Coffee Day Group eyeing $1.2 bn valuation

PE funds willing to invest $100 mn at valuation of about $800 mn

Coffee Day Group, a Bangalore-based diversified conglomerate, is understood to be working on raising $100 million through the private equity route at a valuation of $1.2 billion, almost double from the $650 million valuation during 2010, when it raised a record $200 million.

It is understood that the company has had series of discussions with a clutch of PE funds including TA Associates and the talks are now stalled due to the valuation mis-match.

"The PE funds are willing to look at investing in the holding company of Coffee Day Group at $800 million, but unlikely at the premium which V G Siddhartha, chairman, Coffee Day Group is expecting," a senior investment banker aware of the ongoing discussions told Business Standard.
 

Siddhartha, has been looking to raise $100 million at the holding company from early this fiscal primarily to fuel the expansion of cafe chains, expand the presence in wealth management and logistics and as well trim the close to Rs 600 crore debt.

Investment bankers in the know of Coffee Day Group's fund raising plans said that Barings Asia have also had discussions in addition to TA Associates.

Coffee Day Group is under a debt of close Rs Rs 600 crore on a networth of about Rs 1,200 crore and majority of that debt was raised to give exits to earlier investors in Cafe Coffee Day and to acquire Sical Logistics from A C Muthiah Group during late 2010.

As part of its fund-raising plans, Coffee Day Group is also looking to raise debt of close to Rs 100 crore through the NCD route with tenor of upto 36 months.

For the fresh debt raise, Coffee Day Group proposes to issue secured redeemable NCDs and it is being secured though security collateral of 2.25x pledge of equity shares of MindTree, Sical Logistics and Amalgamated Bean Coffee Trading Limited (ABCTL) in a combination of listed and unlisted shares and by personal guarantee of the promoter. Siddhartha has also relied on debt to increase his stake in publicly held mid-tier software exporter MindTree Limited, which he helped co-found more than a decade ago.

According to senior private equity fund managers, Siddhartha had indicated that post this fund raise, investors will have an option to exit through a public offer over a period of time, a change from the earlier strategy of raising funds through structured transactions.

Global blue chip private equity investors - Kohlberg Kravis Roberts (KKR), Standard Chartered Private Equity and New Silk Route Advisors (NSR) led the previous $200 million fund infusion into Coffee Day Holdings at a valuation of around $650 million.

Investment bankers further added that various combinations are being explored this time around as well including a structured transaction and there may be some interest from strategic players as well.

It is understood that around 28% is held by these investors while the rest is held by the promoters. Prior to that, other private equity investors including Sequoia Capital, Darby Private Equity (a part of Franklin Templeton), Deutsche Bank, IFC were among the investors in Cafe Coffee Day when the cafe business was being put through rapid expansion.

Coffee Day Group currently is the largest Indian operator of cafes with about 1,500 cafes and has a target to add anywhere between 200-300 cafes on an average, annually.

The total revenues of the Group is understood to be in the range of Rs 4,000 crore including the 14,000 acres of coffee plantations under ABCTL, which will not be included in the fund raise.