Tata Consumer Products Ltd. : The Tata Consumer & Coffee Day agreement in valuation limbo
Existing shareholders, as well as lenders with whom a portion of the promoters’ stock is pledged, are reluctant to sell at the price offered by the Tata Group company, the people told ET, on condition of anonymity.
AND last week reported that
(CDEL), the group’s listed company, had put a price of Rs 2,000 crore on its vending machine business and that Tata Consumer was likely to offer only Rs 1,000 crore.
Selling is the most profitable segment of Coffee Day’s business. Shareholders would not agree to separate and sell a lucrative vertical unless the valuation warrants it, one of the people said. Sections of shareholders believe a deal is only worthwhile if the value of the deal can leave a surplus in the base for reinvestment in other verticals, after paying off debt, the person added.
Private equity firms and financial institutions control more than half of CDEL. The family of late founder VG Siddhartha owns around 17%. About fifteen financial institutions have loaned to the group against the actions of promoters, and they must be convinced for an agreement to be reached.
Tata Consumer, which operates 185 Starbucks stores in India, is considering a strategic agreement with the Coffee Day group, market leader in vending.
In response to an email query, Tata Consumer said, “The company is constantly evaluating various opportunities. As a policy, we do not comment on speculative information. The Coffee Day group did not respond to a request for comment.
The Coffee Day Group currently operates a chain of around 750 outlets and operated, until lockdown, around 60,000 vending machines in places such as tech companies, hospitals, offices, shopping malls and establishments. teaching.
In June of last year, Siddhartha, who was found dead the following month, was seeking a valuation of around Rs 8,000 crore from Coca-Cola for the coffee chain he set up more than two decades.
After Siddhartha’s death, most of the top executives stayed with the company, which showed they were confident they could pass the milestone, said a company executive, unrelated to the Tata talks.
The coffee business, which included some grain exports, generated revenue of Rs.1777 crore and rupee 1,814 crore in fiscal 2018 and 2019, respectively, according to regulatory documents. As of March 31, 2020, NSR, KKR and Affirma Capital held 10.6%, 6% and 5.6% of the company’s capital.
According to the latest audited figures available, as of March 31, 2019, CDEL had a debt of Rs 7,000 crore. The company has since reduced it to around Rs 4,000 crore.
With outlets and staff shrinking, Coffee Day will turn around by December and resume as Covid-19 worries about ebb, the person quoted earlier said. “Without Covid, the CCD would have already turned around,” he said, adding that its promoters were pragmatic and determined to tackle the difficulties.
CDEL’s debt would decrease by half compared to the current level after the exit of the subsidiary company Sical Logistics. It is expected to decline further to around Rs 1,050 crore after US private equity firm Blackstone paid off the balance of its purchase of the Global Technology Village park in Bengaluru for Rs 2,700 crore in March this year. The company plans to use part of the proceeds to pay off the debt.