The untimely death of VG Siddhartha, the adored founder of India’s most frequented coffee chain- CCD swirled us with shockwaves. Siddhartha, one of the most venerated members of India’s corporate elite, was bogged down by a humongous debt pile.
In a letter purportedly written by him, Siddhartha openly admitted that he found it profoundly difficult to deal with the exacting creditors- mostly banks and financial institutions and an unnamed private equity investor. Data retrieved from stock exchanges and the Ministry of Corporate Affairs reveal that the deceased founder of India’s first coffee chain may have accumulated a debt which peaked at over Rs 11,000 crore. His letter abundantly points to the scale of harassment he faced from the Income Tax authorities as well as his lenders. Over the course of nearly two decades, Siddhartha built a java empire with more than 1700 stores, 10 times more than the multinational favourite Starbucks Corp.
Siddhartha’s death also lays bare India’s story of swelling debt crisis and a tottering economy- two grim areas where the government has not turned on its ample attention yet. A successful entrepreneur capitulating to his mounting debt burden has touched a nerve with the business elite of India. There is certainly a murmur of dissonance within most of India Inc as business leaders are grappling with an economy wide cash crunch and crippling growth. This is an unpalatable scenario for Prime Minister Narendra Modi who has reclaimed power with an enormous mandate and a promise to put the tottering economy on high gear.
Growth of eight core sectors has dipped to two per cent, nearing four year lows. Unemployment, we all are acutely aware of touching 45-year high- only the official confirmation came after the elections. This government has so far done precious little to revive growth or jobs. Its own public sector enterprises are ailing. Air India’s revival plans have hit a limbo. As many as 1.78 lakh employees of Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) have not been paid their July salaries.
Besides CCD, there are 100 other enterprises where people are either driven to extremes or are not finding a route for refinancing. A review of the public disclosure of Siddhartha’s personal debt reveals how he spent much of the two years before his demise staking his CCD shares to refinance loans for ever shorter periods at steeper rates of interest. This is a lurking crisis and for a growth focused government, this phenomenon is unsustainable especially when the economy is in the doldrums. It’s an unspoken slowdown- one that is not proclaimed but forebodes the disaster in the offing.
Indian economy, the third largest in Asia, has lost its mojo with growth slowing to a fourth straight quarter in June 2019. Lenders are wary after the collapse of Infrastructure Leasing & Financial Services (ILFS) magnified the festering bad loans crisis. Stories are replete in the media of farmers suicides as prices of crops are crashing. Auto sales are plummeting with dealers downing shutters and 32,000 jobs already lost. The liquidity crunch and its slipshod management have failed farmers and entrepreneurs alike. We have lived more than five years into the illusion of ‘Achhe Din’- the growth halo has dimmed. It’s time to front load reforms before the economy sinks into disrepair.