Valuation issues pose a hurdle in Coke’s bid for CCD

K. Giriprakash Bengaluru | Updated on August 17, 2019 Published on August 17, 2019

Vast chain The Cafe Coffee Day chain has over 1,600 outlets in 219 cities   -  ANUSHREE FADNAVIS

Various reports value the company at $1.5 billion; talks may be revived if the coffee chain agrees to a lesser valuation

Coca-Cola, which was one of the bidders for Cafe Coffee Day, is learnt to have put on the back burner its plans to acquire the coffee chain due to valuation issues.

Sources in the company said talks were at a preliminary stage and were not pursued further. According to various reports, the Cafe Coffee Day chain, consisting of over 1,600 outlets in 219 cities, is valued at $1.5 billion.

“The talks may get revived only if the company agrees for a lesser valuation,” sources told BusinessLine.

The parent, Coffee Day Enterprises, which this week inked a deal with PE fund Blackstone and real estate venture Salarpuria Sattva to sell off Global Village Technology Park for up to ₹3,000 crore, is learnt to have decided to sell off a few of its other assets.

Sources said Salarpuria Sattva may pick up to 49 per cent stake in the special purpose vehicle in which Blackstone will be a partner. There is a possibility that the final price could be far less than what Coffee Day Enterprises’ board may want to sell it for because part of the tech park has already been developed.

An analyst with Epic Research said Coffee Day Enterprises was following the right path by disposing of certain assets which could earn them a fair price in the market so that they can then decide the roadmap for the future.

“The interest outgo has gone up and the financials are not that good. But the situation is not that alarming. The company has not defaulted on repayment of loans. The stocks tanked because the promoter passed away suddenly. It is just a sentimental issue and the stock will rise again,” Lovelesh Sharma, Head of Research, Epic Research, said. Coffee Day Enterprises’ stocks closed at ₹62.70 on Friday, which was a 52-week low. The company’s market cap has slipped to ₹1,400 crore from ₹4,000 crore a month ago.

Meanwhile, analysts have raised concern about the authenticity of the letter purportedly written by late VG Siddhartha before he went missing. The letter dated July 27 makes allegations against a certain PE fund and a former tax official for harassing him.

On July 31, the board said the authenticity of the letter was unverified and it is unclear whether these statements pertain to the company or the personal holdings of Siddhartha.

On August 8, the board said it has appointed Ernst and Young LLP to investigate into the circumstances leading to statements made in the purported letter and to scrutinise the books of accounts of the company and its subsidiaries.

“The family of late Siddhartha has claimed that the letter is authentic while the board has not seconded that even though one of the board members happens to be the wife of the late founder. It sends confusing signals to the shareholders,” the analyst said.

Another analyst said whatever has been written in the letter can cause some panic among investors, especially retail traders.

Published on August 17, 2019
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