Café Coffee Day sale plan on hold, promoters to explore new options to raise funds

Photo: Cafe Coffee Day

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.

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.”

“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.”

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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