PROJECT REPORT

(Submitted for the Degree of B.Com. Honors in Accounting & Finance under the University of Calcutta)

Title of the Project

CORPORATE GOVERNANCE

Submitted by

Name of the Candidate: AMISHA KARNANI

Registration No. 224-1211-0821-20

Name of the College : Seth Anandaram Jaipuria College

College Roll No. 0883

Name of the Supervisor: Prof. Parichita Basu

Month & Year of Submission

20th May, 2023

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 ACKNOWLEDGEMENT
It is in particular that I am acknowledging my sincere feeling towards my
mentors who graciously gave me their time and expertise.

They have provided me with the valuable guidance sustained and friendly
approached it would have been difficult to achieve the results in such a short span
of time without their help.

I deem it my duty to record my gratitude towards my project supervisor

Prof. Parichita Basu who devoted her precious time to interact, guide and gave me
the right approach to accomplish the task and also helped me to enhance my
knowledge and understanding of the project.

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 Contents
Serial Chapters Subjects Page No.
No.
1. 1 Introduction 5
2. Brief Review of Topic 6
3. Objectives of the Study 7
4. Research Methodology 8
5. Limitations of the Study 9
6. Chapter Planning 10
7. 2 Conceptual Framework 11
8. Concept of Corporate 12
Governance
9. Importance of Corporate 13
Governance
10 Brief overview of CCD 14
11. Golden Days of CCD 15
12. Business Model and Strategy 16
13. 3 Presentation Analysis and Findings 17
14. Analysis 18-19
15. Findings 20
16. Facts of CCD 21
17. 4 Conclusion and Recommendations 22
18. Conclusion 23
19. Recommendations 24
20. References 25
21. Annexures 26-27

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 Chapter1:
Introduction

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 INTRODUCTION
 Corporate governance is a system of application of best
management practices fulfilment of law and ethical
standards of what is right or wrong for effective
management and distribution of wealth and discharge of
various responsibilities for sustainable development of all
stakeholders.

 In India it is mandatory for all listed entities to comply with the

applicable regulations of Corporate Governance, failure to which
penalty imposed by the regulator Securities Exchange Board of
India (SEBI).

 My objective behind this project report is to establish the

importance of corporate governance and the consequences of
ignorance of good governance practices, with the help of a
landmark case of Café Coffee Day (CCD).

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 Brief Review of Corporate Governance
Corporate governance is a multidisciplinary field of study it covers a wide range of
disciplines – accounting, consulting, economics, ethics, finance, law, and management. The
main function of corporate governance is to make agreements that describe the privileges
and tasks of shareholders and the organization. In case of disagreements because of
conflict of interest, it is the responsibility of corporate governance to bring everyone
together. It also has the function of setting standards against which corporations work can
be managed and administered.

According to ICSI, "We may define 'corporate governance as a

blend of rules, regulations, laws and voluntary practices that
enable companies to attract financial and human capital, perform
efficiently and thereby maximise long term value for the
shareholders besides respecting the aspirations of multiple
stakeholders including that of the society."

The Kumar Mangalam Birla committee constituted by SEBI has

observed that, "Strong corporate governance is indispensable
financial reporting structure."

Sir Adrian Cadbury Committee, which looked into corporate

governance issues in U.K., defines Corporate Governance "as the
system by which the companies are directed and controlled. The
basic objective of corporate governance is to enhance and
maximize shareholder value and protect the interest of other
stake holders".

Over the past two decades, the investment world has seen a large
numbers of scandals relating to companies which are attributed
to failure of governance. This has been caused due to a
combination of factors which can be principally classified into
three corporate sins.

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 Objectives of the Study

Good governance is integral to the very existence of a company. It

inspires and strengthens investor's confidence by ensuring company's
commitment to higher growth and profits.
My intention behind this project report to make the readers aware that
the importance of Corporate Governance and the consequences of
ignorance of good governance practices with the help of the landmark
case study of Café Coffee Day.
With the passage of time, Central Government is making sure that
companies incorporating under Companies Act 2013 and liable to follow
SEBI Regulations are required to follow Good Governance Practices.
Failure to which penalties under required Regulation or as the case may
be, imposed upon companies.

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 Research Methodology

Area of Study: Secondary Data

The data for the project report has been collected from the data
available from different websites such as-

 https://startuptalky.com/cafe-coffee-day-case-study/

 https://blog.ipleaders.in/corporate-governance-structure-cafe-
coffee-day-went-wrong/

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 Limitations of the Study

My Project Report is based on Secondary Data.

Details available in the project is subject to data available
over the internet.
Therefore, I am not sure whether the data I collected is
absolutely based on actual facts and figures.
Thus, the objectives and methodology used to collect the
secondary data may not be appropriate for the required
information for this research.

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 Chapter planning

Chapter2 - Conceptual Chapter3 - Analysis and Chapter4 - Conclusion

Chapter 1- Introduction
Framework Findings and Recommendation
•Brief Review of Topic •Concept of Corporate •Analysis •Conclusion
Governance
•Objectives of the •Findings •Recommendations
Study •Importance of
Corporate Governance •Facts of CCD •References
•Research
Methodology •Golden Days of CCD •Annexures

•Limitations of the •Business Model and

Study Strategy

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CHAPTER 2

CONCEPTUAL

FRAMEWORK

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CONCEPT OF CORPORATE GOVERNANCE

 Corporate governance is a system of application of best

management practices fulfilment of law and ethical standards of
what is right or wrong for effective management and distribution
of wealth and discharge of various responsibilities for sustainable
development of all stakeholders.
 As per Regulation 27(2) of SEBI (LODR) Regulations, The listed
entity shall submit a quarterly compliance report on corporate
governance in the format as specified by SEBI from time to time
to the recognized stock exchange(s) within 21 days from the end
of each quarter.
 Important terminologies of Corporate Governance:-
 VIGIL MECHANISM
 The listed entity shall formulate a vigil mechanism / whistle blower
policy for directors and employees to report genuine concerns.
 The vigil mechanism shall provide for adequate safeguards against
victimization of director(s) or employee(s) or any other person who avail
the mechanism.
 The vigil mechanism shall also provide for direct access to the
chairperson of the audit committee in appropriate or exceptional cases.

 WHISTLEBLOWER
• A whistleblower is a person, often an employee, who reveals
information about activity within a private or public organization
that is deemed illegal, immoral, illicit, unsafe or fraudulent.
Whistleblowers can use a variety of internal or external channels to
communicate information or allegations.

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IMPORTANCE OF CORPORATE
GOVERNANCE

Risk Management - It elaborates the division of responsibility within

the organization for risk management, and determines the means at each
level, risk management will be implemented.

Rights and Responsibilities - The responsibilities of the board

include setting the company's strategic aims, providing the leadership to
put them into effect, supervising the management of the business.

Accountability - Corporate accountability holds that, beyond making a

profit for its shareholders, a company must also be accountable to its
employees and community members.

Legal Abidance - This element deals with the requirement of any

organization for fair legal systems and boundaries in placed for an
organization to conduct its business.

Efficiency - Efficiency in management refers to optimum utilization of

resources so that the organization can maximize the profit.

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 Cafe Coffee Day, Later renamed as Coffee Day Enterprise Limited
Founder-VG Siddhartha Slogan- a big deal can over some espresso. Set up on 11th july 1996

Business Model and Strategy

Acceptablity Affordablity Assessblity

Outlets and Turnover

company owned around 1,700 cafes, 48,000+ company owned outlets in Austria (Vienna), the
vending machines, 532 kiosks, and more than 403 Czech Republic, Dubai, Malaysia, and Cairo, Estimated as INR 4,264 crore
ground coffee-selling outlets. Egypt.

Famaous Beverages
Coffee Day Take away (owns 7000 vending
Coffee Day Fresh n Ground Coffee Day Xpress
machines)

Competitors
Barista Costa Coffee Starbucks

Shareholding Pattern
KKR Mauritius PE Investments Ltd. - Promoter Group -- 39.01% (32.75%
NLC Mauritius LLC- 10.61% 6.07% Public - 44.32%
pledged)

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 Golden Days of CCD
A Brief History:
 Café Coffee Day (CCD) is India's largest coffee chain to date and is owned
by Coffee Day Global, a subsidiary of Coffee Day Enterprises.
 The first Cafe Coffee Day outlet was set up by the CCD owner VG
Siddhartha on 11th day of July, 1996 in Bangalore, Karnataka with a slogan
'a big deal can over some espresso.'
 Siddhartha completed his post-graduation and economics from Mangalore
University. He emerged as a full time proprietor investor in the stock
market in 1985. Furthermore, he also became the owner of 10,000 acres of
coffee farms by then.
 It was then that the Amalgamated Bean Coffee Trading Company Limited
(ABCTCL), a company that focus on coffee exports. In around 2 years, the
company became the second largest exporter from India.

National Scenario:
 The company soon expanded far and wide with its revolutionary
concept, the company owned around 1,700 cafes, 48,000+
vending machines, 532 kiosks, and more than 403 ground coffee-
selling outlets. The annual turnover of Coffee Day Enterprises
was worth INR 4,264 crore, as per Moneycontrol report of 2019.

International Scenario:
 Café Coffee Day has likewise extended outside India with its outlets in
Austria (Vienna), the Czech Republic, Dubai, Malaysia, and Cairo, Egypt.

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Business Model and Strategy
CCD has adopted a very effective business strategy.
The chief components influencing rivalry in the espresso retail area include
evaluating, item/administration quality, brand recognition, taste, and item
assortment.
To separate itself from rivalry, CCD has manufactured its retail
procedure on 3As:
☞ Affordability — CCD ensures that it attracts every kind of customer — be it a
school/college student or an office goer, at an affordable price.
☞ Accessibility — The goal of the brand was to ensure that the cafes should be
within arm's reach. CCD believes in serving people across the country by
providing the same experience everywhere.
☞ Acceptability — CCD ensures that consumers should buy and drink their
product without compromising on taste. The strategy was to bring people
together to relax and unwind. The company further encouraged its customers
with its catchy tagline that says "Let us catch up on CCD" that every Indian
must have heard at one point or another.

The humongous amount of sustenance and refreshments made CCD possible.

Besides, the ambitious moves of CCD and its rapid expansion into level 2 urban
communities of India and other remote areas were some triumphant techniques that
encouraged CCD to be on the fronts of its rivals like Starbucks and Barista.

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 CHAPTER 3

PRESENTATION

ANALYSIS

AND

FINDINGS

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ANALYSYIS
ON THE
BASIS OF
CERTAIN
POINTS

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 • As per the Annual Report of 2018-19 of Café Coffee Day, the
promoter and promoters’ group held approximately 53.93% of
shares. Shareholding Pattern of top ten shareholders, indicates that
NLC Mauritius LLC. and KKR Mauritius PE Investments Ltd.
held the highest no. of. shares which are 10.61% and 6.07% shares
Shareholding respectively. The annual report suggested that the coffee chain
followed the pattern of concentrated ownership out of which the
Pattern founder promoter V.G. Siddhartha held around 32.75 of the shares.
The main concern about the structure is that out of all the shares
held by the promoter group, 39.01% were either pledged/
encumbered to total shares. Out of this V.G. Siddhartha pledged
around 32.75 of these shares in his capacity thereby compromising the
financial independence of the coffee chain.

• The company’s financial statements and audit reports did not record
Diversion in most of the business services exchanged with around 40+ subsidiaries.
Financial It was alleged that the money transferred to these entities was diverted
for other investments and ventures. The same diversion was not
statements & identified as only the holding company, Coffee Day Enterprises Ltd
Audit reports: (CDEL), was listed.

• The Income tax department thereafter conducted raids at over 25

locations which showed that a lot of amounts were concealed and
hidden. It was also provided that the company was in huge financial
debt. Also, the transactions were not recorded and diverted to other
Unfettered entities. This diversion, therefore, acted as a bridge to move funds
between other entities without any detection by other members of the
Powers given company. The same was indicated by the letter issued by the founder
to few promoter, V.G. Siddhartha, that he was responsible for each
transaction. It said: My team, auditors, and senior management
individuals personnel are totally unaware of all transactions. The law should
hold only me accountable, as I withheld information from
everybody”. It is important to note here that the authenticity of this
letter is disputed as the signature of the founder as provided in the
letter is different from that provided in the annual statements.

• The founding promoter had also indicated conflict with some private
Conflict with equity investors. In respect of some loan taken from a private lender,
Private whereby which V.G. Siddhartha to buy back the shares. This shows that
the financial position of the company was in shambles, which led to
Equity losing the confidence of investors in the decision-making of the
company.
investors
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The cost of
keeping • Businesses face a slew of regulations that must be adhered to, with
each industry attracting its own set of legislation. Corporate
legally governance ensures legal observance, but it comes at a high cost.
compliant

• Considering all of the regulations that must be satisfied, the

administrative costs for organizations with corporate
governance are quite high. Here are a few documents that must
Increased be kept up to date:-
costs • Sales and purchases of stock.
• Records of legal compliance.
• Annual registration.

• Regardless of the size of the company, all formalities and

Maintenance standards must be followed without exception. Failure to follow
these regulations exposes the company to significant risk, such
of as “piercing of the corporate veil,” in which the corporation’s
segregation separate legal entity status is disregarded in order to get insight
into what goes on behind closed doors.

• It is usual practice in large organizations to pick a well-known

The management with a proven track record to oversee the day-to-
principal- day operations of the company. Unfortunately, this can lead to a
conflict between shareholders and managers, as they may have
agent quite different goals and viewpoints. This frequently results in a
conflict clash between the two, impacting the company’s overall capacity
to manage operations smoothly and efficiently.

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 FINDINGS
 As per annual report of 2018-19 of Café Coffee Day the promoter and
promoter group held approximately 53.93% of shares from which
approx.39.01 shares were pledged/encumbered.

 The company’s financial statements and audit reports did not record most of
the business services exchanged with around 40+ subsidiaries.

 The Income Tax department conducted raids over 25 locations and showed
that lot of amount concealed and hidden.

 It was found that company was in huge financial debt, also transactions were
not recorded and diverted to other entities.

 The promoter had also indicated conflict with some private equity investors.

 V.G. Siddhartha and other promoter were the key decision makers of the
company which seriously affects the Governance of the company, giving the
promoters of the company

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 Facts of CCD
 Coffee Day Enterprises Ltd (CDEL) had seen net loss widening to Rs. 67.71
crore in the fiscal year ended March 31, 2018 from Rs. 22.28 crore loss in the
previous year. This despite revenues climbing to 122.32 crores.
 Siddhartha had been found missing since July 29, 2019, and two days later his
body was found in the Nethravathi river backwaters.

 The company had been trying to pare its debts with the sale of its non-core
assets after the death of its founder.

 CCD has announced to repay its debts worth Rs 1644 crore to 13 of its lenders.
This had been possible with the sale of its technology business park to
Blackstone Group and Salarpuria Sattva at an enterprising value of Rs 2,700
crore. The company also sold its stakes to Mindtree and L&T.

 The company's net debt was worth Rs 2,909.95 crore in the FY20.

 CDEL's net operational revenue was measured on a consolidated basis in FY21,

which was valued at Rs. 853 crores against Rs. 2,522 crores in FY20.

 The last report said that the "Management of the Company is putting its best
efforts to get back the company on track." It further added that "the debt levels
have reduced significantly from the beginning of the financial
year March 2021."

 Café Coffee Day reportedly shut down around 280 outlets in the wake of FY20
and with this, the company reported a total of 1480 outlets, as per the reports
dated June 30, 2020.

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 CHAPTER 4

CONCLUSION

AND

RECOMMENDATIONS

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 CONCLUSION
Café Coffee Day is considered to be one of the most popular coffee chains in India.
The Company has properly used its early mover advantage to set up its business
in India but the situation has turned around this time. The case of Café Coffee Day
is a clear example of the mismanagement of a company by giving powers in the
hands of a few individuals. It is important to understand that Corporate
Governance is more than just following the legal compliances provided in the
Companies Act, 2013 and SEBI Regulations. Corporate Governance regulates
the operative structure of the Company. From deciding on the shareholding
structure to managing day-to-day business operations, corporate governance
policy holds an important part in every aspect of the corporate process.

Drafting a one-sided governance policy that only favors the majority

shareholders of a company shall severely affect the governance of a company.
In most cases, it is seen that the governance of a company is controlled by few
individuals. Because of this, other members of the company are left in abeyance on
the major decisions taken by the Company. It is therefore necessary that the
drafters of the corporate governance policies do not provide majority powers
to few individuals. Even if the same is done, then an effective mechanism should
be incorporated so that no arbitrary decisions can be taken by the decision-makers
of the company.

The aftermath of COVID and subsequent lockdowns have only worsened the
position of owners & the creditors of Café Coffee Day. In order to save itself
from bankruptcy, the company had sold stakes of several promoter-owned
entities and other entities which include the sales of around 20.32% stake in
Mindtree Connect to Larsen & Toubro (L&T) for approximately Rs. 3,2000
crores rupees. This has severely reduced the financial debt taken by the company.
The Company has improved its position from the last 2 years but is still not debt-
free. As of March 2021 quarter, the company has defaulted on payment of
debts and has reported having an outstanding debt of around Rs. 280 Crores.
With no viable solution left, the creditors are considering approaching the
National Company Law Tribunal (NCLT) so as to fulfill the remaining debt
obligations.
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RECOMMENDATIONS
 Every company should follow a proper management structure with
a delegated power to Key Managerial Personnels.

 Time to time Audit is necessary. Audit must be followed by

required terms and condition by proper Professionals. And the
Professional must not be Disqualified.

 Communication with the consumers as well as employees is

equally significant. The organization must invest in adequate
promotions to ensure customer experience and customer bonding.

 Finally, systems and processes are the cornerstone of operations.

Retailers need to invest in designing and implementing appropriate
systems and processes.

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Annexure- IA

Supervisor's Certificate

This is to certify that Ms. Amisha Karnani a student of B.Com.

Honors in Accounting & Finance of S.A.Japuria College under
the University of Calcutta has worked under my supervision
and guidance for his/her Project Work and prepared a
Project Report with the title
CORPORATE GOVERNANCE
Which she is submitting, is her genuine and original work to
the best of my knowledge.

Place: Kolkata
Date: 20.05.23

Signature:
Name: Parichita Basu
Designation: Faculty of Commerce
Name of the College:Seth Anandaram
Jaipuria College

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Annexure- IB
Student's Declaration
I hereby declare that the Project Work with the title
CORPORATE GOVERNANCE submitted by me for the partial
fulfilment of the degree of B.Com. Honors in Accounting &
Finance under the University of Calcutta is my original work
and has not been submitted earlier to any other University
/Institution for the fulfilment of the requirement for any
course of study.

I also declare that no chapter of this manuscript in

whole or in part has been incorporated in this report from any
earlier work done by others or by me. However, extracts of
any literature which has been used for this report has been
duly acknowledged providing details of such literature in the
references.

Signature:
Name: Amisha Karnani
Address: Howrah

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THANK YOU

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