The sad demise of coffee king V.G Siddhartha has unearthed the increasing debt crisis in India that is forcing business tycoons take drastic measures. The financial strains that were making the life of the coffee chain tycoon Siddhartha were becoming clear even before his body was recovered from a river in southern India earlier this week.
A letter that was supposedly written and signed by Siddhartha sent to senior management of Coffee Day Enterprises Ltd. clearly indicated his financial crisis that led him to take his own life. The explicit words in the letter “serious liquidity crunch” which resulted in “tremendous pressure” from the lenders and an unnamed private-equity investor indicated the situation that Siddhartha was dealing with.
Siddhartha wrote “I would like to say I gave it my all,” and “I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I gave up.” He had sent the letter to the board on 27th of July, two after which, the entrepreneur was reported missing after he told his driver that he is going for a stroll.
Siddhartha’s suicide is a very grave incident, as he was admired member of the Indian business elite class and was closely connected with the highest levels of the Indian political sphere as well. For over two decades, Siddhartha built an empire comprising of over 1,700 stores in India, also over 54,000 vending machines, and all these he handled almost single-handedly. He made his Café Coffee Day chain a household name, even though India is primarily a tea loving country.
However, what people didn’t know about is how Siddhartha was slowly breaking under the pressure of mounting debts. A review of the public disclosures of his personal debts reveals how he suffered for around two years before he took the grave decision to put an end to his life. He was putting up even more of his Coffee Day shares to refinance loans for shorter periods at higher rates of interest.
At Café Coffee Day itself, short-term debts doubled in the fiscal that ended in March. Siddhartha spent most of the last two weeks of his life in Mumbai trying to raise funds to repay loans, as per a close source. He had many payments due in July and August, the source said. Café Coffee Day’s board held an emergency meeting on 30th July saying that it can ensure the continuation of all business operations consistently.
The death of Siddhartha has revealed the situation of many business tycoons in the Indian corporate elite sphere, who are facing mounting economical crisis and slow growth. The supposed letter from Siddhartha clearly indicated the pressure from the lenders and stakeholders. This is an unfriendly situation for the Indian economical growth when Prime Minister Narendra Modi in its process of his second term with promises to transform the country into an economic powerhouse.
The Indian economy is the third largest in Asia, and has lost its growth momentum and has become sluggish. Creditors remain cautious after the non-bank lender Infrastructure Leasing & Financial Services Ltd. compounded bad loan issues last year. As a result, the Reserve Bank of India was the first among the major central banks of the to have slashed down interest rates this year.
