The Coffee Day Enterprises founder VG Siddhartha, who had gone missing on Monday and his body was fished out a day later from the Netravati river, might have been the first casualty of ongoing distress in the Indian economy.
Siddhartha, according to the sources in the know, has taken a personal debt of Rs 500 crore to service the debt of companies he owned. "The numbers of his Coffee Day Enterprises were not that convincing. So to keep credit lines going, Siddhartha had taken the personal loans," a friend of Siddhartha told DH.
Siddhartha had taken this personal loan from private lenders, so as his companies don't default of the debt. "The leveraging on debt can take you places, but it can also be very dangerous at times. Had he defaulted once, his credit lines would have stopped," one of the people who knew Siddhartha said.
The total debt of the companies owned by Siddhartha amounted to a whopping Rs 8,183 crore -- of which substantial chunk of Rs 4,575 crore was the exposure of the IDBI Trusteeship Services Ltd (ITSL). "We would like to clarify that, ITSL is not a lender to any entity. It acts as Share Pledge Trustee / Debenture Trustee / Security Trustee in various cases. ITSL is holding the pledge of shares in the capacity as Share Pledge Trustee / Debenture Trustee / Security Trustee, as security for securing the loans/ investments extended by the lenders/Investors to the respective borrowers," IDBI Bank said in a statement.
As the pressure from the private lenders started increasing over the period, Siddhartha set about selling his assets in various companies. His assets had far overweighed his liabilities. According to a letter purportedly sent by Siddhartha to the board of Coffee Day, he enlisted assets worth almost Rs 17,000 crore.
However, other than the sale of the Mindtree shares, which was seen as a life-saving deal for this first generation entrepreneur, no other deal matured over time due to the scarcity of buyers. "The market condition is so bad. How can you find buyers at all right now? The markets are walking on a thin line," an analyst said.
In fact, refinancing has been an issue plaguing hundreds of companies for a while now. DH had reported about problems in refinancing about a month back. According to the estimates, almost Rs 2 lakh crore worth of debt needs to be refinanced but debt-hit companies are unable to find any takers.
