With founder Siddhartha missing, will Cafe Coffee Day get sold to PE firms?

Experts say the counter will remain under pressure in the short-term till there is clarity on who runs the business

Reports of V G Siddhartha, co-founder of Café Coffee Day, going missing sent the stock of Coffee Day Enterprises spiralling down to hit the lower circuit filter of 20 per cent on Tuesday. If the reports of his demise are proven true, there could be more pain in store for the counter in the days ahead, analysts say. 

"Coffee Day Enterprises was more of a promoter-driven outfit. This business prospects and the stock will take a hit in the short-to-medium term, at least till the time there is clarity on the news development and how the business will be managed going ahead," says A K Prabhakar, head of research at IDBI Capital. 

Siddhartha was the chairman and managing director of Coffee Day Enterprises and held 32.75 per cent stake in the company as of June 2019 quarter, ACE Equity data show. Of this, 71.4 per cent stake had already been pledged. Malavika Hegde, his wife, is the other significant owner in the company with a 4.05 per cent stake as of June 2019 quarter, data show.

Over the past few years, the company's fortunes had been dwindling. On a standalone basis, Coffee Day Enterprises reported a loss of Rs 7.72 crore for the financial year 2008-2009 (FY09). This surged to Rs 150.75 crore in FY16. On a consolidated basis, as well, the company reported a profit after tax (PAT) of Rs 6.64 crore in FY11, which ballooned into a loss of Rs 155.74 crore by FY15.

"There is a significant capital expenditure involved in setting up a new outlet and the breakeven takes time – typically two years for a new store in a metro city and around three or four years if the outlet is in a Tier-II or Tier-III city," Prabhakar adds.

Over the past 10 years, the capital employed by Coffee Day Enterprises surged from Rs 202.19 crore in FY09 to Rs 2,914.92 crore in FY18, data show. Simply put, capital employed can give a snapshot of how a company is investing its money.

Meanwhile, Siddhartha found himself amid a tax evasion case in September 2017. A tax raid was conducted at over 20 locations in Mumbai, Bengaluru, Chennai and Chikmagalur by senior officers of Income Tax Department of Karnataka and Goa regions, reports suggest.

On the business front, however, things seemed to be on the mend. The Rs 150.75 crore loss reported in FY16 was brought down to Rs 61.49 crore in FY18. At the consolidated level, as well, the company delivered a turnaround performance – from a loss of Rs 155.74 crore reported in FY15, Coffee Day Enterprises reported a profit of Rs 48.94 crore in FY18, ACE Equity data show.

"The stock saw a panic reaction on Tuesday post the development and I do not rule out another 25–30 per cent downside. The counter will remain under pressure in the short-term till there is clarity on who runs the business. There are chances that the chain will get sold to private equity firms as such reports were already doing the rounds," says Ambareesh Baliga, an independent market expert. 

On a year-to-date basis, the stock has slipped nearly 45 per cent to Rs 154 levels on Tuesday. In comparison, the S&P BSE Sensex has moved up around 4 per cent, data show.  


Board composition

Name	Designation	Reported designation
V G Siddhartha	Chairman	Chairman and Managing Director
V G Siddhartha	Managing Director	Chairman and Managing Director
Malavika Hegde	Non Independent & Non Executive Director	Non Independent & Non Executive Director
SV Ranganath	Independent Non-Executive Director	Independent Non-Executive Director
Albert Hieronimus	Independent Non-Executive Director	Independent Non-Executive Director
Sanjay Omprakash Nayar	Nominee Director	Nominee Director
Sadananda Poojary	Company Secretary	Company Secretary & Compliance Officer

Source:AceEquity

Company financials 

DESCRIPTION	Mar-18	Mar-17	Mar-16	Mar-09
Gross Sales	143.10	98.96	51.72	0.10
Total Income	144.82	100.88	61.87	0.10
Total Expenditure	80.14	57.43	44.38	0.15
PBIDT	64.68	43.44	17.49	-0.06
PBIT	64.24	42.94	17.02	-0.06
PAT	-61.49	-79.58	-150.75	-7.72
Cash Profit	-61.05	-79.07	-150.28	-7.72
RONW(%)	-3.34	-4.30	-13.24	-10.00
PBIDTM(%)	45.20	43.90	33.81	-57.69
PATM(%)	-42.97	-80.42	-291.45	-7919.86
CPM(%)	-42.66	-79.91	-290.55	-7919.86

Coffee Day Enterprises Ltd Holding More than 1% (Promoters)-All 

Name	No of Shares	% of Shares	No of Pledged Shares	% of Pledged Shares
Coffee Day Consolidations Private Limited	12,268,416	5.81	11,770,573	95.94
Devadarshini Info Technologies Pvt Ltd	12,408,440	5.87	10,308,440	83.08
Gonibedu Coffee Estates Pvt Ltd	11,071,104	5.24	8,739,104	78.94
Malavika Hegde	8,562,506	4.05	5,589,000	65.27
V G Siddhartha	69,174,700	32.75	49,391,757	71.40

Source: AceEquity 

Shareholding pattern

Particulars	No of Shareholders	No of Shares	% of Shares	% of Pledged Shares
Promoter and Promoter Group	.	.	.	.
Indian Promoters	6	113929198	53.93	75.7
Foreign Promoters	0	0	0	0
Total of Promoter and Promoter Group	6	113929198	53.93	75.7
Public Shareholding	.	.	.	.
Institutions	58	12204542	5.78	0
Non-Institutions	40620	85117979	40.29	0
Total Public Shareholding	40678	97322521	46.07	0
Total of Promoter and Public Shareholding	40684	211251719	100	40.82
Shares held by Custodians and against which Depository Receipts have been issued	0	0	0	0
ADRs	0	0	0	0
GDRs	0	0	0	0
Other	0	0	0	0
Grand Total	40684	211251719	100	40.82

Data for June 2019 quarter

Source: AceEquity