The decision not to sell a stake in Coffee Day Global follows talks with potential suitors including ITC and Coca-Cola
To pare debt, the promoters are also exploring the possibility of inducting an investor in Coffee Day Enterprises
New Delhi: Promoters of Coffee Day Enterprises Ltd and its lenders have temporarily shelved a plan to sell a controlling stake in the unit that owns the Café Coffee Day (CCD) chain, two people directly aware of the development said.
The decision not to sell a stake in Coffee Day Global Ltd follows initial talks with potential suitors, including Coca-Cola and ITC Ltd, the people cited above said requesting anonymity.
“The promoters feel that they should first exhaust all other available options to raise funds before committing to the sale of the profitable coffee business, which remains the focus of the group," the first person cited above said.
Founder Siddhartha, who allegedly committed suicide in July under mounting stress and high debt levels, built CCD from a single café in Bengaluru in 1996 to India’s largest coffee chain with more than 1,750 stores spanning 243 cities. In the process, Coffee Day Enterprises amassed a debt of ₹6,547 crore as of end March.
To pare debt, the promoters are also exploring the possibility of inducting an investor in Coffee Day Enterprises. The holding company includes Coffee Day Global (coffee business), Sical Logistics Ltd (integrated logistics), Tanglin Developments Ltd (real estate), Way2Wealth (financial services) and Coffee Day Hotels and Resorts Ltd (hospitality). In the year ended 31 March, Coffee Day Enterprises reported net operating revenue of ₹4,264 crore, a 13% increase from a year earlier. Profit grew 21% to ₹128 crore.
Soon after Siddhartha’s demise, Coffee Day Enterprises announced the sale of its Global Village Tech Park, owned by unit Tanglin Developments, to US-based buyout giant Blackstone Group Llp for ₹2,600-3,000 crore in August.
“The group is trying to monetize other assets as well which include its holding in Sical Logistics and the financial services arm," the person second person cited above said. “The promoters feel that if these transactions conclude then there may not be an immediate need to sell the coffee business."
In the last financial year, Coffee Day Global posted a 10% increase in its net profit to ₹41 crore. Revenue grew 8% to ₹1,468 crore. Mint reported on 30 July that Siddhartha was in talks to urgently refinance a large portion of his and his company’s outstanding debt taken in his personal capacity. The debt in question is around ₹2,000 crore and is over and above the consolidated borrowings of CCD group.
“However, the family is cognizant of the group’s debt obligations and may revisit sale of the coffee business at a later date," the second person said.
“The promoters are in touch with the lenders, who have in turn agreed to extend the flexibility to Coffee Day Enterprises to explore sale of non-core assets for the next six months or so," the person said. “However, a potential sale will involve a formal bidding process and a bilateral deal is unlikely."
A regulatory filing by Coffee Day Enterprises has pegged the value of the CCD brand at ₹7,000-8,000 crore, which includes the coffee chain and more than 54,000 vending machines and over 500 express stores.
Shares of Coffee Day Enterprises fell by the maximum 5% daily limit on Wednesday after lenders invoked the pledged shares of the promoters. According to exchange filings, Edelweiss and IndusInd Bank invoked up to 5.24% of the company’s pledged shares between 1 and 27 August.
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