Beleaguered Coffee Day Enterprises has reportedly been sent a show-cause notice by Securities and Exchange Board of India (SEBI) seeking details over funds raised by the company, misappropriation of these funds, and losses to shareholders, Livemint reported on Monday. The markets regulator has reportedly asked for details over funds that were raised under its late founder VG Siddhartha.
This comes after an investigation into the books of the company and the letter left behind by Siddhartha revealed a gap of Rs 2,693 crore in the balance sheet of Coffee Day Enterprises. The report suggested that the money may have been diverted by Siddhartha to his company, possibly to pay back PE investors, repay loans or even fund his other private investments.
SEBI has reportedly also asked for details on whether the company has tried to recover this amount that was diverted to fund other transactions. SEBI’s focus is on these fraudulent transactions that caused losses to public shareholders of the company.
SEBI has issued the show-cause notice under its prevention of fraudulent and unfair trade practices rules, Mint reported.
On August 30, 2019, the board of Coffee Day had appointed a committee led by former Deputy Inspector General of CBI Ashok Kumar Malhotra to investigate the circumstances leading to the statements made in the letter by Siddhartha and to scrutinize the books of accounts of Coffee Day and its subsidiaries.
This investigation also revealed that Mysore Amalgamated Coffee Estates Limited (MACEL), a private coffee trading firm owned by Siddhartha and his father, owes Rs 3,535 crore to the subsidiaries of Coffee Day Enterprises as on July 31, 2019, while Consolidated Audited Financial Statements of Coffee Day showed that MACEL owed only Rs 842 crore to subsidiaries as on March 31, 2019, revealing a gap of Rs 2,693 crore that needs to be addressed.
The subsidiaries of Coffee Day have been trying to sell off assets to pare down debt. In September 2019, the Blackstone Group and Salarpuria Sattva group bought the Global Village Tech Park in Bengaluru from Coffee Day’s subsidiary Tanglin Development for Rs 2,700 crore.
Reports also suggested in September that Tata Consumer Products was looking to bid for the Coffee Day’s vending machine business.