Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

10 things a Café Coffee Day investor should know

With the company launching its IPO today, here are the 10 things investors should know before investing

Bengaluru: Bengaluru-based coffee chain Café Coffee Day launches its initial share sale offer on Wednesday through its holding company Coffee Day Enterprises Ltd (CDEL), in a bid to raise 1,150 crore to scale operations across the country. The much-anticipated initial public offering (IPO) puts investor interest back in the consumption-driven domestic food services market.

Here are 10 things you should know about the company.

1. The first Café Coffee Day came up in 1996, at Bengaluru’s MG Road. V.G. Siddhartha, promoter of the Coffee Day Group, wanted to first start selling coffee at 25, a feat almost never accomplished by organized cafes, especially in a market where coffee was retailed by local shops at 5. The first outlet was positioned as an Internet café serving coffee to attract the then scarce IT population in the city.

2. Today, the company owns and manages a network of 1,550 cafés in 209 cities. It has the largest network of food outlets in the country. International fast-food chains such as McDonald’s (300-350), Dominos (921) and Subway (531) trail CCD’s store count. International coffee chain Starbucks, however, has rapidly scaled to 75 outlets since its entry into India in 2012 through its local partner, the Tatas.

3. Coffee Day Enterprises is the largest IPO on the food services side. In 2010, Jubilant Foodworks, promoter of Domino’s franchisee in India, hit the stock market to raise 329 crore. It is currently valued at 10,210 crore. McDonald’s through its franchise partner for West and South India, Westlife Development Ltd, is listed on the BSE, too.

4. Café Coffee Day currently operates under three brands—its namesake Café Coffee Day, Coffee Day Square and a more upmarket Coffee Day Lounge. It also serves at high-traffic locations such as airports and railways through The Coffee Day Xpress. The company also has a large vending machine network (30,000) across offices in India.

5. Siddhartha, 55, is the 75th richest man in India with an estimated wealth of $1.27 billion, according to business publication Forbes.

6. In 1993, he set up Amalgamated Bean Coffee Trading Co. Ltd to export coffee beans and later forayed into coffee retailing. Siddhartha is no rookie at the stock market, having spent his initial years working at JM Financial. He also set up his own stock broking firm, Sivan and Co. He holds a bachelors degree in arts from the University of Mysore. Siddhartha’s family interests in coffee plantations in Southern India span over 130 years.

7. Private equity firms KKR India Advisors Pvt. Ltd, New Silk Route PE Asia Fund Lp and Standard Chartered Private Equity Fund have made investments in the company. Earlier this year, Infosys co-founder Nandan Nilekani (1.77%) and billionaire investor Rakesh Jhunjhunwala picked up a stake in the company.

8. The Coffee Day Group has interests in coffee retailing, logistics, technology parks (special economic zone and software technology park schemes), financial services and investments in technology and software companies. CDEL has investments in technology companies such as Mindtree with 16.76% equity holding. Siddhartha additionally owns 3.01% in Mindtree.

9. The company’s post-IPO plans are focused on reducing debt and increasing the existing store count. About 625 crore will be spent on refinancing debt, 88 crore on setting up new cafés and Coffee Day Xpress kiosks and another 104 crore for refurbishment of existing cafés and on setting up a new coffee roasting facility.

10. CCD also has an international presence with cafes in markets such as Kuala Lumpur, Vienna and Prague.