Coffee Day Enterprises shares hit 5% upper circuit on talks of stake sale, reduced debt

Coffee Day Enterprises shares hit 5% upper circuit on talks of stake sale, reduced debt

Shares of Coffee Day Enterprises (CDEL), owner of cafe chain Cafe Coffee Day (CCD), rallied as much as 5 per cent in intra-day trade on the Bombay Stock Exchange (BSE) on Monday after media report suggested that the promoters were likely to resume talks with Coca-Cola for a stake sale in Cafe Coffee Day chain to pare its debt.

“The promoters of the Coffee Day Group plan to restart talks with Coca-Cola for selling a chunk of their stake in the Cafe Coffee Day (CCD) chain in a bid to cut the group’s debt further,” according to The Economic Times report.

The report said that its late founder VG Siddhartha had begun talks with Coca-Cola, seeking a valuation of Rs 8,000-10,000 crore for the company in June, but he was reluctant to sell a majority stake.

Boosted by the development, share price of Coffee Day Enterprises hit an upper circuit of 4.92 per cent to trade at Rs 66.05 apiece against the previous close of Rs 62.95 on the BSE. There was surge in volume trade as a total of 18.51 lakh shares changed hands on the BSE as compared to two-week average volume of 8,817 shares.

In a similar fashion, stocks of Coffee Day Enterprises were locked in the upper circuit of 4.94 per cent at Rs 65.80 on the National Stock Exchange. The scrip opened higher at Rs 65.80 against previous close level of Rs 62.70.

The CDEL stock has risen for the first time in last three-weeks after the sudden demise of its founder VG Siddhartha, whose body was found on the banks of the Netravati river in Karnataka on July 31, two days after the businessman had gone missing.

The stock has been on selling spree and has fallen as much as 68 per cent since July 26, 2019, from Rs 195 to hit an all-time low of Rs 62.95 on August 16.

Meanwhile, the CDEL in an exchange filing on Saturday clarified its debt position and expressed confidence that the ongoing divestment transactions will reduce the debt position of Coffee Day Group. The company also appealed to its lenders and creditors to give it sufficient time to honour its repayment obligations.

“The company is confident that the ongoing divestments will significantly reduce the debt position of Coffee Day Group. The financial position and asset base of the Coffee Day Group will be comfortable to service the debt obligations of the entire group in full,” CDEL said in a filing to the BSE.

The company in the exchange filing presented a breakup of debts held by its subsidiaries which came to a total of Rs 4,970 crore. This includes Rs 4,796 crore in secured loans and Rs 174 crore in unsecured loans.

Last week, the CDEL had sold Global Village Tech Park located in Bengaluru, under it is real estate arm Tanglin, to private equity major Blackstone for a valuation ranging between Rs 2,600 crore and Rs 3,000 crore. Following the transaction, the total debt position of Coffee Day Group will reduce by Rs 2,400 crore, the company had said in the filing.