Tatas plan to buy V G Siddhartha's coffee plantations for Rs 1,500 crore

Reports suggest that VG Siddhartha had given about Rs 5,000 crore of personal guarantee for Cafe Coffee Day’s business.
Tata Coffee is learnt to be in the initial stages of negotiations to acquire 12,000 hectares of coffee plantations that belonged to V G Siddhartha, the founder of Café Coffee Day Enterprises, for a valuation of Rs 1,200-1,500 crore.

His wife Malavika Hegde has been in charge of the group’s operations since Siddhartha ended his life in August 2019, and is handling his personal assets, including the coffee plantations, believed to be the second largest in Asia.

Siddhartha is believed to have availed loans worth Rs 2,000 crore from banks, including HSBC, Rabo Bank, Lakshmi Vilas Bank (LVB), RBL Bank, and IndusInd Bank. LVB and a few other lenders initiated recovery proceeding against the plantation assets last November. 

“Discussions between Tata Coffee and Hegde started in February, but were put on hold because of Covid,” said a person with direct knowledge of the matter. “Talks have resumed, though the deal may be in preliminary stages,” he added.

When contacted, a Tata Coffee spokesperson said the firm does not comment on speculation.

However, a family representative said: “We have not discussed sale of plantations to Tata Coffee. Speculation in this regard should be treated as baseless rumours. None of the lenders have invoked recovery proceedings on plantation assets, and we deny your inferences on the subject matter.” 

Located in Karnataka’s Chikkamagaluru district, the plantations employ 3,000 people and export 20,000 tonnes of coffee annually. They are said to be valued at Rs 2,000 crore. Reports suggest that Siddhartha had given about Rs 5,000 crore worth of personal guarantees. Apart from the coffee plantations, he also had silver oak and timber plantations valued at about Rs 2,000 crore. His personal assets also include the luxury hospitality chain The Serai Resorts.

Bloomberg had reported that the board of Tata Consumer Products (TCP) had approved a proposal to explore the acquisition of Café Coffee Day Enterprises’ vending machines business. The report could not be independently verified.

Sources say that with Tata group having completed the restructuring of the consumer business and TCP’s joint venture with Starbucks progressing well, deliberations to acquire the plantations are largely with the view of scaling up Tata Coffee’s land base. TCP holds 57.48 per cent stake in Tata Coffee.

Tata Coffee currently has about 8,000 hectares of coffee plantation, most of it located in Toopran (Telangana) and Theni (Tamil Nadu). 

While it does have presence in Kodagu and Chikkamagaluru districts of Karnataka, these plantations cater to the green bean segment, which is largely exported. Tata Coffee is the leading player in the industrial instant coffee segment and the acquisition would boost its exports.

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