Saturday marks the fourth anniversary of the disappearance of V G Siddartha, the founding Chairman and MD of Coffee Day Enterprises Ltd (CDEL) who was eventually fished out of the Netravati river in Karnataka. The unfortunate demise of the entrepreneur was attributed to financial pressures and not many thought that the popular Café Coffee Day chain he founded would survive.
However with his wife Malavika Hegde at the helm, CDEL has pared down considerable part of its debt which stood at ₹7214 crore at the time of Siddartha’s demise. This has been achieved through the sale of non-core assets, shutting down loss-making outlets, withdrawing coffee machines situated at unprofitable locations and focussing on exports. However, there is still some way as CDEL still has debt, which now stands at ₹1731 crore including long term borrowing of ₹1263 crores`
A rude reminder of this was served recently when last Wednesday on a petition filed by IndusInd Bank, Coffee Day Global, operator of the CCD chain of cafes and a subsidiary of the listed CDEL was admitted for corporate insolvency by the Bengaluru bench of National Company Law Tribunal. Coffee Day Global owed ₹67.3 crore to IndusInd Bank, according to the company’s balance sheet. Company is yet to officially comment on the proceedings. It also did not respond to a BL questionnaire on the ongoing proceedings.
This is the story of the locally nurtured coffee brand that charmed the entire nation with its diverse coffee offerings and became a place for the young and young at heart to meet, drink and eat. This ensured that it became the country’s largest coffee chain boasting a network of 1,752 cafes by 2019 operating across 200 cities of the country apart from a small international footprint.
However the company has now cut down and as of March 2022 which is the latest data available, it had 495 cafes in 158 cities, and 285 CCD Value Express Kiosks apart from 38,810 vending machines which dispensed coffee at hotels and workplaces.
In FY23, it made a loss of ₹30.78 crore compared to a loss of ₹34.93 crore in FY22. According to Harish Bijoor, a Business and brand strategy expert, CDEL has done a fair amount of revamping in the last four years by paying down a significant amount of debt from its books with prudent fiscal and business management. It now needs a fresh channel of investment to expand its business.
“Profitability for them is a matter of scale; however, they don’t have the scale yet. For the same reason, they would need an investment partner. CCD has great potential if it gets a partner. A fair amount of money is needed for the company to break even and become profitable.”
Even today, CCD brand resonates in the market he adds “The company has a few more years of runway to get back to its glorious day before the limelight is taken away from it for good, if it can’t get its act together,” he added. Before the NCLT affair, CDEL shares had run up a bit, but over the last few days has lost about a third of its value and currently trades at
Apart from the restructuring, there are grounds for optimisim as a new regime was sworn in recently in Karnataka from where the company is headquartered. Malavika is the daughter of S. M. Krishna, who had served as the former Chief Minister of Karnataka, Indian Minister for External Affairs, and Governor of Maharashtra. Her son Amartya Hegde is married to Aiswharya the daughter of KPCC President D K Shivakumar who is also the deputy CM of the state and is one of the richest legislators in the country. Shivakumar has a reputation for being the key trouble shooter and fund raiser for the Congress party.
With the restructuring, paring down of debt and a more sympathetic and supportive administration CDEL will be hoping to resolve its issues and revive its dented growth story.