Café Coffee Day parent sees share price froth over takeover rumours

Cafe Coffee Day

Indian Market
by 5paisa Research Team Last Updated: 2022-09-13T14:39:22+05:30

Coffee Day Enterprises, the parent of Cafe Coffee Day, has been facing challenges for some time, especially after its promoter VG Siddhartha died by suicide three years ago. The debt-laden company even defaulted on some loan dues earlier this year.

The stock was abuzz on Tuesday after rumours of a takeover spread in the market. While some are betting on Reliance taking over the company or assets, the other view is that D-Mart is also in the fray for the deal.

Coffee Day Enterprises saw its share price shoot up 20% to hit the upper circuit as the rumours spread. The company is currently valued at Rs 1,400 crore.

Although it is much below its recent peak in January when it had tripled in just four months, it has risen almost 50% over the last few weeks.

Coffee Day Enterprises had been working to reduce its pile of debt that had risen to over Rs 7,200 crore in March 2019. The firm had earlier disclosed that its debt reduced to Rs 1,810 crore by March 2022.

Rumoured suitors

The proposed deal would sit well with cash-rich Reliance, which has been buying brands and businesses in the consumer products and services field. Coffee Day Enterprises would also sync with its strategy of swooping onto debt-laden or financially-troubled businesses.

On the other hand, for D-Mart the deal could well be an extension of its retail business and the firm may look to expand in-store consumer engagement and draw revenues from it.

Notably, in the past, Tata Group was also considered a potential suitor for Café Coffee Day’s vending machines business but this didn’t materialise. Tata Group is also the joint venture partner of US major Starbucks. However, the group has not stayed back from multiple ventures in the same sector.

In the aviation sector, for instance, it runs both full-service airline Vistara along with Air India and also Air Asia’s India unit.

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