The internet is flooded with the news of coffee chain enterprises, Cafe Coffee Day’s owner’s suicide and his last letter to his employees. But if we think thoroughly about this, the situation is alarming and it points to the fragile world the wealthiest of individuals live in. The news and the letter say that he was facing the income tax overdue regarding the sale of shares in an IT firm Mindtree. Though many people will say that the inherent need to stay on top of their game, despite the high risks involved, makes the job extremely high pressure, and sometimes perilous, still we think, the story has a different angle as well. We agree that Entrepreneurship and leadership, turns out, has a psychological cost, but the question here is, who’s fault was it?
Being a gentleman, Siddhartha took the blame of everything, his losses, and the suicide on himself through his last letter, but was he really solely responsible? This is worrisome.
Let us first talk about his actual position in the market. Siddhartha wanted his nationwide coffee chain, CCD, to serve coffee and snacks to common citizens at reasonable prices. In fact, we can say that CCD is the outlet that has brought the concept of cafes in India. He planned to use the money raised from selling his stake in Mindtree to L&T to expand his coffee business. His family has been in the coffee business, including growing coffee beans in northern Chikamagalur district.
In his last letter, Siddhartha has blamed the pressure of private equity (PE) investors. There are three PE investors in the group—KKR, Rivendell PE (formerly New Silk Route) and Affirma Capital which manages the portfolio of Standard Chartered PE. While KKR owned a 6.07% stake, Rivendell and Affirma own around 10.61% and 5.67%, respectively, in Café Coffee Day as on June 2019, data from the stock exchanges show. Sources say that he was finding a buyer for CCD and now has raised money from the sale of a stake in Mindtree.
Siddhartha’s net worth was arguably more than the debts and tax overdue the business tycoon was struggling to repay. But it was said that there were signs of distress. The CCD owner had reportedly been selling assets to cut down debt and cover potential tax liabilities. Siddhartha also tipped Mindtree Limited into a bitter acquisition battle after the coffee giant sold his 21 percent stake in the Bengaluru-based IT firm to infrastructure major Larsen and Toubro (L&T).
L&T bought the stakes from Siddhartha to gain a minimum of 51 per cent in Mindtree, which would give the infrastructure giant control over the IT firm at a time when other Mindtree promoters and founding members were staunchly against the deal. Also, the reports say that he was to earn a profit of close to Rs 2,858 crores from the sale of all his stake in Mindtree to L&T. However, the Income Tax Department attached a portion of shares held by him in Mindtree over a potential tax demand. The attachment also ‘prohibited for transfer or charge’ of 22.2 lakh equity shares of Coffee Day Enterprises Ltd, and 52.7 lakh shares held by Siddhartha.
Meanwhile, CCD was also in talks with soft drink giant Coca Cola to gain equity by the sale of shares, although he intended to keep the controlling stakes with himself. The deal, which was still in the negotiation phase, was mostly under wraps. However, according to the police sources, Siddhartha took the extreme step after speaking to his company’s Chief Financial Officer for 56 seconds. That was his last known call. So it impliedly applicable here that Siddhartha’s financial issues were the reason for his taking such extreme step. It is noteworthy that the pressure he was dealing with from quite some time was such unbearable that ending up his own life seemed to him was an easier option.
Here comes the concept of Ease of Doing Business by the World Bank, that recently in October 2018, release a list of countries following the same. India has recorded a jump of 23 positions against its rank of 100 in 2017 to be placed now at 77th rank among 190 countries. India’s leap of23 ranks in the Ease of Doing Business ranking is significant considering that last year India had improved its rank by 30 places, a rare feat for any large and diverse country of the size of India.
But the question arises here is how Ease of Doing Business in growing on papers when such billionaire entrepreneurs are taking their lives because of the so-called ‘taxtortion’?
According to the letter by Siddhartha, he blamed pressure from private equity and harassment by the Income-tax officials. He also wrote that his intention was never to cheat anybody. We agree that in India, Tax Evasion is one of the biggest hurdles in the growing economy, but pressuring such entrepreneurs is not a way to deal with it. Any businessman with an intention to pay out all the legal things but not able to do so deserves a second chance. The government has to come up with ways to deal with the issue. As VG Siddhartha was not the only one taking such an extreme step, he was just next in the queue.
And lastly, let us tell you CCD is not just a common coffee chain in India, many people have emotional attachments with it as well. Established in the year 1993, CCD was a place that started the trend of serving quality and variety of coffee, snacks at a reasonable price. People are having great memories with it. Many of us have had the most important meetings of their lives at CCD. Some pitched their start-up ideas there, some went on their first date at CCD. Meanwhile, there are people who sipped their first cappuccino there only. CCD was always a sight soothing to eyes after a long tiring day, and to catch up with friends.
CCD gave employment to many. VG Siddhartha was always an inspiration for youth with a dream of startup and will always be the same. “I’ve failed, sorry to let you down,” he wrote in his letter. But we think he has not failed, not by any means, just the time was not right and he gave up a bit sooner. If anybody from the Income Tax department or any high authority government official have understood his problem and would have helped him, his unfortunate demise could be avoidable. May his soul rest in peace.
