KKR-led consortium to invest $100 million in Coffee Day Holdings

Global private equity giant Kohlberg Kravis & Roberts (KKR) is understood to be in final stages of leading a $100 million round of private equity investment in Bangalore-based coffee exporter and retailer Coffee Day Holdings.

Coffee Day Holdings holds a wide range of companies ranging from coffee exports & retail, real estate development, wealth management, private equity and hospitality. V G Siddhartha, chairman, Coffee Day Holdings confirmed they have multiple offers from five private equity players and a deal will be finalised within the next two months.

Private equity industry sources however detail that Coffee Day Holdings is in advanced stages of concluding a deal with KKR. Coffee Day Holdings through its various companies has previously raised private equity and debt funding from AIG, Sequoia Capital, IFC, Deutsche Bank, J P Morgan and Darby Investments from the stables of Franklin Templeton.

Siddhartha detailed that the holding company has cash of $70 million and the additional $100 million which they plan to raise will be used over a three year period to expand globally and consolidate its coffee retailing business in India. He added that they have started due diligence to acquire a coffee chain in East Europe and they are open to acquiring a chain in the United States to expand its international operations. Siddhartha added that they will maintain a debt equity ratio of 1:1 as they embark on the expansion. “We are the largest coffee retailing chain in Asia and our vision is to be in top 3 chains globally within the next five year span,” he added.

Coffee Day Holdings is the holding firm for Amalgamated Bean Coffee Trading Company, the coffee-growing and exporting business, Cafe Coffee Day (the coffee retailing business), Coffee Day Hotels and Resorts, retail broking firm Way2Wealth, Global Technology Ventures (venture capital) and Tanglin Development, the real estate arm which has set up software parks in Bangalore, Mysore and Mangalore. It is also understood that the company has land bank near Pune in Maharashtra.

Coffee Day Holdings was set up during late 2007 to consolidate promoter’s holding in these firms. Coffee Day Holdings is promoted by V G Siddhartha, who started out as a coffee exporter having estates in Chikmagalur, around 250 kms from Bangalore. The company has around 5,000 acres of coffee plantation and is the second largest such firm in India.

The company during June 2007 raised $125 million debt from Deutsche Group, as part of its $200 million fund raising plan. The move to raise debt was precipitated after J P Morgan which was expected to come in with a significant portion of this $200 million limited itself to committing $50 million. According to sources, the equity infusion into Coffee Day Holdings was raised at a valuation of $550 million.

Café Coffee Day is on an expansion spree and is estimated to touch the 1,000 cafes mark shortly from around 800. The chain also has presence in the United States, Vienna and in Pakistan and is planning to dot more global locations.