After Coffee Day Enterprises shares hit a record low on news relating to VG Siddhartha going missing, stock market experts say that investors should wait for management commentary to gain more clarity.
Shares of Coffee Day Enterprises, which runs the Cafe Coffee Day outlets, plunged to a record low on Tuesday morning, after founder VG Siddhartha went missing and a letter written by him admitting wrong business decisions came to light. Coffee Day Enterprises shares plunged 20% to hit the lower circuit at Rs 154.05 on BSE. According to experts, there is still uncertainty and investors must wait for management commentary to gain more clarity. However, those holding the shares would be better off exiting the stock.
“If we take a broader look at CCD shares, the stock is in a continued downtrend ever since it marked a high of 318. Following today’s lower circuit, the short term investors should exit as the stock may take some time to stabilize,” Milan Vaishnav, Consulting Technical Analyst, Gemstone Equity Research & Advisory Services told Financial Express Online, adding that the longer-term investors should continue to remain invested with a medium-term investment horizon.
According to investment advisor Sandip Sabharwal, the key is whether the liabilities mentioned in VG Siddhartha’s letter were personal liabilities or also impact the company. “Leverage has been an issue with the company but it also has assets. Exit might be tough as the stock is on lower freeze and might remain so for some more time. Results, management and Board of Directors commentary will need to be closely monitored,” financial advisor Sandip Sabharwal told Financial Express Online. Mustafa Nadeem of Epic Research notes that the future course will depend on the new management or anyone from existing how they handle and take things forward. Meanwhile, Cafe Coffee Day has said that the company is professionally managed and led by competent leadership team, which will ensure continuity of business.
In a shocking revelation, CCD founder VG Siddhartha said that he faced turbulence in business, talking about the enormous pressure that he faced from lenders that made him succumb to the situation. “I have failed to create the right profitable business model despite my best efforts,” VG Siddhartha said in the letter dated 27 July 2019, released by ANI. Financial Express Online has not independently verified the authenticity of the letter.