Coffee Day Enterprises files for IPO to raise Rs 1,150 crore

MUMBAI: Coffee Day Enterprises, which runs India’s largest coffee chain, has filed a draft red herring prospectus to raise Rs 1,150 crore through an initial public offering to expand its retail network and reduce debt.

The operator of Café Coffee Day outlets plans to use Rs 632 crore to repay loans and the rest to open stores, manufacture vending machines and set up roasting facilities, according to the document. “The company plans to open over 215 Cafe Coffee Day outlets and 105 kiosks in the next two financial years,” it said.

Globally, most cafe consumers are attuned to a takeaway culture, which helps them add margins at little cost. In India, young office-goers and students prefer to spend hours in cafes over coffee and snacks. This impacts profitability.

High real estate costs and an economic slowdown that has curbed consumer spending have hurt cafe chains. The global book running lead managers to the issue are Kotak Mahindra Capital, Citigroup Global Markets and Morgan Stanley, while Cyril Amarchand Mangaldas is the legal counsel to the company. ET reviewed the prospectus on Kotak’s website.

VG Siddhartha, the main promoter, who is also chairman and MD, holds a 54.78% stake in the company, while all the promoters together have a 92.75% holding. Among the other major shareholders, Kohlberg Kravs Roberts & Co has 3.43% and Nandan Nilekani, Infosys co-founder and former chief of UIDAI, holds 1.77%.

Coffee Day Enterprises posted a net loss of Rs 10.9 crore and a consolidated revenue of Rs 875 crore for the nine months ended December 31. On an annualised basis, sales growth was stagnant compared with Rs 1,144 crore in FY14.

The company shut over 300 coffee shops in the past three years due to poor location, among other factors, and said it will continue to close 25 to 40 outlets every year. It runs 1,423 outlets across 209 cities in India and 16 stores in Austria, the Czech Republic and Malaysia.