The Coffee Day Enterprises board today appointed Ernst & Young (EY) to inspect its books and also look into the circumstances outlined by its deceased founder VG Siddhartha in his purported suicide note.
Siddhartha's body was found on July 29 in the Nethravati river in South India, two days after he went missing, and a note that seemed to have been written by him said he had "failed as an entrepreneur" and talked about pressure from lenders and an investor. It also alleged harassment at the hands of the income tax department.
Coffee Day Enterprises owns, among other things, Cafe Coffee Day, India's largest coffee chain.
The board in its meeting appointed Malavika Hegde as an additional member of the executive committee, which was formed on July 31, 2019. The executive committee consists of SV Ranganath, interim chairman, Nitin Bagmane, interim COO and R Ram Mohan, the Chief Finance Officer (CFO).
“The Board of Directors has decided it owes a duty to all the stakeholders to ensure that the company continues to have a strategic direction and a suitable way forward,” a statement by the company said.
“To achieve this objective it was decided by the board to appoint a person of eminence or a reputed firm as strategic corporate advisor/s to the Board,” it added.
Not including Siddhartha, the Coffee Day board has four members: Malavika Hegde (Siddhartha's wife), Ranganath, non-executive director and CEO of PE firm KKR India Sanjay Omprakash Nayar, and Independent Director Albert Hieronimus.
A fifth board member, Sulakshana Raghavan, MD of Landor, had resigned on August 2 citing personal reasons.
Siddhartha’s sudden demise has put a cloud over the company's. It has a debt about Rs 11,000 crore, according to reports.
The promoter group's pledged shares increased to over 80 percent recently from 75.7 percent till July 29, 2019. The shares prices fell from Rs 191 on July 29 to Rs 77 on August 8.
Given the circumstances, some of the investors have invoked pledged shares of the Coffee Day group to recover a part of their debt.
The main focus for the board now would be to deleverage coffee day business to dilute debt.
Before his death, Siddhartha was in talks with Blackstone to sell the real estate property in Bengaluru. He was also in talks with Coca-Cola for selling part of the Café Coffee Day business recently. The valuation for the business was estimated at Rs 8000-10000 crore.
According to reports, the talks with Blackstone has resumed with the property valued at Rs 3000 crore. There is no clarity on where talks with Coca-Cola stand.
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