Indian coffee firm's shares plummet after founder goes missing

Cafe Coffee Day owner VG Siddhartha, who holds a 32.75% stake in Coffee Day Enterprises, has not been seen since Monday evening

epa07748364 People walk outside a branch of Cafe Coffee Day, India's Largest cafe chain in New Delhi, India, 30 July 2019. According to a news report, VG Siddhartha, the founder of India's largest Coffee chain Cafe Coffee Day (CCD) has gone missing from a bridge near Mangaluru in Karnataka since 29 July.  EPA/RAJAT GUPTA
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Shares of Coffee Day Enterprises, India's version of Starbucks, tumbled 20 per cent on Tuesday after the company's founder, V G Siddhartha, went missing.

Mr Siddhartha was last seen close to the city of Mangalore in south India on Monday evening, when he asked his driver to stop the car and got out, but he did not return.

Cafe Coffee Day based Bangalore is India’s largest coffee chain with more than 1,700 outlets across the country.

The company's stock fell to an all-time low of 153.40 rupees (Dh8.19) in trading on Tuesday, a search Mr Siddhartha.

Indian media reported police suspected he had jumped off a bridge over the Netravati river.

"The reasons why he is missing remain unclear," said Rajesh Gupta, the managing partner at SNG & Partners, an Indian law firm.

"Only his safe return would resolve all issues and challenges amicably, putting all rumours to rest," he said. Coffee Day Enterprises said in a statement to the BSE stock exchange, where its shares trade: "The company is professionally managed and led by competent leadership team, which will ensure continuity of business."

Mr Siddhartha holds a 32.75 per cent stake in Coffee Day Enterprises.

Last month, Indian business newspaper The Economic Times, citing unnamed sources, reported the founder was seeking a valuation of up to $1.45 billion (Dh5.32bn) from Coca-Cola for the coffee chain and looking to sell a stake, while planning to retain a controlling share.

In March, Mr Siddhartha sold his stake of about 20 per cent in a software services company called Mindtree.

Mr Siddhartha comes from Chikmagalur in the state of Karnataka in south India. In the 1990s, he bought coffee plantations and started exporting coffee.

He founded the coffee chain in 1993 and its first outlet opened in Bangalore in 1996.

Cafe Coffee Day's prices are lower than Starbucks'in India and it gained popularity as a coffee culture took hold in a country better known for being a nation of tea drinkers.

Cafe Coffee Day markets under the slogan: "A lot can happen over coffee". Starbucks did not enter India until 2012 and it has less than a tenth of the number of outlets Cafe Coffee Day does in the country.

However, the homegrown chain has faced challenges. Cafe Coffee Day has shut down several of its smaller stores over the past couple of years.

Mr Siddhartha is the son-in-law of the former chief minister of Karnataka, SM Krishna.

Indian media yesterday circulated an unverified letter addressed to Coffee Day Enterprises' board of directors and employees reportedly written by Mr Siddhartha. Dated July 27, it said he had "failed to create the right profitable business model", claiming he had conducted transactions others were unaware of and that the authorities should hold him "accountable".

There was also a mention of “harassment” by income tax officials in the unverified letter.

Mahesh Singhi, the founder of investment bank Singhi Advisors in Mumbai, the circumstances had shaken the business community. The government "will need to institute adequate checks and balances to ensure that investor sentiment is not dampened and a fear psychosis does not pervade businesses and commercial establishments ... and assure them that cases of undue harassment will be dealt stringently", Mr Singhi said.

Indian politician DK Shivakumar took to Twitter to say he had known Mr Siddhartha and his family “for decades”.

He seemed to doubt the veracity of letter and said he had received a call from Mr Siddhartha on July 28 asking to meet him.

“It’s unbelievable that a courageous man like him would resort to this,” Mr Shivakumar said.

The matter was “utterly fishy”, he said.