Indian market witnessed steps taken by the coffee giant Cafe Coffee Day (CCD) after a severe impact of lockdown on its already debt ridden firm. The move comes in time to keep the business working while repaying debts as much as possible.
Crux of the Matter
Recent Activities Coffee Day Global Ltd recently hired Ernst & Young (EY), an advisory firm, to facilitate the process of seeking investment from third parties. The step comes after the firm received bids for buying from Coca-Cola in June 2019 and TPG in November 2019. The central aim of the move is to repay the firm’s debts, which totaled ₹7,214 crores in 2019. History Of CCD
1996: VG Siddhartha opens first CCD in Bangalore
2010: Investment by Kohlberg Kravis Roberts firm of $140 million in Coffee Day Resorts
2011: 1000+ cafes working across India
2015: CCD IPO fails, with stocks closing at a decline of 17.64%
2019: Siddhartha commits suicide owing to tax harassment and the company’s declining business as allegedly reported in his final letter
2019: Hired IDFC securities to sell assets to repay loan
2020: Blackstone group from US buys Global Village Technology Park from Coffee Day group for ₹2,700 crore
Business Model Coffee Day Enterprises Ltd operates the coffee shops under its Cafe Coffee Day labels. It produces its own coffee beans, and is the largest producer of the arabic type of beans in Asia. Currently, CCD outlets are situated in 6 countries: India, Egypt, Czech Republic, Austria, Malaysia and Nepal. CCD is based on a franchise model, and has a considerable number of subsidiaries which enable it to produce its own coffee beans, vending machines, kiosks etc. Several critics have pointed to the unusually large number of subsidiaries as well as a business model neglecting profitability, an exponential increase of cafes and restaurants, and mounting debt as the cause of its fall.
Understanding Underperformance Through CCD’s Financials
Curiopedia
CCD’s founder, VG Siddhartha, owned around 20% stakes in Mindtree which L&T acquired from him in 2019 for around Rs.3200 crores. This deal helped L&T to complete the acquisition of Mindtree later that year.
Café Coffee Day Global Limited Company is the largest producer of arabica beans in Asia, exporting to various countries including the U.S., Europe, and Japan. The first CCD outlet was set up on July 11, 1996, at Brigade Road, Bangalore, Karnataka.
In 2000, VG Siddhartha founded Global Technology Ventures Ltd, a company that identifies, invests in, and mentors Indian companies engaged in technologies. GTV set up Global Village Tech Park on a 59-acre plot as an incubator park in Bangalore, providing office space, communication links, recreational facilities, and a commercial center.
Curated Coverage
VCCircle – Café Coffee Day operator hires EY to evaluate potential suitors
The Economic Times – Coffee Day may restart stake sale talks with Coke
Livemint – Why Coffee Day Enterprises left a bitter taste for its investors
CNBC TV18 – Rewind 2019: The death of VG Siddhartha and what went wrong with Cafe Coffee Day
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