From Coffee to Tax Soup: Meet Cafe Coffee Day’s VG Siddhartha
VG Siddhartha, Founder and Owner of Café Coffee Day (CCD), is a man less known by his name. People know him through the 1.6 billion cups of coffee brewed every year. His entrepreneurial journey began when he met the owner of Tchibo, a German coffee retailer.
Siddhartha, the son-in-law of former Karnataka Chief Minister SM Krishna, owns a 57% stake in Coffee Day Enterprises, along with his wife Malavika Hegde.
The Income Tax (I-T) department recently concluded raids on the premises linked to Siddhartha. According to an informal release, the search operations ended with an admission of previously concealed income exceeding Rs 650 crores.
Siddhartha was born in a family who have been in the business of growing coffee for over 135 years. Despite this, he was hesitant to enter the coffee industry. After earning a postgraduate degree in economics from Mangalore University of Karnataka, he borrowed some money from his father and landed in Mumbai.
He went back to Bengaluru and bought a stock market card for Rs 30,000. In 1984, he launched the investment consulting firm, Sivan Securities.
Soon, he expanded operations in the areas of trading, mutual funds, and Real Estate Advisory. After 15 years, he renamed the company as Way2wealth Securities Ltd. Siddhartha also runs the venture capital wing of the firm, known as Global Technology Ventures Ltd, which typically infuses money in technology start-ups.
How Café Coffee Day Happened
In the year 1993, Siddhartha took to trading and exporting coffee beans. He established Amalgamated Bean Coffee and bought an ailing coffee curing unit in Hassan. The company began supplying coffee beans to a German coffee retailer, Tchibo.
In 1948, Tchibo had set up an outlet in a 10X10 store in Hamburg, but had soon grown to be a million-dollar firm grossing over 2,00,000 tonnes of coffee. Siddhartha was impressed with the headway of the company. After he met with its owners, he was obstinate to start his own chain of cafes in India.
Since the southern part of the country was synonymous with filter coffee, he took off by setting up 20 stores to sell coffee powder. He then realised that profit margins per cup of coffee was comparatively higher than for coffee beans and powder.
On a Mission to Expand
The supply of coffee to the outlets came from Siddhartha’s 10,000-acre coffee plantation in Chikmagalur, Karnataka.
In an interview to Livemint, Siddhartha had said that the he expects to have at least 5,000 outlets up and running in the next five years.
As of 2016, Siddhartha was running 1,607 cafes, 579 Xpress kiosks, and 415 Fresh & Ground outlets. He was also managing outlets across Austria, Czech Republic and Dubai. Café Coffee Day was one of the few franchises to have opened an outlet across the historically troubled border of Karachi. But very soon, services had to be pulled away.
Infusion of Funds
In 2015, Siddhartha decided to go public with Coffee Day Enterprises (formerly known as Amalgamated Coffee Beans). After three days of bidding in a price band of Rs 316 to 328, the IPO was over-subscribed 1.81 times with a demand worth Rs 2,000 crores
The significant stakeholders in the company include Nandan Nilekani, private equity firms – KKR Mauritius, Standard Chartered Private Equity, and New Silk Route PE Asia Fund LP.
One of India’s largest media houses, The Bennett Coleman and Company Limited, is also an investor.
Other Business Ventures in Siddhartha’s Kitty
Siddhartha ventured into many other undertakings while catering to the beverage market. He entered the logistics space in 1955 with the launch of SICAL Logistics Limited.
He set up a 73-acre incubation park under the name of a wholly owned subsidiary, Tanglin Development Limited.
Siddhartha also owns a furniture manufacturing plant in Chikmagalur, Karnataka. The Dark Forest Furniture Company was named after his estate ‘Kathale Kaad’ (Dark Forest in Kannada).
The coffee retailer is also a part of the board in companies like Liqwid Krystal and Ittiam. He is the single largest shareholder of Mindtree with a stake of about 12%.
Alleged Involvement in the Veerappan Case
Since the late 90s, sandalwood smuggler Veerappan’s notorious acts and demands brought him to the government’s attention.
Former DGP C Dinakar had depicted VG Siddhartha as a ransom money carrier to Veerappan in his book 'Veerappan's Prize Catch – Rajkumar.
Times of India had reported about Siddhartha's petition which said, "The book has also been released in a sensational manner, and the intention of the defendants is to make quick money and ridicule and tarnish the reputation of the family members.’’
A Division Bench of Delhi High Court had later dismissed the case.
Way2wealth’s Involvement in a Defaulters’ Private Deal
The firm PD Agro Processor had defaulted Rs 687 crores on the National Spot Exchange Limited. As per the affidavit filed with a High Court-appointed Committee, the company had paid Rs 54.04 lakhs to Ram Naresh Saraf.
In 2015, Hindu Business Line reported a statement made by Prakash Chaturvedi, the Joint Managing Director of NSEL. Chaturvedi had said that Saraf’s family accounted for Rs 4.19 crores of the receivables from defaulters, and that they were traded through Capital First and Way2wealth Commodities.
Petition to Inquire Into Siddhartha’s Wealth
In February 2017, the Samaj Parivartan Samudaya requested the Special Investigation Team (SIT) on black money to inquire into the VG Siddhartha’s accumulation of wealth. SR Hiremath, the President of the trust said that Siddhartha’s revenue was generated from the fake stamp paper scam (popularly known as Karim Lal or Telgi) as reported by The Hindu.
I-T Department Raids Siddhartha’s Premises
The Income Tax department began search operations in Siddhartha’s offices on 21 September. Raids were undertaken in over 20 locations including Bengaluru, Chennai, Chikmagalur and Mumbai.