Cafe Coffee Day IPO: Should You Subscribe?

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Coffee Day Enterprises, which is more popular known under the brand "Cafe Cofee Day" or CCD, is the parent company of the Coffee Day Group.

The first branch of Cafe Coffee Day opened in 1996 on Brigade Road in Bangalore. From then, it has nearly 1,500 outlets and dominates the business with a market share of 46 per cent.

Cafe Coffee Day IPO: Should You Subscribe?

IPO Details

  • Issue Open: Oct 14, 2015 - Oct 16, 2015
  • Issue Type: 100% Book Built Issue 
  • Face Value: Rs 10 Per Equity Share
  • Issue Price: Rs 316 - Rs 328 Per Equity Share
  • Market Lot: 45 Shares
  • Minimum Order Quantity: 45 Shares
  • Listing At: BSE, NSE
  • Company Promoters: V.G. Siddhartha, who holds 63,945,904 Equity Shares, which is equivalent to 54.78% of the pre-Issue share capital.

Here are 6 must-know things about the company and IPO

1. The company is looking to raise an estimated amount of Rs 1,150 crore which will assist in expansion plans and to pay off debt.

2. The book running lead managers to the Issue namely, Axis Capital Limited, Edelweiss Financial Services Limited and YES Bank Limited.

3. The company has got private equity leads like KKR, Stanchart PE and New Silk Route as its investors. The company has set aside the reserve of Rs 15-crore worth shares for staff.

4. The parent company plans to utilise nearly Rs 632 crore to pay off debt and the remaining to open new stores, set up coffee bean roasting plants and make vending machines.

5. The company incurred losses in Financial Years 2013, 2014 and 2015, and the three-month period ended June 30, 2015, which may adversely affect business and financial performance.

6. There were also reports that Infosys co-founder Nandan Nilekani and ace investor Rakesh Jhunjhunwala have bought stakes in the entity that owns the Cafe Coffee Day 

Should you subscribe to the Cafe Coffee Day IPO?

Fundamentally speaking, the issue is overpriced, simply because the company has been making losses in the last few years. The best comparison that one can do is with Jubilant Foodworks, which runs the "Dominos" Pizza brand.

But, even that comparison is illogical, because Jubilant Foodworks has been making profits in the last many years. Sometimes markets do not go by fundamentals and are ready to pay a premium, for solid track record and a great brand equity, which Cafe Coffee Day has. 

So, price to earnings ratio, would be meaningless, as the past has shown a negative EPS. But, there is so much fancy for consumer-driven stocks with a solid brand, one would not be surprised, if there is listing gains. Jubilant Foodworks has given good returns and this is the best comparison that we could have.

GoodReturns.in

Read more about: ipo, coffee day
Story first published: Tuesday, October 13, 2015, 14:10 [IST]
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