Protected by Copyscape ccd case study - Startup Startup cafe coffee day ccd

ccd case study

ccd2

ccd case study

Why did CCD’s founder commit suicide?

What is CCD’s full business model?

i will cover everything about ccd case study.

ccd3

In today’s case study we will be talking about

How was CCD started? How were its subsidiaries started?

Also, why did its founder commit suicide?

We will talk about all the things in detail

sir VG Siddhartha completed his post-graduation in Economics from

Mangalore university. After that when he returned home his father said

to join their family business. They had

300 acres of coffee beans farms which is not a less area.

So life was all set.

But he said no I want to start my business.

For that, his father gave a sum of 5 lakh

as a part of seed investment.

Out of which for 3 lakhs he bought land and went to Mumbai with

with the other 2 lakh. There he worked as an intern in a company

and also learned

about the share market there.

ccd2

Sometimes after working there he returns home

and start his own sare market firm

by the name of Sivan securities that

they take to a very good level in terms of

broking and trading.

In 2000, it’s name was changed to Way2Wealth securities

Now along with his share market business, he was also managing his family’s business.

So there he identifies a very big

problem. What happens there that you cannot directly

supply coffee beans to the International market

So there was a government agency through which you could supply

ccd1

Because of which three times more profit

were earned by the International people.

So ultimately Indian producers used to stay in a loss.

Then, he went to the finance minister of that time, Manmohan Singh with his friends

and

discussed the issue

He resolved the issue

and

ultimately liberalization was started on coffee beans.

that meant you were able to supply coffee beans yourself outside.

Now he started his own company ABC, Amalgamated

Bean Company

Here

he started exporting coffee beans

now his market was set together with

he also started roasting and doing all the processes related to coffee.

 

They opened their own outlets in Bengaluru and Chennai

With time they became the

the largest company in India that was exporting coffee outside.

 

Once upon a time, he met the owner of Tchibo brand which used to be a very

big coffee beans system in Germany.

He heard their story and got immensely

inspired. He met him to sell the coffee beans

but got inspired seeing their idea.

Now

ccd4

he returns to India and thinks that I will also do my own work.

But who will buy a 25-30 Rs. coffee in those times?

He stopped that idea at that time.

He was a regular traveler to Singapore and saw that

there are some shops with a huge crowd.

There he analyzed that free internet was provided.

Now all these things were going at the back of his

mind.

Now when he was doing his coffee beans business he realized that

there isn’t much profit margin. Then he thought to open his another vertical

of selling coffee and also providing free internet with it.

 

Now here he combined these two ideas and started his own coffee business with

an investment of 1.5 cr.

25 rupees coffee they used to sell and give

1 hour of free internet with it.

Now they have around 1750 stores of their own,

30,000 employees

and 60,000 coffee vending machines. They make everything on their own

Whatever number of verticals they have, they supply everything on their own.

 

All of their supply in their own stores is what they presently do.

Now if I talk about the second number company

that comes after CCD, is Barista.

Only 220 outlets they have

ccda

If I talk about Starbucks, they have

around 140 outlets of their own in India. That’s it.

 

There is a huge difference if you see the market share.CCD

Is cheaper as compared to starbucks

Here, the best thing that I like about CCD is their marketing vision which is

A lot can happen over coffee

People can organize clients’ meetings in in CCD

If they don’t have an office. i t may be a problem .

suppose you are having a deal with your client but you dont have any office the client may judge you .

its better to invite your client at ccd . its a great idea 

Nobody is going to disturb you that sir your coffee is over and you please

go as there are people waiting outside.

The best I liked about them.

Till now, its all glory now let’s talk about some bad things

Now their business idea

is debt centric. Debt centric means

you have to borrow from the market as a lot of money is required.

To make the first store in those times it took around 1.5 cr.

How much would it cost now?

Now its an investment only right?

ccdc

To do that investment where will you raise the money from?

You cannot earn that much money from selling coffee in the beginning.

So this much stores they have opened in the starting

because of which debt was accumulated.

In 2015, around 6300 cr.

debts were accumulated with them.

Of Around 1150 cr.

they launched an IPO

IPO means Initial Public Offer.

If I want to raise money from the public

How will I do it? I can take a loan from  bank or from my friends

or I can sell my company’s partnership in the form of equity

Take my 20% share and give me this much money.

so become my partner in the company.

or I can make it a public ltd.

I say my company’s 10% share one person cannot buy

So that 10%, I have distributed among several people

so that

you also can become a partner in my company.

Share market listings are because of IPO. They registered themselves in the share market.

The money that came from the share market, they thought what I feel would be utilised

to lower the debt

In 2018 also around 4400 crore

the debt was there on them

It rose to around 6600 cr by the time 2019 came.

that means the debt was constant

in their business model.

Now the whole problem according to me

was they were taking short term loans to repay the debt.

short term loan means debentures n all.

They used to proceed debentures

and say take these debentures and I’ll give you this much % of return later on.

With that money, they used to repay the long term money.

On debt only, everything was going on.

If I talk about the profit

this company was profitable

In March 2019 4264 cr. rupees of revenue they did.

143 crore was the profit out of that

The company was profitable

So this 143 crore rupees

were not sufficient obviously to cover the huge debts of around 6500 crores.

Now

when did this whole issue start

when there was an income tax raid.

A person was caught in Singapore

with 1.2 crores of cash and

he tells that this money is of Siddhartha’s.

After that income tax people raid them

20 times in different offices and

they get to know that 362 crores of unaccounted income they have

ccd2

that means black money on which

they have not paid the tax

Because of which income tax siezes their share.

They say you cannot do any transactions.

Now they were requiring money

as we also talked before their entire business model is very much

debt centric because a lot of capital is required in this business anyhow.

So to raise they

had another business by the name Mindtree

In January 2019, they tried to sell Mindtree

but

income tax department stopped that deal

because till now they haven’t repayed that tax

Now what did they say that leave those Mindtree shares

you hold the CCD one. By giving CCD’s they

sold Mintrees’s shares to Larsen and Toubro

that does the metro work in Delhi.

now from there, they got 3200 crore

which they were about to use for debt repayment.

Together with that, they had another company that

used to make tech parks, IT parks

by the name Tanglin Developments. They tried to sell but failed.

They were also in contact with Coca-cola to sell a few shares

but that also didn’t turn up.

Together with that

the main auditor of CCD

said that 40 subsidiaries audit we didn’t do

this reached to Board of Directors, all the lenders

and they all said we will not give money

as people do not have trust in them, they won’t

give them money

If they won’t get money, how will they expand?

Together with that, all their shareholders were saying to buy-back

Buyback means my shares you keep

and give me money in the return

Now these people were saying and the company

didn’t have money to give it to them as well, because of which so much pressure was created and ultimately they had to over everything.

 

If we read it in their letter, it is written that

there was a private equity partner whom I wasn’t able to repay the amount

because of which I did so and also with that I was facing the problem of liquidity.

Liquidity means I wasn’t able

to cash my assets.

Now see you have made a CCD store,everything is set there.

How will you sell and encash it?

ccdd

because you have invested so much amount in its investment.

Now, this you won’t say right go and sell those two ACs.

How much will you get by doing so? If you wanna sell a store, it is not possible overnight.

With that people were also not going money.

He was not getting funds because of which majorly

he took the step and committed suicide.

Now, what do I believe? What is my perspective?

I always say I do not like funding in very early stage.

yeah if there is a situation you need funding at very early stage then you may go for it .

rules depends on sitation

I believe if you have trust in your business idea.

you too can grow it slowly

Yeah, I believe you cannot become a billionaire by

putting in your own money. Your growth rate might be slow.

But all the money would be your own

all the efforts are yours, the risk would be yours

also, our business model won’t be manipulated by others.

What I have seen most of the time in known companies

where

they bring an investor in their company

he gives his share of the money

and in return of that, he becomes the owner of your company.

No matter he has 20 %, he’ll say I’ve given you 2 crores,5 crores

you do the work

this is what I want

marketing would be like this

now you’ll say according to me it should be like this, he would say no I have given the money

you do. You feel forced under him and not able to do

business according to yourself.

ccde

So that is why if you wanna take an investment, take from a place

that would give you full leverage and have trust in you.

I have said if you think my business model has 40% profit.

 

So in 10% I can take loan from the market and manage

with 30% profit.

People do not understand all this and ultimately all this happens.

I am not saying he didn’t understand but he

kept on falling in it. He thought everything would work out

but after that income tax department raided, the trust went

and alter said all that. All the game was over.

After his death, if we see the CCD’s share

they have decreased drastically

ccdf

In my friend circle, I talk

to my friends, I was telling

it won’t only go down but also up. When it would start going up, invest in it

Now if recently from 6-7 days you would be saying it

always the share is on the upper circuit.

Those who do not know about the upper circuit.

The upper circuit is hitting now slowly the share would go up.

I always believe invest when

the market is down and not when it is up.

Wanna appreciate my article then please share it on your social media .it helps me alot.

Be curious

Be happy

 

Content Protection by DMCA.com
You cannot copy content of this page
error: You Can\'t copy this article
Startup