Cafe Coffee Day Parents Rs. 26 Crore Fine; Stock Tanks 4% – Here’s Why SEBI Penalizes Coffee Day Enterprises
January 2023: New Delhi: The Securities and Exchange Board of India (SEBI) on Tuesday fined coffee house chain Cafe Coffee Day parent Coffee Day Enterprises.
The capital market regulator has fined Coffee Day Enterprises for diverting funds from a subsidiary to a promoter-related company of Rs. A fine of 26 crores was imposed.
The company received Rs. Sebi has asked Coffee Day Enterprises to pay the penalty within 45 days, instructing it to hire a reputed law firm to help it recover the dues of Rs 3,424.25 crore, in consultation with the NSE.
The regulator has also directed the coffeehouse chain to take necessary steps to recover the entire dues along with outstanding interest from Mysore Amalgamated Coffee Estate Limited (MACEL) and its related entities.
Shares of Coffee Day Enterprises fell over 4 percent during intraday trade on Wednesday to Rs. It reached a low of 42.90. The share price is down more than 10 percent year-to-date.
Out of the 7 subsidiaries of Coffee Day Enterprises Limited (CDEL) a total of Rs. 3,535 crore was diverted to Mysore Amalgamated Coffee Estates Limited (MACEL), an entity related to CDEL’s promoters, after VG Siddharth, chairman of the Coffee Day Group, committed suicide in July. 2019.
SEBI has stated that the money transferred to MACEL from the seven subsidiaries went to the personal accounts of VGS (VG Siddharth), his family and related entities and thus remained in the system.
The seven subsidiaries are Coffee Day Global, Tanglin Retail Reality Developments, Tanglin Developments, Giri Vidyut (India) Limited, Coffee Day Hotels & Resorts, Coffee Day Trading and Coffee Day Econ.
It was reported that he left a suicide note addressed to the board of directors and the Coffee Day family in which he revealed that he was deeply in debt.
As per the Sebi order, MACEL is almost wholly owned by the VGS family with a 91.75 percent stake and the family is also the promoter of CDEL.
As on July 31, 2019 Rs. 3,535 crore is the total outstanding amount and the subsidiaries till September 30, 2022 Rs. 110.75 crore has managed to recover a small amount, according to SEBI.
In view of the diversion, SEBI imposed a penalty of Rs. 25 crore fine and violation of LODR (Listing Obligations and Disclosure Requirements) rules of Rs. 1 crore has been fined.
Without making the directors and key management personnel (both past and present) of CDEL and its subsidiaries parties to the current proceedings, the regulator said it is imperative to investigate in detail the acts and omissions of such persons.
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