigation, the report did not account for it; the report has just pointed out the whopping missing amount.
In a disclosure to the stock exchanges, the board of Coffee Day said that the company’s subsidiaries are taking steps to recover dues from MACEL.
The probe was headed by former Deputy Inspector General of CBI Ashok Kumar Malhotra who was appointed on August 30, 2019 by the board of Coffee Day to investigate the circumstances leading to the statements made in the letter by Siddhartha and to scrutinize the books of accounts of Coffee Day and its subsidiaries.
In the controversial letter, Siddhartha had mentioned that a private equity player was putting tremendous pressure on him to buy back shares.
The report did not agree with Siddhartha’s statement and said while he may have felt pressured by persistent reminders from private equity investors and other lenders, such reminders and follow ups are “not something which is beyond normal industry practices and we believe that PE Investors were acting as per accepted legal and business norms.”
In other words, the PE players got a clean chit.
The Income Tax department also got a clean chit. Siddhartha’s letter in July 2019 had alleged harassment from the previous Director-General of Income Tax. However, the probe report stated that there was no documentary evidence to prove the charges.
But the report admitted that there may have been a serious liquidity crunch due to the attachment of Mindtree shares by the Income Tax Department. This probably may have tied Siddhartha’s hands from being able to borrow further.
“The board authorized the Chairman to appoint an ex-judge of the Supreme Court or the High Court, or any other person of eminence, to suggest and oversee actions for recovery of the dues from MACEL and to help on any other associated matters,” the company said.
The company added that the executive committee that was formed after the death of Siddhartha, which had his wife Malavika Hegde in it, has been able to pare down the debt of the company from approximately Rs 7,200 crore as on March 31, 2019 to Rs 4,000 crore till date. The present debt of the group is approximately around Rs 3,200 crore, the board said.