Cafe Coffee Day planning IPO at $1 billion valuation

Mumbai: Cafe Coffee Day, India’s biggest coffee chain, has started interviewing investment banks for a possible initial public offering (IPO) in Mumbai next year, people with knowledge of the matter said.

The company, which is backed by KKR & Co., may seek a valuation of about $1 billion, according to three of the people, who asked not to be identified as the deliberations are confidential. It plans to file a draft prospectus with the Securities and Exchange Board of India (Sebi) later this year, two of the people said.

The offering could help Cafe Coffee Day extend its lead in India over rivals including Starbucks Corp., which opened its first store there in October 2012 through a joint venture with Tata Group. Cafe Coffee Day has 1,650 outlets in the country, more than three times all its competitors combined, according to a September report from consultant Technopak Advisors Pvt. Ltd

KKR, the private-equity firm run by billionaires Henry Kravis and George Roberts, invested in Cafe Coffee Day’s holding company in 2010 together with Standard Chartered Plc’s private equity unit and New York-based New Silk Route Partners, according to a KKR press release at the time.

The owners haven’t made a final decision on whether to list just the coffee chain or its parent company Amalgamated Bean Coffee Trading Co., which also owns coffee plantations and luxury resorts in India, three of the people said.

K. Ramakrishnan, president of marketing at the coffee chain, directed queries on financial matters to chairman V. G. Siddhartha. Siddhartha’s office didn’t answer phone calls or reply to an email seeking comment.

Specialist Coffee

Cafe Coffee Day is the leader in India’s specialist coffee shop sector with a 64% market share, according to Euromonitor data. The market is projected to grow to Rs2000 crore ($340 million) in 2018, from Rs1,640 crore at the end of last year, Euromonitor estimates.

The chain plans to add 350 outlets by the end of next year for a total of 2,000, Ramakrishnan said in a 24 May interview. At least 65% will be in high-street locations in the main residential and shopping districts in a city, he said.

Barista Lavazza, owned by Torino, Italy-based Lavazza SpA, was India’s second-largest coffee chain as of September, followed by London-based Costa Coffee, according to the Technopak report.

Westlife Development Ltd., which runs McDonald’s Corp. restaurants in western and southern India, opened its first McCafe outlet last year and plans to have 150 locations within five years, vice-chairman Amit Jatia said on 24 February. Bloomberg