Indian entrepreneur VG Siddhartha, known as “the coffee king of India”, has been reported missing, sending shares in his flagship company, Coffee Day Enterprises, tumbling nearly 20 percent.
Café Coffee Day, which was founded in 1996 in the information technology hub of Bangalore, is one of India’s most ubiquitous retail brands, with more than 1,700 cafés across the country.
But despite the coffee chain’s size and scale, it is far from a major money spinner, reporting a post-tax profit of just $6m in the past financial year, according to a company presentation.
In a notice to the Bombay Stock Exchange on Tuesday, Coffee Day Enterprises, the holding company, reported that Mr Siddhartha “had not been reachable since yesterday evening”. “We are taking the help of concerned authorities. Company is professionally managed and led by
competent leadership team, which will ensure continuity of business,” the notice said.
Mr Siddhartha, his wife Malavika Hegde, and companies associated with them together held 53 per cent of the equity in Coffee Day Enterprises but, according to stock exchange filings, most of these shares had been pledged to various financial institutions as security for fresh loans taken by the businessman.
As of July 1, Mr Siddhartha, his wife and related entities had pledged 40.8 per cent of the company’s total equity as collateral to various lenders, BSE filings show.
The Bangalore-based businessman was last seen by his driver on Monday night, when he got out from his car close to a bridge across the Nethravathi River, near Mangalore, a city on the Arabian Sea 350km west of Bangalore. The driver sounded the alarm after Mr Siddhartha failed to return.
Police have launched a massive search for Mr Siddhartha, whose father-in-law, SM Krishna, had served as India’s foreign minister and chief minister of the state government in Karnataka, of which Bangalore is the capital.
Indian media reported on a note purportedly written by Mr Siddhartha to the Coffee Day Enterprises board, in which he apologised that he “let down all the people who put their trust in me”, adding: “I have failed to create the right profitable business model despite my best efforts…I fought for a long time, but today I gave up.”
Mr Siddhartha’s disappearance has shocked India’s business community. “The VG Siddhartha news is just stunning,” Amit Ranjan, cofounder of tech company SlideShare, wrote on Twitter.
“He certainly wasn’t a failed entrepreneur. Black letter day for start-ups & entrepreneurship in India.” Café Coffee Day faces growing competition from Starbucks, which entered the Indian market in a joint venture with Tata Group in 2012, and now has about 146 outlets, as well as other foreign rivals such as UK-based Costa Coffee, owned by Coca-Cola.
With its slightly suggestive slogan, “A lot can happen over coffee”, Café Coffee Day developed India’s café culture, capturing the zeitgeist of a young country keen to adopt western lifestyles — and in urgent need of public spaces in which to meet.
In 2010, private equity firm KKR led a consortium that invested $200m in Coffee Day Enterprises. The company’s listing on the BSE in October 2015 marked a revival of interest in India’s then dormant IPO market.
