What’s brewing? Coffee Day stock doubles in grey market in 5 days!

What's brewing? Coffee Day stock doubles in grey market in 5 days!

NEW DELHI: Shares of distressed beverages firm Coffee Day Enterprises (CDEL) are catching the eyes of investors in the unofficial market, when the stock price has doubled in just five days in the new calendar year.

The stock has surged to Rs 52 from Rs 26 in the grey market. While trading in the scrip remains suspended on the bourses, the shares have been changing hands in off-market deals.

Off-market dealers says the company is likely to be back on track this year. They are buying the management view at the AGM, where it asserted that the worst is over for the company.

Divyanshu Aggarwal of Growfast Securities & Credit, a Delhi-based boutique firm, said the company management has announced a few new developments, which shall have a lot of positive impact on the company’s financials. “The company’s debt is expected to be reduced to Rs 300 crore and cash flows are likely to turn positive,” he said.

Coffee Day Enterprises, India’s biggest coffee chain, will allow waffle-making startup London Bubble Co (LBC) to open nearly 150 shop-in-shops at its cafe chain, hoping to generate incremental revenue amid rising pressure to repay debts.

CDEL is likely to strike another deal with the Tata group, where the largest conglomerate is likely to acquire the formers’ coffee vending machines business.

Media reports said CDEL is seeking Rs 2,000 crore for the same, while Tatas are offering Rs 1000 crore with some strings attached. A few other listed FMCG companies are said to be showing interest in the vending machines business.

CCD had 1,192 cafes in operation across 208 cities in FY20, compared with 1,752 in 243 cities a year ago, the annual report said. However, the number of vending machines increased to 58,697 from 56,799.

Aggarwal said, the company management has also indicated that all compliances have been completed regarding the relisting process. This suggests trading in the stock on BSE and NSE may resume soon.

“Shares of Cafe Coffee Day are apparently available at very attractive prices compared with its peers like Burger King and Jubilant Foodworks,” Aggarwal said.

The company is reportedly keen on monetising its non-core assets to focus on the key business.

Ashish Chugh of Hidden gems said one of the group companies, Sical Logistics, is asset rich. It’s an integrated logistics company and can have various suitors if it can settle with the lenders.

“At some point, the company could be sold, and this would result in reducing the group’s liabilities and the additional cash can be utilised for Coffee Day Enterprises,” he said.

The company’s annual report showed net revenues fell 28 per cent to Rs 2,552 crore in FY20 from Rs 3,569 crore in FY19, mainly due to liquidity issues in the group after the demise of VG Siddhartha and the Covid-19 lockdown.

Consolidated net profit for FY20 stood at Rs 1,884 crore against Rs 127 crore reported for the previous financial year, a growth of 1,377 per cent. This includes an exceptional gain of Rs 1,828 crore on account of sale of equity stake held in Mindtree and Rs 1,190 crore gain from the sale of a Global Village property held by Tanglin Development.

Total loans stood at Rs 3,013 crore, and it comprises long-term borrowing of Rs 2,189 crore and short-term borrowing of Rs 824 crore. The company’s net debt as on March 31, 2020, stood at Rs 2,910 crore.

However, Arun Kejriwal, Director, KRIS Capital, has a word of caution for investors interested in the stock.

He said the company has not offered any official confirmation so far on any of these stories doing the rounds. “Gullible investors should not fancy such information and fall prey,” he said

CCD has since appointed Malavika Hegde, the wife of its late founder V G Siddhartha, as the Chief Executive Officer. “Malavika Hegde, Director of the company, has been appointed as CEO of the company with effect from December 7, 2020,” the company said in a regulatory filing.

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