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July 3, 2000
The Rediff Business Special/M D Riti
V G Siddhartha: From coffee to cyber cafes and beyond
When V G Siddhartha talks about money, his eyes acquire the blaze of missionary zeal. And you cannot help but get 'converted': he makes the entire process of making seem like fun, and you begin to feel that it must be a very simple thing to do indeed.
"When I was a young man just out of college in Mangalore, I decided that I wanted to get into business and make a lot of money: albeit, in a very respectable manner," he says, his eyes sparkling with delight, sitting in his simply furnished office in Raheja Chambers in Bangalore.
The M F Husain paintings on the walls are the only indicator that this space belongs to a very successful businessman. There were three options that he considered seriously at that time: exports of some kind, trading in stocks and shares, and trading in metals. Metals, he discarded, as 'not a very pretty option'. As he could not figure out what to export, he decided to join J M Financial Services -- now J M Morgan Stanley -- in Bombay as a management trainee.
Almost 15 years later, Siddhartha is now virtually the coffee king of Karnataka. He grows coffee on 2,500 acres of plantations in Chikmagalur, the heart of the coffee-growing region of Karnataka. He exports about 28,000 tonne of coffee annually, sells another 2,000 tonne locally for about Rs 350 million each year, and his coffee growing and trading company Amalgamated Bean Company has an annual turnover of Rs 25 billion.
Siddhartha now has 200 exclusive retail outlets selling his brand of Coffee Day powder all over South India. He is also halfway through negotiations with at least two foreign investors, who will invest another Rs 1 billion in his coffee retail business, and help him go national with his branded stores, increasing them to 600 in number, spread over the whole country. After two years, he plans to take the chain overseas: into China and Singapore.
However, Siddhartha has not stopped just at selling coffee. He was the first entrepreneur in Karnataka to set up a cyber café in 1996. Now, he has 11 Coffee Day Cafes all over Bangalore, and another four due to open in Hyderabad shortly. V G Siddhartha also hopes to bag the contract to take his chain to all the airports of Karnataka and then the rest of the country.
"But that is not my thrust business area at the moment," says Siddhartha, almost dismissing Rs 1 billion with a wave of his hand. His pride and joy at the moment is Global Technology Ventures (GTV), a Bangalore-based incubator that will create, build and mentor the development of Indian technology companies. GTV was formally launched only in May this year, but along with its promoting company Sivan Securities, already has stakes in 24 young companies, including high profile start-ups like Sabeer Bhatia's Arzoo!.com, Ashok Soota's MindTree Consulting, Ramana Gogula's Liqwid Krystal and B V Jagadeesh's NetMagic.
Siddhartha's company Sivan holds 80 per cent in GTV, while Bank of America Equity Partners (BAEP), which provides private equity capital to the Bank of America Corp, has the remaining 20 per cent.
GTV has now set up a global technology village on a 59-acre technology incubator park in Bangalore, which will provide its companies office space, communication links, recreational facilities and even a commercial centre. GTV has been valued by BankAm at $100 million last year, and is expected to have doubled its valuation this year. It is poised to grow on the lines of Softbank of Japan.
A family connection that seems to embarrass Siddhartha a little bit now is that he is the son-in-law of S M Krishna, the Chief Minister of Karnataka.
The media never fails to focus attention on this when writing about his business interests. Thus, Siddhartha often prefers to avoid contact with the media. He prefers so much to remain just a low-profile businessman, that he refuses to even pose for photographs.
Vernacular media even wrote that Siddhartha made his money with the help of political favours. "I had already bought most of my coffee plantations before my marriage, which took place in 1989," says Siddhartha, debunking all speculation right away.
"Krishna became a minister only in 1992. What major favours could he have done for me to help me buy my plantations before that? Actually, it works the other way around. Businessmen all over the country fund both political parties and individual politicians. This happens in other countries too, but there its all legal, above board and organised, that's the only difference."
After a two-year stint with J M Financial Services, when Siddhartha returned to Bangalore, his father gave him a good amount of money to start any business of his choice. Siddhartha promptly bought a stock market card for Rs 30,000 with it, along with a company called Sivan and Company, as well as a site in the city. "I was a very smart trader," says Siddhartha with an endearing kind of self pride. "I made money almost every day on the stock market. And with whatever money I made, I kept buying coffee plantations in Chikmagalur. My family background was such that I had a mindset that the new economy might not be the greatest, and that solid, tangible, physical assets like land were the best to own."
When the coffee business was opened up due to liberalisation in 1993, and government restrictions compelling planters to hand over most of their produce to the Coffee Board were eliminated, Siddhartha was one of the earliest beneficiaries. He admits to having actually facilitated the process by lobbying actively for this removal of restrictions. He started his coffee trading company ABC in 1993, with a Rs 60 million turnover. His company grew gradually. He bought a sick coffee curing unit in Hassan for Rs 40 million and turned it around. Now, his company has a curing capacity of 75,000 tonne, which is the largest in the country. Last year, ABC's coffee exports were 28,000 tonne, and his projection for this year was 33,000 tonne.
"Then, I thought selling coffee in bulk as a commodity without branding had no future," continues Siddhartha. So he started special retail outlets for his branded coffee powder all over Karnataka. He now has 18 outlets in Tamil Nadu, 20 in Andhra Pradesh, 6-7 in Kerala and about 90 all over Karnataka. They are all owned half by his company and half by other franchisees. He sells 7-8 tonne tonne of coffee per week through this outlets to over 100,000 buyers. The cafes, which he started later on, draw 6,000 to 7,000 visitors a day.
Then, he decided to use the network he had developed as a raiser of funds for other companies on his own coffee retail business. "I would like my chain to become like the Starbuck of Asia," he said, referring to America's leading coffee retail and café chain. The cyber café concept was just incidental to his coffee retail business. "I thought Internet access would be a good way to attract young people to the cafes, and give them a clean hangout place," he explained.
When the stock market crashed in the early 1990s, Siddhartha began to look around for a new investment avenue that would spin him good returns. He decided to invest in technology.
Thus began Sivan Securities, which is now a major player in the South Indian capital market, which is now featured among the top 12 investment brokers in the country. It has a network of 35 offices spread over 25 cities in South India catering to both corporate and retail clientele. Its secondary capitals market division is now in the process of developing an Internet-based trading portal to provide access to retail investors in remote centres.
Siddhartha certainly seems to be blessed with that special intuition that enables him pick out business areas that are poised for takeoff, and get into them before everyone else. This will probably make him one of the major players in the money game in the country soon enough.
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