Coffee Day Enterprises Ltd (CDEL) – the holding company of Cafe Coffee Day chain of restaurants is due to launch its initial public offering (IPO) on 14 Oct. In the red herring prospectus filed with SEBI, the company said the 100% book built issue intends to raise INR11.5 billion. The company, promoted by VG Siddhartha, will have no offer for sale (OFS) in the IPO.
Starting from October 14, the issue would be open for three days. Price band is stated to be INR316-328 per share, though the final offer will be decided after book-building process. From the aggregate, shares up to INR150 million is allotted as Employee Reservation Portion.
Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, Morgan Stanley India Company Private Limited, Axis Capital Limited, Edelweiss Financial Services Limited and YES Bank Limited will be managing the issue.
Read Also: Coffee Day IPO expected in October
Usage of Funds
The company plans to use the proceeds for financing its coffee business subsidiary, Coffee Day Global Limited (CDGL), setting up new Cafe Network outlets and Coffee Day Xpress kiosks, vending machine manufacturing and assembling, revamping its existing outlets and vending machines, setting-up new coffee roasting plant facility with integrated packing facility, prepayment of loans and for general corporate purposes.
INR877.10 million will be invested in setting up new outlets and kiosks, INR973.61 million for manufacturing and assembling purpose, refurbishment for INR605.83 million, INR 418.56 million for plant set up and INR6.3 billion is to be used for repaying loans.
Also Read: Café Coffee Day IPO: What you need to know
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Cafe Coffee Day commenced business in 1996 with its first shop in Bangalore. At present, it leads the local market with around 1,472 cafes across 209 cities in India in addition to 16 international outlets. The company competes with Barista, Starbucks, Dunkin Donuts, Costa Coffee and new entrant McCafe. Cafe Coffee Day’s dominance is highlighted by the fact that its nearest competitor Barista has 169 outlets.
VG Siddhartha owns 37.41% in CDEL while 63.34% stake is held by the promoter group. NLS Mauritius, KKR Mauritius PE Investments II Limited, Standard Chartered Private Equity (Mauritius) II Limited and Nandan Nilekani feature in the list of major shareholders with 13.11%, 12.77%, 8.17% and 1.21% respectively. Among other prominent investors in the company are Bennett Coleman & Company Limited (BCCL), Rakesh Jhunjhunwala’s Rare Enterprises, and value investor Ramesh Damani. Despite the long and impressive list of investors, it is a big positive that none of these will participate in the IPO and all the proceeds will go to the company.
However, the fact that the Coffee Day Group operates in diverse businesses such as coffee, IT-ITES technology parks, integrated logistics solutions, financial services, hospitality and investing in technology companies may not be good for small investors. We highlighted this earlier on the basis of CDEL’s draft prospectus. Out of the last five years, CDEL has been profitable only in FY 2011 and 2012.
India’s IPO story so far
Indian markets have seen a sharp rise in the number of IPOs this year after slow couple of years which were marked by volatility and slow economic growth. So far, 15 IPOs have raised a combined INR63.5 billion in India. In contrast, only INR14.79 billion were raised in 2014 and INR16.45 billion in 2013. CDEL’s IPO is the largest since Bharti Infratel’s INR41.55 billion IPO in December 2012.