Coca-Cola is in early talks to acquire a significant stake in India’s largest coffee chain Café Coffee Day (CCD), according to media reports. If the deal goes through, this would be Coca Cola’s second cafe chain investment after it acquired UK-based Costa Coffee for US $5.1 billion in September 2018.
The CCD deal aims to give Coca-Cola significant scale in the fast-growing café business as the aerated soft drinks segment has been slowing down, an executive with knowledge of the matter told Economic Times.
The discussions are currently being led by Coca Cola’s Atlanta office, the reports said.
Promoted by VG Siddhartha, Café Coffee Day is owned by Coffee Day Global, a subsidiary of Coffee Day Enterprises. Shares of Coffee Day Enterprises rose as much as 8.8% in intraday trade on Thursday following the stake sale buzz. At 10:22am, the stock pared some of its gains to trade at Rs 233.35, up 4.5%, on BSE.
CCD is India’s market leader in the organised café space with around 1,750 cafes across the country. Other players are far behind, with Barista operating 200 stores, Starbucks running 146 stores and Costa having just 50 stores in India.
However, CCD’s parent firm Coffee Day Global is reeling under heavy debt. As on 31 March 2019, Coffee Day Enterprises' total debt stood at Rs 6,547 crore, two-and-a-half times its net worth of Rs 2,529 crore. A stake purchase by Coca Cola can help the company clear some of its dues.
Interestingly, CCD promoter VG Siddhartha had sold 20.32% stake held by him and two CCD affiliate firms to Larsen and Toubro Ltd in March this year for Rs 3,200 crore, which was largely seen as a move to pare off debts.
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