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Jun 30, 2011, 03.42 PM | Source: Forbes India

VG Siddhartha is branching out

Just like he did with coffee, converting a commodity into a lifestyle brand, Cafe Coffee Day's VG Siddhartha now wants to convert timber into value-added furniture.

VG Siddhartha is branching out
By: Mitu Jayashankar/ Forbes India

Just like he did with coffee, converting a commodity into a lifestyle brand, Café Coffee Day’s VG Siddhartha now wants to convert timber into value-added furniture

In 1983, if someone had told coffee baron V.G. Siddhartha that one day he would own an impressive multi-storied office on Vittal Mallya Road, Bangalore’s tony residential and shopping address, he would have called them crazy. Siddhartha was then just a rookie analyst at JM Financial and Investment Consultancy.

Today Coffee Day Square, his Group’s headquarters, a glitzy glass-fronted building, stands right across UB City from where Vittal Mallya laid the foundation of the multibillion dollar UB Group managed today by his son Vijay.

Siddhartha’s office, occupying an entire floor, has glass walls that offer a breathtaking view of Bangalore. On the day we visit, the founder of Café Coffee Day, India’s largest cafe chain, is waiting by the lift. A strapping tall man, who looks much too young to be 50, he opens the conversation with the typical south Indian greeting, “Have you eaten?”

Nandan Nilekani who has known him since the early ’90s, and is a close friend and mentor, describes Siddhartha as a natural born entrepreneur with an uncanny ability to sniff out a good deal. “He is extremely restless and is very quick and decisive. Once he gets an idea, he will quickly go and implement it. He is very methodical and also very big on backward integration,” says Nilekani. Combine that with his ability to work 12-14 hour days, seven days a week and the result is a business empire that straddles retail (Café Coffee Day), financial services (Way2Wealth Securities), venture capital, hospitality, logistics (Sical), land development and now an upcoming furniture business.

Last year Siddhartha brought all his businesses (except agriculture) under a common holding company, Coffee Day Resorts Holdings. The group’s combined turnover is Rs. 2,000 crore to Rs. 2,250 crore. He owns about 10,000 acres of plantations which grow coffee and other commodities. “In the next seven years, at least three or four of these businesses will be doing revenues of $1 billion each,” he says.

But even as his empire stretches and his bets become bigger, Siddhartha remains completely hands on. In the late ’90s, two of his businesses, Way2Wealth and Café Coffee Day (CCD), were both at a crucial stage. This was when the retail financial industry was taking off. It was also the time his father-in-law S.M. Krishna, the present Indian Minister for External Affairs, was chief minister of Karnataka. Friends say that between 1999 and 2004, Siddhartha managed his companies in the day and spent the evenings helping his family look after state politics.

Strapped for time, he had to make the painful choice of focussing on one business. In the next few years, CCD raced ahead and today is India’s largest retail brand. Way2Wealth, on the other hand, lost the battle to Kotak and India Infoline, companies which started at the same time.
Friends say that succession planning — in particular, building a strong second tier of leaders — is on his mind a lot these days. Over the years, Siddhartha has received coaching from global consultants on this. But investors seem to be less concerned about succession issues.

K.P. Balaraj, of Westbridge Capital, which invested $20 million in CCD in 2004 (worth at least five times more today), says that at this stage of the company’s growth, succession is not a burning issue. “No one’s asking Mukesh Ambani this question,” he says.

Last year, a consortium of three private equity (PE) firms, Kohlberg Kravis Roberts, New Silk Route and StanChart PE, picked up a 25 percent stake for around USD 200 million in the holding company. “It is very rare for PE funds to invest in a holding company. Normally, they invest in business directly,” says Balaraj. The funding rounds closed in just two months, and one investor says that the venture capital funds were falling all over themselves to pick a stake.

Siddhartha’s biggest success story till date is Café Coffee Day, which at 1,000 plus outlets, is India’s largest retail brand. He is equally bullish about his other businesses: SEZ, Way2Weath, Sical, and agriculture. “We haven’t done anything great till now, but the next 10 years will be extremely crucial for us,” he says.

His biggest bet though might be on a business that is still below the radar. He wants to build India’s largest retail furniture business. “My dream is to create an IKEA from India,” he says.


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