CCD board to probe Siddhartha's transactions, plans to monetise assets

Among other things, the company is considering monetising the Global Village tech park located off Mysore Road in Bengaluru, for which private equity major Blackstone was said to have shown interest.

The board of Coffee Day Enterprises on Wednesday decided to probe the past financial transactions allegedly made by V G Siddhartha, apart from evaluating various options to deleverage the balance sheet.

A letter purportedly written by the founder chairman days before his death had said his team, auditors, and senior management were “totally unaware” of his personal financial transactions.

Siddhartha’s body was found on Wednesday on the banks of the Netravathi river in Karnataka, with police saying it appeared to be a case of suicide.

“While the authenticity of the letter is unverified and it is unclear whether these statements pertain to the company or the personal holdings of Mr V G Siddhartha, the board took a serious note of the same and resolved to thoroughly investigate this matter,” the board said in a regulatory filing.

The board also appointed law firm Cyril Amarchand Mangaldas its legal counsel to advise it on the related matters.

The crucial board meeting that took place after the demise of Siddhartha took several decisions, including the appointment of interim chairman and chief operating officer (COO), and the constitution of an executive committee to take over all the responsibilities of the late business tycoon.

The committee is expected to play a significant role given that Siddhartha is learnt to have not left behind any succession plan.

The board appointed Independent Director S V Ranganath interim chairman, while Nitin Bagmane, chairman of subsidiary Tanglin, was named as group COO. The executive committee will comprise Ranganath, Bagmane, and R Ram Mohan, who is group CFO.

“The main focus was how to bring back the ship to the shore safely,” a source privy to the board discussion said.

“The board took cognizance of the fact that there are several assets in the group which, if part monetised, will significantly reduce the debt burden to a manageable level of around Rs 3,000 crore.

"The board will discuss those in details in the next meeting scheduled on August 8.”

The Bengaluru-headquartered conglomerate’s debt shot up to Rs 6,500 crore as of March 2019 from Rs 5,100 crore in the previous year.

Analysts expect this number to come down as the proceeds of Mindtree sale are accounted in the ongoing fiscal.

Among other things, the company is considering monetising the Global Village tech park located off Mysore Road in Bengaluru, for which private equity major Blackstone was said to have shown interest.

The 91-acre campus with a built-up area of around 4 mn sq ft has a further scope to build another 5 mn sq ft of office space.

“The estimated value of the asset could be Rs 3,500-4,000 crore. So, if this single thing (Blackstone deal) goes through, then the debt will be reduced sharply and come under a manageable level,” the person said.

The company has another 21 acres of unutilised land parcel near Bengaluru which it may consider de-leveraging.

The board is also evaluating several other strategic assets, including 12,000 acres of coffee plantation and bringing in strategic investors into the Coffee Day chain.

The coffee plantation also houses 900,000 silver oak trees, which can be money spinner given that each tree costs around Rs 10,000.

The company also has the option of boosting its cash flow by increasing the number of vending machines from 54,000 to around 100,000, given that it also supplies coffee powder and other ingredients to clients.

Once the grieving family comes to terms with the reality, the board is planning to meet them to discuss if any of them would be keen to take up the mantle.

Siddhartha’s elder son, Amartya Hegde, an MBA from Columbia Business School, has started coming to office.

Siddhartha’s other son, Ishaan, is also an MBA from a US university.

Photograph: Anushree Fadnavis/Reuters