Amalgamated Bean likely to spin off Cafe Coffee Day

Amalgamated Bean Coffee (ABCTCL) is planning to spin off its coffee chain Cafe Coffee Day into a separate entity.

The move is believed to be a precursor for making Cafe Coffee a listed company in three years, when the coffee bar business is expected to have a top line of little over Rs 800 crore from the current Rs 380 crore.

Banking sources said the Rs 500-crore ABCTL had shared its plans for Cafe Coffee Day with them. The projected business growth of Cafe Coffee Day, as it had been shared with bankers, indicate the company will reach a top line of Rs 505 crore in FY08, Rs 645 crore in FY09, and a little over Rs 800 crore in FY10.

Cafe Coffee Day has its business spanning the entire value chain of coffee consumption in the country. Its different divisions include, Coffee Day Fresh n Ground (which owns 386 coffee bean and powder retail outlets), Coffee Day Xpress (which owns 500 Coffee Day Kiosk), Coffee Day take-away (which owns 7,000 Vending Machines), Coffee Day Exports and Coffee Day Perfect (FMCG packaged coffee) division.

Naresh Malhotra, CEO, Cafe Coffee Day, declined to comment on the company's roadmap. He maintained they had sufficient funds for the future, having recently raised close to Rs 160 crore through a mix of debt and equity from Sequoia Capital and International Finance Corporation.

ABCTCL in its roadmap has stated it aims to double the number of coffee bars to 800 in three years, while the coffee powder vending stores will number up to 650 from the current close to 400. The Xpress brand on the other hand will be paced up to 2,500 outlets from the current 500 in three years time frame.

According to sources, Cafe Coffee Day's EBIDTA, which is currently around 15 per cent, is expected to cross the 17 per cent by FY10. The net margin, which is just short of 6 per cent, is targeted to be close to 9 per cent in the three-year time frame.

Said an analyst, who is keeping track of the firm's expansion plans: "On an average, each cafe costs around Rs 25 lakh, as almost the entire chain is on rented premises' and the impact of real estate price increase does not affect them much. The critical factor, which is turning the tide in favour of the company, is that they tend to start making money on each cafe just after six months of their opening."

Cafe Coffee Day, which has its presence in 70 cities across country, has also spread its tentacles globally setting up cafes in Vienna, Austria and is planning to set shops in West Asia, Eastern Europe, Eurasia, Egypt and South East Asia in the coming months, besides in Pakistan and the US.