Shares of Coffee Day Enterprises continued to see hefty buying interest from investors as the stock was locked in 5 percent upper circuit for each session since the start of the current week.
The company's initiatives and prioritising debt reduction, especially after the sudden death of its 60-year old founder VG Siddhartha on July 29 (2019), seem to have boosted confidence among investors.
The deal with private equity firm Blackstone for the sale of Global Village Tech Park, which the company announced over the last weekend, was one such example that lifted sentiment and reduced uncertainty over business viability.
As a result, the stock has rallied nearly 22 percent in four consecutive sessions to Rs 76.40 after plunging 68.5 percent in the week after Siddhartha's death.
Recent media report have indicated that FMCG and hotels giant ITC may be looking to buy a stake in the company's coffee chain Café Coffee Day, which has 1,750 stores across India.
ITC, in its clarification note available on the BSE, said company on an ongoing basis received enquiries from market participants which are suitably evaluated. "One such enquiry was also received from an intermediary on Café Coffee Day. However, no progress has been made on the matter."
Interestingly, Coffee Day Enterprises (CDE) denied the news as factually incorrect, adding that the company is unaware of it.
CDE, which has total debt of Rs 4,970 crore, said on August 17 that it was confident the ongoing divestments would 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," it said.
The total debt of Coffee Day Group, excluding Sical Logistics and Magnasoft, stood at Rs 3,472 crore. Sical Logistics' (consolidated) debt was Rs 1,488 crore and Magnasoft's, Rs 10 crore.
As a part of its debt reduction plan, CDE sold Global Village Tech Park, held by its subsidiary Tanglin Developments Limited, for an aggregate consideration of Rs 2,600-3,000 crore to Blackstone.
After this deal, the company said the debt position of Coffee Day Group would reduce by around Rs 2,400 crore in the next 45 days.
Recent media reports indicated that the company may also have resumed talks with Coca-Cola for a stake sale in the CCD chain.
This is not the first time that the US-based carbonated soft drink major entered talks with the Coffee Day Group. The first time the two sides held talks, VG Siddhartha was looking for a possible investment rather than a full acquisition deal from Coca-Cola, but that failed due to valuation concerns.
In addition, Sical Logistics has also been working on divestment of certain assets and the proceeds from the divestment is expected to significantly reduce debt in company, CDE said.
Note: The date of VG Siddhartha's death was erroneously mentioned as August 29 and has been corrected to July 29. The error is regretted
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