coffee day enterprises: Coffee Day Group ready with turnaround plan, await lenders’ nod
This is part of a restructuring plan
(CDEL) has drawn up to turn around the group that runs the Café Coffee Day chain. The listed firm will move ahead with the plan after lenders give their approval, people briefed on the matter told ET.
Rabobank, DEG, Yes Bank,
and are the top five among a dozen lenders which backed the company, founded by the late VG Siddhartha.
The building that houses the corporate office is spread over 100,000 sq ft and sits on a 1.22-acre plot, owned by the Jesuit Society on Vittal Mallya Road, overlooking Cubbon Park in central Bengaluru. CDEL still has 19 years of the long lease with the Jesuits left. The company may shift the corporate office to a smaller facility.
CDEL, helmed by chairman SV Ranganath and chief executive Malavika Hegde, is currently focusing only on the core coffee business in view of its growth potential. Footfalls at cafés are picking up, giving the beleaguered managers a shot of confidence, company insiders said.
“These plans aim to cut costs and get some cash to pay off debt,” a person aware of the discussions said.
CDEL did not respond to an email seeking comment.
Coffee is a huge market, and the Coffee Day group has built a business model around coffee drinking and provided jobs to rural youth, Karnataka Bank managing director Mahabaleshwara MS told ET. “Their coffee business is very much viable. If the promoter’s family is willing to take the business forward, I think people would be willing to support.” His bank has a Rs 100 crore exposure to the group.
CDEL’s debt has dropped to Rs 1,899 crore in March 2021 from Rs 7,231 crore two years earlier, after the company sold off its Global Village Tech Park to the Blackstone Group and stakes in businesses such as Way2Weath and Global Edge.
Coffee Day Global, the CDEL subsidiary that operates cafes and vending units, accounts for Rs 1,100 crore of debt, while other CDEL subsidiaries owe the rest.
Cutting the Coffee Day Global debt by half using money from the sale of the corporate office lease and issuing appropriate financial instruments, such as optionally convertible debentures or bonds, to lenders are part of the restructuring plan. These will be followed up with raising equity from investors, the people said.
CDEL is not seeking any haircut from lenders, instead wants to pay every rupee of its debt over the next eight years, the person quoted earlier said.
CDEL’s coffee business can handle a debt of Rs 600 crore on its current revenues, the people ET spoke to said. As for the remaining non-coffee debt, the company plans to pay them off on receipt of a second tranche from Blackstone, and by selling resorts and other assets.
The company aims to implement restructuring by March 2022 on receipt of approval from banks. In the last two years, Coffee Day Global has cut the number of outlets from 1,752 to 550 and vending units from 70,000 to 60,000. It has also merged functions and introduced new products to save on costs and drive revenue.
The group did not sell its lucrative vending business as both lenders and promoters found the offers not up to their expectations in a market hurt by Covid-19, the people said.