Entrepreneurship Shamed

VG Siddhartha's Story May Hit Entrepreneurship Dream Hard
Entrepreneurship Shamed
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Editor-in-Chief, Entrepreneur Media (APAC & India)
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Only yesterday, I read about how Jollibee Food Corp that came out of small country like Philippines took global rights for The coffee Bean and Tea Leaf Coffee chain under the chairmanship of Filipino entrepreneur Tony Tan Caktiong and just today one gets to read about the biggest success story of coffee chain in India’s founder has gone missing after succumbing to business pressures and ability to not take it further. 

This incident has brought forward a serious flaw in the Indian Business ecosystem. 

Why is entrepreneurship at a corporate level falling out in India? VG Siddhartha’s story is not the first example but perhaps the most painful one when it comes to building large organizations as entrepreneurs in India. Former chairman of Jet Airways Naresh Goyal has also walked the same dreaded path.  Earlier too, Flipkart Founders -Sachin Bansal and Binny Bansal had sold out Flipkart under the pressure of investors questioning their ability to manage a large organization. Something on the top that surely does not work in the favor of Indian Entrepreneurs because this is a story of giving up and not so much a failure as he mentions his assets will exceed his liabilities in his letter.

However Siddhartha’s scenario brings to light many hard lessons for the entrepreneurial community:

1. Private equity can be cruel: The lure of inviting funds in the organizations looks like a great prospect for growth, however it may not end out as planned for the founder himself in the long run. Given by the US market’s case studies, Indian Restaurant companies had just opened up to the idea of inviting PE funds into their companies however Café Coffee Day’s plight would not go down very well for the food service community to invite external funding into the system. Most restaurateurs are good at food operations and are not the best at finance at corporate level – and this may make them even more wary of the way forward. 

2. You can fight tough times but not Harassment: VG Siddhartha’s letter at best brings out a scenario of harassment whether it was from investors or from income tax department or from others in Business Ecosystem. In India, there is a general tendency to bring down the guy who has a success story and virtually every stakeholder gets after him to extract his gains. This leads to him succumbing to pressures and not being able to fight back the oppressing situation. 

3. When core business is hit, rest spirals: The economic climate for both ecommerce and physical retail is not at its best. On one side, internet users are not increasing significantly and on the other hand retail sales are also seeing a slowdown. Consumerism has taken a hit in the market. If you core gets hit, other things around you would always fall apart sooner then one can imagine. For Café coffee day – the financial year between March 2018-March 2019 was not its best time as evident in the balance sheet.

Profit & Loss - Coffee Day Enterprises Ltd.Rs (in Crores) 2019 

 

Mar'19

Mar'18

Mar'17

Mar'16

Mar'15

 

12Months

12Months

12Months

12Months

12Months

INCOME:

Sales Turnover

122.32

140.31

96.46

48.72

28.69

Excise Duty

.00

.00

.00

.00

.00

NET SALES

122.32

140.31

96.46

48.72

28.69

Other Income

1.7420

1.7120

1.9180

10.1450

2.0370

TOTAL INCOME

124.06

142.02

98.38

58.87

30.73

EXPENDITURE:

Manufacturing Expenses

.00

.67

.62

.72

.76

Material Consumed

69.13

61.15

39.31

20.71

6.62

Personal Expenses

8.50

7.69

6.70

5.88

4.83

Selling Expenses

.00

.38

1.22

9.63

.00

Administrative Expenses

8.60

7.44

7.08

6.17

13.05

Expenses Capitalised

.00

.00

.00

.00

.00

Provisions Made

.00

.00

.00

.00

.00

TOTAL EXPENDITURE

86.23

77.34

54.93

43.11

25.26

Operating Profit

36.09

62.97

41.52

5.61

3.43

EBITDA

37.83

64.68

43.44

15.76

5.47

Depreciation

.47

.44

.51

.67

.63

Other Write-offs

.00

.00

.00

.00

.00

EBIT

37.36

64.24

42.94

15.09

4.84

Interest

105.08

125.73

122.52

125.61

132.29

EBT

-67.71

-61.49

-79.58

-110.52

-127.46

Taxes

.00

.00

.00

.00

.00

Profit and Loss for the Year

-67.71

-61.49

-79.58

-110.52

-127.46

Non Recurring Items

.00

.00

.00

.00

.00

Other Non Cash Adjustments

.00

.00

.00

.00

.00

Other Adjustments

.00

.00

.00

.00

.00

REPORTED PAT

-67.71

-61.49

-79.58

-110.52

-127.46

KEY ITEMS

Preference Dividend

.00

.00

.00

.00

.00

Equity Dividend

.00

.00

.00

.00

.00

Equity Dividend (%)

.00

.00

.00

.00

.00

Shares in Issue (Lakhs)

2112.52

2112.52

2060.02

2060.02

145.92

EPS - Annualised (Rs)

-3.21

-2.91

-3.86

-5.36

-87.35

Source: Economic Times 

This is the time when an Entrepreneur has to focus on his main business and not worry too much about other matters; it seems reverse happened for Siddhartha and hence his reference to liquidity crunch in the letter perhaps. 

4. The Ripple Effect: Business slowdown always has a ripple effect. Today auto, real estate, FMCG sectors are grappling from a slowdown.The last six months have seen weak demand and lower sales growth in these key sectors. These sectors also have great entrepreneurial stories in India.

On one hand, regulatory pressures and on the other hand technology disruption has hit them at the same time. Siddhartha’s story may just set in motion many other such entrepreneurs who are under immense business pressures to give up their dreams and may lead to many business owners to call it a day.

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