V G Siddhartha, the owner of Coffee Day Group, is set to increase his stake in Amalgamated Bean Coffee Trading Company Limited, an arm of the group which holds the coffee retailing chain business — Café Coffee Day.
According to investment bankers close to Coffee Day Group, marquee investors like Sequoia Capital, Darby Private Equity an arm of Franklin Templeton, IFC and Deutsche Group are among the investors understood to be holding stakes in Amalgamated Bean Coffee Trading Company Limited. These investors have over a period of years have invested around $80 million (Rs 360 crore) to fuel the expansion of the coffee retailing business. “It is likely that some of these investors are looking at paring their stake and Siddhartha is making this move to partly buy them out,” a banker close to the Coffee Day Group said. It is understood that Siddhartha will claw back his stake step by step. The management of Coffee Day Group were not available for comment.
For starters, it is understood that Siddhartha is raising a debt of Rs 125 crore for this move with a combination of Rs 100 crore NCDs (non-convertible debentures) as well as loan of Rs 25 crore. Bankers further added that external investors hold in the range of 35-40 per cent while the rest are held by the promoters.
It was during 2008-09 that Siddhartha pressed on the pedal of the coffee retailing chain raising private equity in quick succession that led to Café Coffee Day retailing presence expanding dramatically and its current count stands close to 1,300 cafes. It is understood that Siddhartha is raising this resources in Coffee Day Resorts Pvt Ltd’s (CDRPL), a privately-held company of Coffee Day Group. It was in this arm that Siddhartha raised a record $200 million during early 2010 from blue-chip global investors — KKR, Standard Chartered Private Equity and New Silk Route Partners.
The bankers further said that the fresh debt is secured by way of security cover/collateral of 2.2 times pledge of equity shares of Mindtree Ltd, Sical Logistics and ABCTL and by the personal guarantee of the promoter. It may be recalled Siddhartha holds around 18 per cent of MindTree and a significant stake in Sical Logistics.
Coffee Day Group, which straddles diverse businesses ranging from coffee retailing to furniture to wealth management to commercial realty to hospitality, has outlined a Rs 400 crore capital expenditure plan during the ongoing fiscal. It is likely to add around 300 cafes during this year at a time when the global coffee retailing major — Starbucks is expected to open its first cafe in India from September 2012.