Coffee Day Enterprises (CDEL) on Wednesday announced its intent to sell one of its prized assets, Global Village Tech Park, to private equity major Blackstone for a valuation ranging between Rs 2,600 crore and Rs 3,000 crore.
The deal is expected to substantially reduce the overall debt burden of the group, which stands at around Rs 5,200 crore after the payment of Mindtree’s sale proceeds of Rs 2,100 crore net of taxes. The Bengaluru-based firm said a “non-binding letter of intent” to this effect had been signed with Blackstone. “The transaction closure is subject to completion of Blackstone’s due diligence, documentation and receipt of requisite regulatory approvals, which is expected in the next 30-45 days,” the firm, which runs the Café Coffee Day outlets, said in an exchange filing.
The move comes a fortnight after the death of Café Coffee Day founder V G Siddhartha, whose purported last letter had talked about “a serious liquidity crunch” faced by the company.
Owned by CDEL’s subsidiary Tanglin Developments, Global Village Tech Park is spread over 91 acres with a built-up area of around 4 million square feet (sq ft) and a scope for building another 5 million sq ft of office space. The IT park, located off Mysore Road on the outskirts of the city, houses marquee tenants like Accenture and Mindtree and fetches a rental income of around Rs 250 crore a year. The company is said to have engaged with Blackstone for a sale when Siddhartha was at the helm.
However, the discussions had stalled owing to differences over valuation. In his 'last letter', Siddhartha mentioned the valuation of the asset at Rs 3,600 crore.
"The (current) valuation is fairly okay. The earlier valuation, as mentioned in Siddhartha's purported letter, was based on the assumption that the remaining land parcels can be used for construction which can fetch a higher valuation," a source in the know said.
Blackstone declined to offer any comment on the development.
However, sources said the tech park would be jointly owned by Blackstone and Bengaluru-headquartered realty firm Salarpuria Sattva Group. "Salarpuria Sattva and Blackstone are likely to form a special purpose vehicle (SPV) for this property, which will be finalised in a meeting towards the end of this week," another source said. ALSO READ: Cafe Coffee Day, V G Siddhartha lenders staring at legal quagmire
Blackstone and Salarpuria Sattva already have a joint venture with a real estate portfolio of 16 million sq ft, though most of these assets are in Hyderabad. The combined entity is said to be looking to buy properties in Bengaluru to expand its current portfolio.
An early closure of the deal with Blackstone is critical for CDEL, whose share price has fallen by around 65 per cent after the demise of Siddhartha. The company's market capitalisation has fallen from a peak of Rs 7,000 crore to around Rs 1,400 crore now.
Wednesday's board meet, which was attended by Malavika Hegde, wife of Siddhartha, also decided to sell one the company's subsidiaries, AlphaGrep Securities, to Mumbai-based Illuminati Software for Rs 28 crore. AlphaGrep, which is involved in algo-trading, was formed as a joint venture between the Coffee Day group and Illuminati Software, in which the former held a majority stake. The company is said to be running in losses.
Industry experts said that while the decision of CDEL to monetise assets for reducing debt was a timely move, there was no clarity yet on the gross liability of all group companies put together.
With inputs from Raghavendra Kamath ALSO READ: Shakeout brewing at CCD, firms eye coffee chain after Siddhartha's death