The board of director at Coffee Day Enterprises has appointed EY to scrutinise the books of accounts of the company along with its subsidiaries in the light of the purported letter written by the chain’s founder V G Siddhartha, who was found dead in mysterious circumstances last month. The company made the disclosure in a regulatory filing on Thursday after a board meeting.
The board has also decided to appoint a person of eminence or a reputed firm as its strategic corporate advisor for determining the future strategic direction for the firm.
The Coffee Day founder had claimed that none of his team, auditors, senior management or the board was aware of his personal financial transactions. Although the veracity of the letter is under investigation, such claims had raised doubts over existence of unknown financial transactions beyond the knowledge of the board. Industry experts said EY was likely to conduct a forensic audit to find out if there was any off the book transactions without the knowledge of key management personnel and auditors.
"EY is likely to look at the forensics of the book, because the board also needs to know the right picture. This is a positive sign as the board is taking some measures," said Shriram Subramanian, founder of corporate governance advisory firm InGovern. "Also, the decision to rope in a strategic advisor is timely as it can provide a future direction. However, these are just initial steps and we have to wait for the outcome of EY audit to make a view."
In its last board meet held on July 31, the board had roped in law firm Cyril Amarchand Mangaldas as its legal counsel to advise on related matters.
During Thursday’s marathon board meet, stretching for more than six hours, Malavika Hegde, wife of late Coffee Day founder, was appointed as an additional member of the executive committee. Currently, the executive committee is vested with all the powers of then chairman and CEO and comprises the group's interim chairman S V Ranganath, chairman of real estate subsidiary Tanglin Nitin Bagmane and group CFO R Ram Mohan.
However, according to industry watchers, the outcome of the board meeting was devoid of any specifics regarding deleveraging the balance sheet of the firm. "This is vague because it is not clear whether they will explore to sell it or continue with the expansion or go for fund-raising," an analyst said.
Sources close to the company had earlier told Business Standard that the company was considering monetising its 'Global Village' tech park located off Mysore Road in Bengaluru to reduce its debt to around Rs 3,000 crore from Rs 6,500 crore now. The company was also looking at roping in a strategic investor in the coffee retail chain business. However, Thursday's meet was silent on such strategic moves.
Meanwhile, the share price of Coffee Day Enterprises was on a free fall and touched a new 52-week low of Rs 76.85 on Thursday on NSE.