Coffee Day Enterprises wipes out Rs 5,500 cr in market cap; stock below Rs 100 for the 1st time

Shares of Coffee Day Enterprises were locked at its lower circuit for the fourth consecutive day on August 2 over concerns about the company’s debt levels, which came to light after the sudden demise of founder VG Siddhartha on July 29. The share fell below Rs 100 for the first times since getting listed October 2015.

The stock corrected nearly 49 percent this week and fell in 12 out of the last 13 sessions. The consistent correction eroded more than Rs 5,500 crore in market capitalisation since January 2018.

It lost 72 percent from its record high of Rs 364.5 touched on January 2018. The stock was quoting at Rs 99.90, down Rs 11.05, or 9.96 percent with a market capitalisation of Rs 2,110 crore on the BSE at 1145 hours.

Also, its subsidiary Sical Logistics was locked in the lower circuit for the fourth day, losing nearly 48 percent in those sessions.

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VG Siddhartha, who was missing since the evening of July 29, was declared dead on July 31 after police found his body at Hoige Bazaar beach in Mangaluru.

Founder and MD & CEO, VG Siddhartha owned 32.75 percent stake in Coffee Day Enterprises and Malavika Hegde, non-executive director, has 4.05 percent stake in the company, as per the latest shareholding pattern available on exchanges.

Total promoter and promoter shareholding stood at 53.93 percent as of June 2019, of which 75.70 percent shares are pledged against debt.

The company reported 20 percent growth in profit and 12.6 percent growth in revenue in FY19 YoY, but its borrowings (mentioned under financial liabilities section of consolidated statement of assets and liabilities) increased to Rs 3,889.63 crore by the end of FY19, against Rs 810.91 crore in FY18.

A Business Today report on August 1 indicated that VG Siddhartha’s debt may have touched over Rs 11,000 crore including Coffee Day Enterprises which has debt obligations of around Rs 6,547 crore and personal guarantee worth around Rs 1,028 crore.

On June 27, Siddhartha, who opened the first Café Coffee Day outlet in Bengaluru in 1996, wrote a letter to the company’s board of directors saying that he has failed to create the right profitable business model despite best efforts.

He further added, “I would like to say I gave it my all. I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I gave up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from other lenders nod to me succumbing to the situation.”

“There was a lot of harassment from the previous DG Income tax in the form of attaching our shares on two separate occasions to block our Mindtree deal and then taking position of our Coffee Day shares, although the revised returns have been filed by us. This was very unfair and has led to a serious liquidity crunch,” he said.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.

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