CDEL sees I-T breakthrough soon

Coffee Day Enterprises Ltd (CDEL) chairman and managing director V G Siddhartha is expecting to resolve the issue of freeing up CDEL's share in Mindtree with the income tax (I-T) department very soon.

Talking about the status of the Mindtree stake provisionally attached by the I-T department, Siddhartha said, "In total, we own 3.36 crore shares as a group of which 54 lakh shares owned by me and another 22 lakh held by the company are under the attachment notice. We are working with the I-T department to release the shares and in a matter of a few days we should get some positive results."

As part of the business restructuring exercise, the CDEL management had appointed legal and financial consultants last quarter. The consultants had suggested a few options and the sale of Mindtree shareholding is a part of the exercise. The company Board has already given its in principle approval for selling the Mindtree equity shares held by the company, its subsidiary and promoters.

"In the first phase, we are selling our shareholding in Mindtree. We are already talking to people (potential buyers) and are expecting to close this transaction as early as possible," he said without sharing any specific details.

Earlier media reports had indicated that L&T Infotech and private equity firms like KKR and Barings are among potential buyers for the Mindtree stake held by promoters, subsidiaries and CDEL.

On market concerns, about the increase in pledged shares to 74.9% from 60% earlier, Siddhartha said, "Mindtree was at Rs 1,100 and it came down to Rs 750 or so. When it crashed we gave additional shares to the lender."

While CDEL is the holding company, it has various subsidiaries including Coffee Day Global (retail), Sical (logistics), Tanglin (tech parks and SEZs), Way2Wealth (financial services) and Coffee Day Trading (investments). The company also owns and operates three luxury boutique resorts under the brand name The Serai in Karnataka.

Coffee Day Global operates a cafe chain under the Coffee Cafe Day banner with 1,751 stores across 243 cities in the country. It is also a market leader in the coffee vending machine space with 54,146 machines as on December 31, 2018.

While talking about the company's debt position, Siddhartha said while gross debt is Rs 5,600 crore, net debt currently stands at Rs 3,750 crore and it is Rs 975 crore for the holding company. "Proceeds from the sale of Mindtree shares will be used for debt repayment. The idea is to make the holding company a zero debt one," he said.

The company had earlier said that it will add140-150 cafes in the current fiscal. However, analysts tracking the business said the pace of growth in terms of store additions as well as business was slow.

Responding to analysts' concerns on the net store addition in the cafe business for the December 2018 quarter, Siddhartha said the company added 80 stores in the last nine months of which 20 stores were added in the third quarter. "We had clearly told that, we will be cleaning up a lot of small cafes and that is getting done in a very aggressive manner. In fact, another 50-70 small cafes will get cleaned up over the next 12 months," he said adding that business growth will follow suit once the entire restructuring gets completed.

RESOLVING ISSUES

• 53 lakh – shares owned by V G Siddhartha, chairman and managing director of CDEL  
   
• 22 lakh – of the total 3.36 crore shares belonged to Coffee Day Enterprises Ltd
   
• 16% – IRR foreign investors will expect from their investments