Coffee Day Enterprises, the owner and operator of coffee chain Cafe Coffee Day (CCD), hopes to raise as much as Rs 1,150 crore, the draft prospectus filed with the Securities and Exchange Board of India said.
The company intends to offload about a 20% stake, which values the company at Rs 5,750 crore. However, the exact details on stake sale could not be independently verified.
The company aims to utilise about Rs 632.8 crore towards full or partial repayment or prepayment of certain borrowings availed by the company and its subsidiaries Coffee Day Global and Sical Logistics, according to information available in the filing.
Coffee Day had a consolidated debt of Rs 2,860 crore, incurred losses in the three financial years through March 2014 and also in the subsequent nine months, according to the prospectus.
“…such repayment/ prepayment will help reduce the outstanding indebtedness and debt servicing costs and enable utilisation of the internal accruals for further investment in the business growth and expansion. In addition, we believe that this would improve the ability to raise further resources in the future to fund the potential business development opportunities,” the company said.
Coffee Day Enterprises has hired six merchant bankers — Citigroup Global Markets, Kotak Investment Banking, Morgan Stanley, Axis Capital, Edelweiss Financial Services and Yes Bank — to manage the share sale.
The chain, which counts KKR among its investors, runs about 1,480 outlets across India, more than three times all its rivals combined, according to a February report from consultant Technopak Advisors.
The share sale may help CCD extend its lead over competitors including Starbucks, which opened its first store in the nation in October 2012 through a joint venture with Tata Group.
KKR, the private-equity firm run by billionaires Henry Kravis and George Roberts, invested in CCD’s holding company in 2010 along with Standard Chartered’s private-equity unit and New York-based New Silk Route Partners, according to a KKR press release at the time.
The chain began operations in 1996 with its first store in Bengaluru, then Bangalore, and has a 65% market share in the world’s second-most populous nation, according to Euromonitor data. It also competes with Barista Coffee, which was formerly owned by Luigi Lavazza, and UK-based Costa Coffee.
Consumption at such chains is likely to grow to Rs 2,000 crore in 2018 from Rs 1,640 crore at the end of 2013, according to Euromonitor. CCD outlets range from kiosks at corporate canteens to 1,500 sq ft facilities stocking artisanal coffee for connoisseurs.