Rising From The Ashes

After the untimely death of V.G. Siddhartha, the founder of Coffee Day Enterprises Limited (CDEL), which runs the  Café Coffee Day (CCD) chain of coffee outlets, in July 2019, most people had written the company off. After all, Siddhartha had left behind a huge debt of around Rs 7,000 crore.  

Amid questions on who would take over CDEL, Siddhartha’s wife Malavika Hegde stepped forward. Having studied engineering, she did not have a formal degree in business, but she had been associated with the company since her marriage.  

The debt was enough to burn CDEL to the ground, but Hegde took upon herself the daunting challenge to free the company from it. She took charge of CDEL as the chief executive officer in December 2020 and from thereon never took a step back.  

Her passion and commitment were clear right from the beginning. In a letter to all the employees of her group, she said that the Coffee Day story was “worth preserving” and assured them that she would bring down the company’s debt to a manageable level. Despite stepping up in a state of crisis, she rarely betrayed any signs of panic or fear.

Fulfilling Promises

Hegde’s efforts helped save the sinking ship. Today, the company continues to serve its large pool of customers across the country. It has seen a steep decline in its borrowing figures after she took over the reins. According to its annual reports, its net debt fell to Rs 1,524 crore as on March 31, 2023, from Rs 2,910 crore in 2020. Long-term borrowings fell to Rs 1,297 crore from Rs 2,189 crore and short-term borrowings to Rs 303 crore from Rs 824 crore.

In one of her calculated moves, Hegde shut down several CCD outlets which were not turning in any profit for the company instead of increasing the prices of the products. As a result, the total number of outlets, which were over 1,000 earlier, was reduced to less than 500. Within a year of taking over, she managed to repay Rs 1,644 crore after negotiation with lenders.

For the remaining debt, she sold a chunk of CCD shares to strategic partners Mindtree, Shriram Credit Company and Way2Wealth. This brought down the debt significantly. Since her goal required large offerings from her end, she did not hesitate from making bold moves. She even sold off the Global Village Tech Park, the group’s Bengaluru-based property, to repay more of the debt.

Apart from selling off assets, Hegde pooled in money by exporting premium Arabica beans from her 20,000-acre farm to foreign buyers. This was said to be a smart move, given the high demand for these beans globally.

Impressive Report Card

The company’s financial results for 2022–23 showed that the coffee chain now operates just 469 stores in India. The decision to limit the business operations is in line with her efforts to make CDEL profitable on a sustainable basis. The company reported a 59% jump in net revenue to Rs 924 crore from Rs 582 crore last year. The contribution of its coffee retail business, which includes the CCD chain, amounted to Rs 869 crore of the total revenue.

According to the company, the average sales per day per café increased by 42% during the last fiscal, to Rs 20,622, while the number of operational vending machines increased by 26%. There was also a 65.8% increase in the revenue per machine during the year. All this put together helped the company to record a profit of Rs 23 crore in the first quarter of the current fiscal.

The company’s bottom line is currently juggling between ups and downs over the quarters. However, the plan to be profitable on a regular basis seems very much possible, thanks to Hegde’s leadership. If the company has come this far after Siddharatha’s death, it is largely due to her efforts.

Pushed by desperate times, she had turned entrepreneur and saviour of a dying business. Her unfaltering determination to save a falling empire may have sounded like an impossible task back then but has become an inspiring case study today. With her strategies, she managed to bring down the company’s debt from Rs 7,000 crore in 2019 to Rs 465 crore in 2023. CDEL’s Hegde is the phoenix that has risen from the ashes.