The promoter family at the CafĂ© Coffee Day group has decided to appoint an external auditor to do due diligence of its books of accounts. Deloitte, the internationally known audit firm will conduct a financial and commercial due diligence of the transactions the company has entered into and submit a report. The due diligence report will then be used to convnice the prospective investors showing interest in investing in the company.
Besides this, Deloitte will be mandated to conduct a forensic audit of CCDâ€™s vendors which means the transactions CCD has carried on in the past with the various coffee plantation companies will also come under the scanner. Some of these transactions may include the ones which the founder of the group VG Sidhartha, would have concluded when he was alive and in control of the company.
Coffee Day Enterprises Limited (CDEL) is the parent company that owns CCD and the promoters now managing the companies founded by Siddhartha after his demise, have been finding ways to get the group out of the debts it has plunged into. There has been enormous pressure on the promoters to sell off some of the companies and some deals have been struck as well.
The board of CDEL has now decided to appoint Deloitte to conduct these audits. It is learnt that the promoters wish to sell only a minority stake in CCD and this forensic audit will help convince the prospective investors that everything is above board.
CafĂ© Coffee Day happens to be the best company within the CDEL fold and its shares can possibly fetch a better price as compared to the other companies. For one, CCD is Indiaâ€™s largest retail cafĂ© chain and as a standalone unit is profitable. Its direct customer facing business with retail outlets throughout the country can appear attractive to any investor, Indian or foreign. The promoters would want to rope in a strategic investor with similar interest so that the business can be further expanded and the companyâ€™s value enhanced.
As of now, rumours have it that some private equity firms KKT and Apax Partners have showed interest in picking up stakes in CCD and there may be others as well. There were some who had evinced interest but later backed out. These include hospitality startup Oyo, TPG Capital and Bain Capital.
In a typical deal of this sort, new investors may want to do their own due diligence and therefore the report by Deloitte could form the basis in asking for details that are not included in the auditorâ€™s report.
There is another probe, which the Central Bureau of Investigation (CBI) is conducting, following a letter said to have been left behind by Siddhartha and found after his demise under unfortunate circumstances. The company has not filed its financial results etc. to the authorities citing this investigation and has requested for a few more weeksâ€™ time to submit them.
Meanwhile, a debt burden of close to â‚ą5,000 crore is still staring at the promoters.