Coffee Day IPO turns a low-key affair: 13% subscription on Day 1

IPO of Cafe Coffee Day’s parent company Coffee Day Enterprises Limited (CDEL) got a half-hearted response from the investors. The issue was subscribed 13% at the end of the first day.

The company had raised INR334.2 crore from anchor investors at the upper end of the price band of INR316-328 per share.

Qualified institutional buyers (QIBs) portion and retail investors’ portion got subscribed by 17% and 16% respectively whereas high net-worth investors subscribed to 3% of their reserved portion.

Bids were received for 34,24,275 shares against the total issue size of 2,58,14,198 according to data available at NSE. The share sale would close on 16 October.

CCD coffee

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The company expects to raise INR11.5 billion with shares up to INR150 million allotted as Employee Reservation Portion. Coffee Day IPO is one of the biggest in India in three years.

Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, Morgan Stanley India Company Private Limited, Axis Capital Limited, Edelweiss Financial Services Limited and YES Bank Limited are managing the issue.

Earlier this year the firm had raised INR1 billion from investor group including Infosys co-founder Nandan Nilekani, value investor Ramesh Damani and Rakesh Jhunjhunwala’s Rare Enterprises. Other major shareholders include KKR Mauritius PE Investments II Limited, NLS Mauritius and Standard Chartered Private Equity (Mauritius) II Limited. It is a positive sign that none of the investors are looking out to cash out in the IPO. Promoter, Chairman & Managing Director of the company holds 54.78% stake in Coffee Day.

Cafe Coffee Day Collage

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The company plans to use the proceeds for financing its coffee business subsidiary,  setting up new Cafe Network outlets and Xpress kiosks, manufacturing and assembling vending machine, revamping its existing outlets and, setting-up new coffee roasting plant facility, prepayment of loans and for general corporate purposes.

The company competes with Barista, Starbucks, Dunkin Donuts, Costa Coffee and McCafe. Cafe Coffee Day’s dominance is highlighted by the fact that it owns around 1,472 cafes whereas its nearest competitor Barista has 169 outlets.

Analysts of various brokerage houses intimated a straight NO for the issue, few considered it as an option for long term investments.

Vipin Mathur

By working in multiple cultures and segments of various organizations, Vipin has earned 15 years of experience in managing and organizing different operations. Most recently, he is associated with IPO Central as CEO. At IPO Central, he plays a leading role in management and operational practices. He also guides authors and researchers about the latest trends and news of upcoming IPOs.

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