BANGALORE -- In early 2019, around six months before his body was retrieved from the Netravati River in the south Indian state of Karnataka, V.G. Siddhartha met with representatives of Blackstone Group, one of the world's leading investment companies.
Siddhartha was one of the state's most successful and influential men: the founder of Cafe Coffee Day, India's answer to Starbucks. He owned 1,700 stores nationwide and 4,500 hectares of coffee plantations. He had stakes in startups, eco-resorts, banana plantations and commercial property.
The jewel of his real estate portfolio was the huge Global Village Tech Park, a 240,000-sq.-meter technology hub in the state capital of Bangalore. He was desperate to sell it, and he hoped Blackstone would take it off his hands.
Cafe Coffee Day's expansion had been fueled by debt, as had Siddhartha's other investments. His borrowing had ballooned to a point that his banks would no longer extend any credit, and so he had turned to the shady, unregulated market of private moneylenders.
Since September 2017, he had been under investigation from the tax authorities, which had raided 20 of his properties. Siddhartha confided to his close friends that he believed the investigation to be politically motivated.
There is no doubt that he was also mired in the shifting, often toxic politics of his home state, a region ruled by a fragile coalition of parties that writhed with changing loyalties and expensively traded favors. Siddhartha reveled in playing the game. "He was a political junkie," one close associate told the Nikkei Asian Review. "He was a kingmaker in his own mind."
He was overextended on all fronts, however. "No business person can survive without political connections," his associate said. "But he was playing a triple game. He was in over his head."
Selling the Bangalore property to Blackstone would have made Siddhartha's debts more manageable. By March, the two parties were close to an agreement, according to people familiar with the talks. But Siddhartha abruptly pulled out.
In late July 2019, the coalition governing Karnataka collapsed, ceding power to the Bharatiya Janata Party, which had swept to power in the national assembly in 2014 and has been consolidating its hold across the country ever since.
Around the same time, Jacob Mathew, co-founder of Bangalore-based Mape Advisory Group, reached out to Blackstone's representatives on Siddhartha's behalf. Mathew informed Blackstone that the deal was back on, and his client was keen to conclude it.
"The deal would have bought him so much time and runway," one person with direct knowledge of the matter said. "It would have gone a long way to solving his debt problems. Why didn't he try to renegotiate sooner?"
On July 29, Siddhartha left his car and driver at a bridge near Mangalore. Two days later, fishermen found his body. A police investigation concluded that he had died by drowning and ruled his death a suicide.
Why he suddenly came back to the negotiating table is just one of many mysteries that remain unresolved. His death has left many unanswered questions in India's business community about crony capitalism, corruption, governance and the close but fragile links between entrepreneurs and politicians. If a politically savvy, highly connected entrepreneur like Siddhartha could find himself under such unbearable pressure, they worry, who, if anyone, is safe?
"He was a great person and built a great brand," said the Indian operations head of one international private equity fund. "He was as politically connected and protected as anyone could be. His death shakes me for what it says about India."
'Nothing to rob'
In a 2016 interview in Outlook, an Indian weekly, Siddhartha recalled his early life: his dismay at not making the cut to join the army and his subsequent decision to go into business. "I wanted to be Robin Hood to rob the rich and give to the poor, but then I realized India was a really poor country. There was nothing to rob, really. It was better to make your own money; to get into business," he confided to the magazine.
In 1983, the young Siddhartha, then in his early 20s, went to Mumbai, "the city of the rich and famous," as he recalled. There he called on Mahendra Kampani, a former Bombay Stock Exchange president, who was running one of the best-known local brokerages and whom the young aspirant had read about in an investment magazine. On his first visit to Kampani's office in Nariman Point, he walked up six flights rather than taking a lift for the first time in his life. He then spent the next two years as a trainee, learning the art of investing and trading.
Siddhartha put some of the profits he made into buying coffee plantations. In the early 1990s the Indian government deregulated the coffee sector, allowing growers to sell directly to customers, rather than through the national Coffee Board. By 1993, Siddhartha's Amalgamated Bean Coffee Trading Company had accumulated around 1,200 hectares of coffee plantations. The timing was perfect. In 1994, a frost in Brazil caused the price of beans to quadruple. By 1996, he owned India's largest coffee exporter.
A chance meeting with a member of the Herz family that controlled Tchibo, a German coffee chain, convinced Siddhartha that his future lay beyond just selling commodities. While eating dinner in Singapore's Boat Quay restaurant district, he was struck by the idea of turning his outlets into internet cafes -- then a novel and expensive proposition for India.
"You could fail spectacularly but if you didn't take those risks, you would not have given yourself a chance to succeed," he told Outlook. "As an entrepreneur, you just can't afford to lose hope."
From the beginning, though, he seemed to lack focus. He invested in South America, even though he knew nothing about the region. He launched a hotel business. He began a furniture business. He backed technology startups and launched unrelated subsidiaries, such as the logistics company Sical.
His most miserable day, he recalled, came in October of 2015 when he publicly listed Cafe Coffee Day, only to see the shares drop 18%. Whenever he met potential investors, he would ask them, "Do you hold my shares? Are you buying my shares?" recalled Rahul Chadha of Mirae Asset Global Investments. "He was very aggressive."
In 1988 he wed Malavika Krishna, the daughter of the influential Congress Party politician S.M. Krishna, in an arranged marriage.
The arrangement worked for both the father-in-law and Siddhartha. Siddhartha bankrolled Krishna's political activities and was rewarded with proximity to the backroom politics both in Karnataka and in Delhi. Krishna went on to become chief minister of Karnataka between 1999 and 2004, and served as India's minister of foreign affairs between 2009 and 2012.
Siddhartha worked closely with the Congress Party leadership, including its president, Sonia Gandhi, and funded not only Krishna's campaigns but those of the national party.
"People believe S.M. Krishna made his son-in-law," a political consultant who was close to Siddhartha told Nikkei. "But, actually, it was the other way around."
Political connections are a necessity for any business in India that deals in large-scale acquisition of land or operates in regulated sectors. Siddhartha, with his 4,500 hectares of plantations, his eco-resorts and his chain of coffee outlets, straddled both. However, he appeared to enjoy playing the political game. He made his resorts, located in his vast coffee estates, freely available to politicians. He funded some of the sparring between the competing parties and financed some members of the legislative assembly to switch sides, according to several people who knew him well. A longtime state chief secretary of the Congress party, S.V. Ranganath, sat on his board and became interim chairman of the company after his death.
"Every politician wanted him to bankroll them," said the founder of a software company in Bangalore in which Siddhartha invested. "Everyone expected his support."
He also leaned on those connections when he needed money. "In politics in Karnataka, money flows both ways," said one of his creditors. As well as raising funds for politicians in the Congress Party, he "took money from politicians because of his liquidity issues. But politics is always a double-edged sword."
His closeness to the Congress Party would eventually become a liability. In 2014, Narendra Modi's BJP stormed to power in a landslide. Its platform included promises to shake up the crony capitalism widespread in India. In practice, that meant putting pressure on businesspeople who had built close relationships with the BJP's opponents. Siddhartha "increasingly realized he needed an insurance policy," the political consultant said.
In 2017, Krishna quit the Congress Party and lent his support to the BJP. At the time, it was rumored to be because he was being marginalized by his colleagues in the party. However, two people close to Siddhartha said that the entrepreneur had pressured his father-in-law to make the switch.
"There is no permanence in politics," Siddhartha told a business partner at the time. "Things change fast."
One motivation for Siddhartha's decision to get closer to the BJP may have been the desire to solve a new problem: a tax investigation.
In India, where tax avoidance is widespread, tax authorities are often highly selective about whom they choose to chase down. Sometimes, their motivations for doing so are political. The phrase "tax terrorism" has entered common usage in business circles. Even former senior tax officials conceded to Nikkei that they were directed by politicians to investigate specific targets.
In summer 2017, they went after Siddhartha. His office and family residences were raided over the course of several days.
Since his death, tax authorities have repeatedly denied that Siddhartha was targeted because of his political sympathies, pointing out that he himself admitted to irregularities.
Investigations by the tax office in India are often highly disruptive, leading to assets being frozen for periods of time and protracted negotiations. Unlike the widely feared Enforcement Directorate or Central Bureau of Investigation, they lack the power to throw their targets in jail -- but even so, Siddhartha felt that he was being harassed.
In the wake of his death, opposition politicians were quick to claim that the tax authorities had hounded him to the end. "He was killed mercilessly by Tax Terrorists who are now seeking to besmirch [him]," Congress Party spokesman Brijesh Kalappa told the Indian press.
Others, though, said that while the tax investigation created additional turbulence, it was only one part of a tangled mass of problems that Siddhartha was facing.
"Despite the harassment, the tax situation will be nothing more than a footnote in the story," said one of the coffee magnate's former advisers.
'You play that game, there are consequences'
Just how much debt Cafe Coffee Day and Siddhartha himself were under is not entirely clear, but one board member told Nikkei that it could have been as high as $1 billion. The number of subsidiaries and separate units under the company had ballooned to around 45, many of which had taken on leverage. Moreover, there was no clear segregation between the company's debts and those of the founder. The business lacked a senior finance specialist who might have been able to impose more discipline on Siddhartha, who was too focused on chasing growth and not enough on profit, according to people familiar with the company.
Another problem was, not only that the amount of debt was mounting, but also the cost of that debt. Siddhartha would borrow from one bank to repay another, or to pay investors -- such as his private equity backers -- the returns he had promised them. But an increasing number of banks were declining to refinance the struggling entrepreneur, leading him to turn to unsavory funding sources in the gray market. The problems mounted when nonbank lender Infrastructure Leasing & Financial Services imploded in late 2018, sending the cost of credit higher across the country.
"If IL&FS hadn't happened, he might have been able to keep it going longer," said Mape Advisory's Mathew.
In mid-July 2019, Siddhartha went to Mumbai to ask HDFC for a new credit line. The bank, despite having been fully repaid on its exposure, declined.
"He was a master of complicated financings and flipping things. But he had too much debt. He could make it work at a smaller level, but when there is inherently insufficient cash flow, the size of the balls he had to juggle kept increasing; the principal and accumulated interest charges kept increasing and the balls finally became too heavy to juggle," said Sanjay Bhandarkar, who recently retired as head of restructuring for Rothschild in Mumbai." He relished his power and used it liberally. Once you start playing politics, you will eventually rub someone the wrong way. You play that game, there are consequences."
In the last few months of his life, Siddhartha was clearly floundering, even as he tried to keep up the facade of success.
"He and everyone else thought of him as a brilliant entrepreneur," said a lawyer who comes from a local political dynasty. "He was always confident, always smiling. Yet he never actually made money."
"He loved his image," one banker added. And yet it became ever more difficult to maintain the illusion, as the debt seemed to be spinning out of control. He entered into negotiations to sell assets and, as he did with Blackstone, pulled out unexpectedly.
In early 2019, as he was negotiating with possible counterparties to sell a 20% stake in the technology company Mindtree, he told friends he felt betrayed when the company's management opposed the sale.
"I gave them all the money with my eyes closed when they got into trouble," he told a banker. "And then they blocked me at every stage." Eventually he found a buyer in Larsen & Toubro, a Mumbai technology, engineering and construction group.
The sale of that stake in April that year reduced his debt load a little. But it was still out of control, and he was losing his empire. His family and holding companies controlled almost 54% of the organization, but 75% of the shares were pledged to lenders. As they took control, the family share dropped to a mere 17%.
Friends said that he became despondent as the company slipped away from him. He told his son he might go to jail. "He had a premonition," one friend said.
'Nothing will come out'
Just weeks after Siddhartha's death, Blackstone signed a deal with Siddhartha's widow for the $385 million sale of the properties. Private equity firms have looked at the rest of the business, but no bid is expected to emerge. "We can fix a bad balance sheet," one investor said. "But it's harder to fix a problem business model."
The company has commissioned Ashok Kumar Malhotra, a former official of the Central Bureau of Investigation, to look into the suicide, though there is still no word of what he has uncovered. The accounting firm Deloitte is also conducting a forensic audit of Siddhartha's corporate empire. Official investigations are underway from the Enforcement Directorate and the CBI. Nitin Bagmane, Cafe Coffee Day's chief operating officer, declined to comment, citing the official investigations.
There was one final mystery. Siddhartha's assistant found a letter in his desk.
Typewritten in English, with an appendix of figures, it was an articulate indictment of those he claimed were harassing him, from private equity shareholders to the tax authorities. It claimed that the deceased entrepreneur's assets surpassed his liabilities and pointed to specific problems caused by the tax investigation -- including delays to the Mindtree transaction -- but alluded to as yet unexposed shortcomings in the business.
"I am sorry to let down all the people that put their trust in me. I fought for a long time but today I gave up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from other lenders led me succumbing to the situation," the letter reads.
At the same time though, the letter suggests some culpability on the entrepreneur's part. "I am solely responsible for all mistakes," it says. "Every financial transaction is my responsibility. My team, auditors and senior management are totally unaware of all my transactions. The law should hold me and only me accountable, as I have withheld this information from everyone including my family."
It looked to be a suicide note from an anguished executive. But, as one creditor pointed out, the numbers were all out of date. An official from the tax bureau said that the signature on the letter was different from the signatures on the documents that Siddhartha had filed with them. His friends, associates and business partners told Nikkei that it is almost impossible that a man known to be easily distracted would have written such a long and logical note.
"He had no attention span," said one of his private equity backers. "He was a man of few words."
Shortly after the letter was discovered, the board of directors of Cafe Coffee Day issued a statement saying its authenticity was unverified. The board has declined to comment further as it awaits the conclusion of its internal investigation.
For those caught in the gravity of V.G. Siddhartha's rise and fall, Cafe Coffee Day stands as a warning for anyone who cleaves their business to one side within India's shifting political landscape. However, despite the very public and tragic consequences, few believe that there will be any kind of a reckoning. Friends and business partners said that they expect from experience that the waters will close over the whole affair, and that business will continue as usual.
"Nothing will come out," said one creditor, "Because nobody has any interest in it coming out."