Siddhartha's family may accelerate CCD sale process; Coke already in talks

Tata Global Beverages, Jubilant FoodWorks likely to step in

The family of V G Siddhartha, the founder of Café Coffee Day (CCD) who was found dead on Wednesday after going missing on Monday in Mangaluru, may accelerate the process of finding buyers for the retail chain. Coca-Cola, the world’s largest beverage maker, is already in the fray, persons in the know said.

Some names of interested players doing the rounds include Tata Global Beverages and Jubilant FoodWorks. Mails sent to the two companies elicited no response till the time of going to press. Coca-Cola declined comment. The American beverage major had initiated preliminary talks for a substantial stake buy in CCD last month. 

As of March 31, 2019, Coffee Day Enterprises' total debt stood at Rs 6,547 crore, two-and-a-half times its net worth of Rs 2,529 crore. Its market capitalisation after Wednesday’s closing price stood at Rs 2,593 crore.

In the past two days — after Siddhartha went missing and a letter purportedly written by him emerged stating he was under "tremendous pressure from lenders" and that he was facing "harassment" from tax authorities — the stock has fallen about 36 per cent. Tata Global has a JV with US coffee chain Starbucks since 2012. Acquisition of CCD, said sources, would give the JV access to more stores, something it needs to expand its presence in Rs 2,500-crore domestic coffee retail market. 

Jubilant FoodWorks, on the other hand, has been looking to go beyond fast food where its rival Westlife Development is already present. Westlife is present in both burgers and coffee with McDonald's and McCafé, respectively, in the west and south of India.

Last month, Siddhartha, who, along with family members and promoter group entities, owned nearly 54 per cent of Coffee Day Enterprises, pledged an additional 1.6 million shares to lenders, taking his total pledged shares as a percentage of promoter stake in the company to nearly 76 per cent from 72.32 per cent in the March quarter. On March 18, Siddhartha had sold his entire 20.41 per cent stake in Mindtree for Rs 3,200 crore to Larsen & Toubro, in a step to focus on the coffee retail business. 

With 1,752 stores, CCD competes with the likes of Starbucks, Barista, and McCafé in India. It has slowed down store additions over the past few quarters even as demand for retail space from multiple brands grows across cities. Starbucks has 150 outlets in India and proposes to keep store additions at around 25-30 this financial year. McCafé was present in 197 McDonald’s outlets at the end of the June quarter and intends to keep store additions at 40-50 this year, while Barista has 200 outlets in the country with plans to double the store count in three years.