Having decided not to go ahead with the sale of the CafĂ© Coffee Day business, the promoters of the holding company Coffee Day Enterprises Limited (CDEL) are understood to have zeroed in on one of the group companies, Sical Logistics to be sold. The funds raised will then be used to clear some of the debts the group is facing. The indications that such a decision might come through has been in the air for a while and brought to you in these columns as well last week.
Reports now emerging more or less confirm those suggestions that the promoters, currently in control after the sudden demise of the founder of the group VG Siddharth, have dropped the plans to go through with the talks being held with companies like Coca Cola and ITC. The talks would have led to an agreement where stakes in the CafĂ© Coffee Day business alone would have been offered for a consideration.
Once it was revealed that the discussion on these lines was abandoned, the only alternatives left with the promoters were to look at some of the other assets within the group that could be sold and resources raised. Sical Logistics did figure in that list.
The latest report is that ICICI Securities has been retained as the advisor to find a suitable buyer and the likely amount raised will be of the order of Rs 1,000 crore to Rs 1,500 crore.
The picture before the promoters of CDEL is that the company has an overall debt of around Rs 4,400 crore. An amount of around Rs 3,000 crore could come in through the sale of Global Village Tech Park, which was part of the real estate firm Tanglin Developments Ltd, a group firm. The process of sale of this property to the Blackstone Group of USA is complete and the funds could roll in anytime now.
Out of the funds from the sale of Sical Logistics, CDEL may retain a part for its working capital requirements and use the remaining to pay off the debts. That should make the group debt-free and make it easier to carry on the business which seems otherwise profitable. Once the company turns debt-free and as an ongoing business, it may fetch a better valuation and it may be prudent to sell its stakes then.
One point of concern for the promoters of CDEL is that the stake in the company still owned by them has come down to 27.46%, following the invoking of debentures worth 26.47% by the debenture holders between the last week of July and the end of August. The companyâ€™s filings with the authorities reveal this.