Coffee Day's Rs 1,200-cr public offer heats up

Investors lining up for pre-IPO placement

The run-up to one of the largest public offers in India seems to be heating up. As many as 20 high-net worth Indians, beside marquee funds, lining up for a sip of the pre-initial public offering (IPO) placement of Coffee Day Enterprises, which hopes to raise Rs 1,200 crore in May. The stake sale will be around 20 per cent, at a valuation of Rs 7,000 crore.

Coffee Day Enterprises, which owns the ubiquitous chain across India, also has a healthy investment portfolio in Mindtree and presence in valuable technology special economic zones (SEZs) and a growing logistics company. It is in the final stages of filing draft prospectus with the Securities and Exchange Board of India.

According to market information, marquee high-net worth investors, including Rakesh Jhunjhumwala of Rare Enterprises and Nemish Shah, the reclusive founder of Enam Securities, are among the probable expected to be part of the pre-IPO placement.

While the management declined to comment on the pre-IPO placements, the HNIs could not be reached for comments.

Investment bankers indicate the media-shy chairman of Coffee Day Group, V G Siddhartha, has managed to hammer out a $1.2-billion valuation for the IPO, elusive some time ago. "Earlier, investors were willing to stretch the valuation to close to a billion dollars but Siddhartha has convinced them to get his valuation," a senior banker told Business Standard.

As and when Coffee Day Enterprises hits the market, it will mark a partial exit to three global blue-chip private equity funds - KKR, Standard Chartered Private Equity, and New Silk Route - which invested a good $200 million during 2010.

With 1,500 Cafe Coffee Day shops doting the major cities in India, Siddhartha is leveraging on first-mover advantage to the hilt, even as Seattle-based Starbucks is pulling out all stops to score an edge.

In addition to this expansive network, investors will be looking to partake of Coffee Day Group's nearly 20 per cent stake in Mindtree, the value of which has grown nearly three times over the past year. While Siddhartha's Global Technology Ventures was the key founding investor when Mindtree started, he has managed to increase his stake slowly to be the single largest shareholder in this fast-growing software services exporter.