How many know Satyam (Truth) about Café Coffee Day?!

No! It shouldn’t have happened. The man who brought World Class Coffee Shops in India, Founder of Café Coffee Day Siddhartha’s body was found and is suspected to have committed suicide by drowning. When a big businessman loses, it is a loss for the country. We may also end up stating, once upon a time, there was a Coffee Shop known as Café Coffee day.

A businessman losing causes equal damage to the country as much as one who cheats and escapes from the country is proven by Vijay Mallya and many other cases. We now hear good words about the departed Siddhartha. Many of them describe him as a great human being. Yet others indicate that he was slowly turning Spiritual. Some others say he is a large-hearted person who gave employment to over 40,000 people. It is a truth that despite being a big businessman, he kept low profile and was humble.

Let is come to this later, after we look into his assets, liabilities and details of his companies.

Siddhartha’s family is into Coffee Plantation business for the past 140 years. By his own admission, he doubled his income through his investments in the Coffee plantations, in the 1990’s. He owned 12000 acres of Coffee plantations. There are 1700 Café Coffee Day (CCDs) and 48,000 coffee machines across the country. The annual turnover through these alo ₹4264 Crores. It is also pertinent to note that he was in Forbes’s List of Rich in 2015 with Siddharth’s worth estimated at ₹8200 Cr. He was also negotiating to sell CCD, at that time CCD was reportedly valued between ₹8000 to ₹1000 Crores. Over and above this Siddhartha was also on the Board of Directors in GTV, MindTree, Liqwid Krystal, Way2Wealth and Ittiam.

Leaving alone what he has done or what his problem was, I will brief reveal about how swindling happens in various companies and how businessmen cheat. Naturally, businessmen who borrow on behalf of the company and divert the funds, the financials go haywire. Yet there are many who have done this and made good profits and yet others have jumped into river and gave up their lives. Those who fear death run away abroad, like Vijay Mallya. This is the modus operandi of all companies. CCD as a company was profitable. We can get the Balance Sheet of the company online. When the company was profitable, where did it lose?

There was a time when Satyam Computers was a renowned company. They declared false assets in their balance sheet. For e.g when stock was merely ₹10 Crores, they indicated ₹200 Crore in Shares and borrowed against it. They diverted these borrowed funds to other businesses or for some other purposes. Satyam computers borrowed by lying. Their wicked calculations was if Banks levy an interest of 10-11% per annum on funds, Real Estate business gives returns of 30%. So Satyam’s plan was to make money overnight and close these bank loans and continue in real estate business. Unfortunately, the real estate market crashed. Revenues dropped and Bank interest liabilities kept mounting. When lenders began chasing them for clearance of the loan and when it became unmanageable, the borrower had to go to Jail.

There is another way companies defraud. Why do a businessman who establishes his company, opt for public listing of his private company and offer shares to general public? By and large, his intentions is to slowly dilute his stake and slip away or will be scheming for something else. What else explains the rationale of a profitable company’s nature from private to public? CCD was a massive private limited company. Why did they go public? Was it to for the founder to exit this business?

When I spoke to the auditors of CCD, they reportedly had warned about 8 years back that company has built up too much of liabilities (especially borrowings) and it may burst at seam and will face bankruptcy anytime.

A businessman can raise loans against the shares he holds in various companies. For e.g. let us consider CCD. Siddhartha held 32.75% of shares. He had already pledged 71.4% of the same and raised loans against it. CCD’s share value at the time of writing this piece was ₹153 per share afterp having crashed by ₹38. Lenders demand the borrowers to bridge this gap by paying up the difference. Siddhartha or any other businessmen experience this. When you borrow for the business and use it for purchase of Coffee Plantation in Chikkamagalur, how do you expect the borrowings to be repaid? Even if you want to dispose the Estate, where will you find the buyers who can pay crores to seal the deal?

These kind of business malpractices were happening as a routine in India. Well until the Congress Government was in power in the centre. Things changed under Modi Government. No one can wriggle out easily after borrowing. If you have committed a mistake, you pay a penalty or go to jail. Due to this clampdown, those businessmen who used to drive around in Jaguars are bound to use Innova today.

A businessman is like that circus artiste on a tightrope walk. All of the applaud when he advances balancing himself and cheer him. When Income Tax Department shake that rope, he is rattled. Those who manage and balance on the tightrope is the survivor. Businessman is a person who chose to go on a tightrope unlike others who tread the normal safer path. The outcomes of the same has to be faced. What is the point blaming the IT authorities and say they are harassing him?

Siddhartha could not account for ₹480 crores when IT authorities had conducted the raid, on the other hand, they had filed returns only for ₹35 Crores as indicated by IT Department to the media. By this means, is it even a virtue to say he used to employ 40,000 people. In which case, Vijay Mallya’s Kingfisher alone had 3000 employees, Mehul Choksey had employed 2300 people. Lehman Brothers that went bankrupt in 2008 employed 26200 people. In 2003, 40,000 employees lost their jobs in Healthsouth, because the CEO declared higher share and borrowed against it. Can that be the basis for condoning gross violations?
This is the culture of India. Posthumous awards are high. We praise someone at his death. Our sympathies and compassion increase multifold when someone goes missing or passes away. Is there a dearth of admirers for Mansoor Khan? Probably Modi Government may the first one to face flak and criticism for doing their job well. By that yardstick, Congress Government was better

 

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