Cafe Coffee Anyone ! ? ~ Successful IPO at Rs 328 ~ Awaiting Listing
I’m sure most of us have had a Coffee at one of the Chain Outlets of Cafe Coffee Day (CCD)
It’s parent Company Coffee Day Enterprises Ltd (CDEL) just concluded a successful IPO and fixed the IPO price at the upper band of Rs 328
Most had recommended to avoid the Issue as the Pricing was very High
I hold a contrary opinion and had recommended the Issue but not as a Stag as there does exist the risk of listing gains not being available
Here are some relevant extracts from the IPO note prepared by us
Subscribe but not as a Stag ~You Need Not Sit Out !
Further Lowering of Debt will significantly transform the Financials Dynamics ~ Low Floating Stock ~ It’s Not an Offer For Sale ~ 16.73 % Equity Stake in listed Mindtree worth @ Rs 2000 crs currently
Immediate Risk : Listing Gains may not be available as IPO Pricing is perceived to be on the higher side
Five Positives in our View
1. Huge Brand Recall & therefore Significant Brand Value ~ CDEL,through its subsidiary, operates the popular Cafe Coffee Day Chain of 1538 stores across 219 cities with a 46% Market Share.It has been recognised as the second best Indian Brand.This Intangible Asset is not in the Books but clearly is in the Premium sought in the IPO Pricing of Rs 316 to Rs 328
2. CDEL has a 16.73 % (10.41 % directly and 6.32% through 88.97% owned subsidiary Coffee Day Trading Ltd) Non Promoter Equity Stake in the listed Software Company Mindtree which is worth @ Rs 2000 crs based on Share Price of Mindtree ~ if monetised it will make CDEL free of net debt instantly and add Rs 250 crs + to bottomline on interest saved=> that’s an incremental EPS of Rs 12 itself !.CDEL had a net consolidated debt of Rs 2864 crs at December 31,2014. Mindtree quoted @ Rs 1400 (FV Rs 10) with a Market Cap @ Rs 12000 crs has just declared a very good Q 2 FY 16 with a Networth as on September 30,2015 of Rs 2243 crs and Book of Rs 267 and Annualised EPS of Rs 70 giving a PBV & PE of 5.25 and 20 respectively.It has also declared a 40% Interim Dividend. Share Price of Mindtree has gained @ 20% thus far in 2015 and holds potential for more
3. The CDEL IPO of Rs 1150 crs is a full fresh issue of Equity Shares and there is no offer of sale from Promoters and other Shareholders.Have a look below at the Pedigree of Non Promoter Shareholders and their pre IPO holdings and cost in CDEL
4. The IPO of Rs 1150 crs has already attracted 17 well known Anchor Investors who have committed Rs 334 crs at Rs 322
5. The IPO comprises just over 17% of post IPO Equity Capital of Rs 206 crs and implies limited floating stock
