Coffee Day share price nosedives 19% after NCLT initiates bankruptcy proceedings

Coffee Day share price plummeted over 19% on Monday's session after the corporate dispute tribunal National Company Law Tribunal (NCLT) has ordered the commencement of bankruptcy proceedings against Coffee Day Enterprises Ltd, the parent company of Coffee Day Group which operates Cafe Coffee Day chain of coffee houses. Coffee Day share price today opened at ₹38 on the BSE, the stock touched an intraday low of ₹37.55 and an intraday high of 41.05 per share. On the Sensex, shares of Coffee Day were among the worst performers.

According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, Coffee Day share price has been an underperformer and has weakened further today, dropping over 14% at the opening on high trading volume.

From a technical perspective, the Coffee Day share price has breached a key support level and is likely to remain under pressure in the short term. While speculative traders often try to capitalise on potential reversals in such situations, we recommend avoiding this strategy.

“We anticipate the Coffee Day share price's underperformance will persist, offering little in the way of substantial gains in the near term. The next support level is ₹33, with resistance at ₹47,” said Bhosale.

NCLT orders insolvency proceedings against Coffee Day Enterprises

On August 8, the NCLT Bengaluru bench approved the appeal from IDBI Trusteeship Services Ltd (IDBITSL), which claimed a default of ₹228.45 crore. An interim resolution specialist was then assigned to oversee the management of the indebted firm.

“This is in continuation to our disclosure made on 08th August 2024, regarding the application filed by IDBI Trusteeship Services Limited against the Company in NCLT, Bengaluru, has been admitted under Section 7 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) for ₹2,28,45,74,180/-,” the company said in an exchange filing.

Redeemable non-convertible debentures (NCDs) coupon payments were not made by Coffee Day Enterprises Ltd, which also owns and runs a resort, provides consulting services, and sells and buys coffee beans, according to a PTI news report.

In March 2019, the financial creditor paid ₹100 crore for the subscription of 1,000 NCDs in a private placement.

In order to designate itself as the debenture trustee on behalf of the debenture holders, Coffee Day Enterprises Ltd negotiated and entered into an agreement with IDBITSL.

But Coffee Day Enterprises Ltd failed to make the cumulative coupon payments that were expected to be made on different dates from September 2019 to June 2020.

Following the passing of founding Chairman V G Siddhartha in July 2019, Coffee Day Enterprises is facing difficulties. It has drastically reduced since the problems began and is reducing its debts through asset settlements.

On July 20, 2023, the same NCLT court in Bengaluru accepted an insolvency petition against Coffee Day Global Ltd., the company that owns and runs the Cafe Coffee Day chain, in opposition to a petition by IndusInd Bank that sought payment of Rs. 94 crore.

On August 11, 2023, the appeal panel NCLAT halted it, nevertheless, and the parties subsequently came to an agreement.

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