CCD sees better working capital flows but no moratorium on loan repayments

Coffee Day Enterprises (CDEL) is witnessing some improvement in its working capital flows in recent months, indicating early signs of better financial health in coming quarters, sources in the know said. However, despite its ongoing talks with the creditors, the Bengaluru-headquartered firm is yet to get any moratorium from creditors on its repayment obligations.
 
“Working capital condition has improved as the first tranche of proceeds from sale of Global Village Tech Park has come in," said a person privy to the functioning of the firm. "However, things have not materially changed. It will take time. They (company officials) are in talks for moratorium deals with creditors," the person added. A detailed mail sent to CDEL remained unanswered at the time of going to press.
 
In September, CDEL decided to sell the Global Village Tech Park to private equity major Blackstone and realty firm Salarpuria Sattva Group for Rs 2,700 crore.
 
By the end of July, the group’s aggregate debt stood at Rs 4,970 crore, of which Tanglin Developments’ liabilities stood at Rs 1,622 crore, while its flagship coffee retailing arm Coffee Day Global's total debt was at Rs 1,097 crore.
 
“Repayment obligations have come down for the company as the payment received from the sale of Global Village Tech Park has been used to pare some debt. Also, invocation of pledged shares by creditors have extinguished some amount of liabilities,” the second person said.
 
According to regulatory filings, promoters’ holding in CDEL, comprising Coffee Day group founding chairman late VG Siddhartha, his wife Malavika Hegde, Devadarshini Info Technologies, Coffee Day Consolidations, and Sivan Securities, has seen a sharp fall of around 28 per cent to touch 25.35-per cent level at the end of September quarter. This was majorly due to liquidation of pledged shares by the lenders during this quarter.
 
Overseas corporate bodies such as NLS Mauritius LLC held the maximum 10.61 per cent stake in the company, followed by KKR Mauritius PE Investments II with 6.07 per cent, during this period. Similarly, Marina West (Singapore) and Marina III (Singapore) were the remaining two overseas corporate investors with 4.63 per cent and 1.04 per cent stakes, respectively.
 
Experts said despite such sharp dilution of promoter's stake, private equity investors are not looking at a change in the management structure. “Promoters are very much in charge. The brand image has not suffered for these things,” said Naresh Malhotra, serial entrepreneur and former chief executive officer of Café Coffee Day (CCD).
 
Even brand strategists are of the opinion that the valuation of CCD remained robust despite the recent events that have arisen post demise of Siddhartha. “One of the most valuable assets in this case is the CCD brand name itself, apart from the tangible assets. If you put a value to it, that is humongous. So, I don't think, any buyer will try to tamper with the branding,” said Harish Bijoor, brand strategist and founder of Harish Bijoor Consults Inc.
 
The company, which has taken permission to delay its results announcement, will declare its first quarter earnings on November 13. Sources said CDEL board was likely to induct new members in the next board meet, as two director positions are lying vacant.
 
Meanwhile, Sical Logistics, a part of Coffee Day Group, said liquidity challenges arose on account of demise of its promoter V G Siddhartha impacted the financial results of the September quarter. The company has reported a loss before tax of Rs  43.19 crore in Q2, as against a profit of Rs 7.77 crore before tax during the same quarter last year. 

In a nutshell 
 

• After deferring results, CDEL will announce its Q1 earnings on November 13
   
• Its flagship coffee retailing arm Coffee Day Global's total debt was at Rs 1,097 crore

• Promoters’ holding came down sharply to 25.35% in Q2 from 53% earlier  
   
• Despite invocation of pledged shares, experts see no change in management structure

• Brand has not suffered despite recent events; valuation remains strong, say experts