Crisis-hit Coffee Day starts deleveraging drive

Reuters file photo for representation

The Coffee Day Enterprises, which has been marred by the controversial death of its founder VG Siddhartha along with the growing debt, has embarked on a deleveraging drive, by selling its assets.

As part of the drive, the company has decided to sell off its investment in the Global Village Tech Park, which it owns through its subsidiary, Tanglin Developments. The company has decided to sell it to Blackstone and the deal is estimated to fetch the Coffee Day anything between Rs 2,600 crore and Rs 3,000 crore.

The transaction closure is subject to completion of Blackstone's due diligence, documentation, and receipt of requisite regulatory approvals, which is expected in the next 30 to 45 days.

The decision at the board meeting of the company held on August 14, 2019. 

Further, the board informed the exchanges that it has also provided in-principal approval for disinvestment in its step-down subsidiary, AlphaGrep Securities Pvt. Ltd in favour of Illuminati Software for an approximate amount of Rs 28 Crore.

"The above-mentioned transactions will significantly help in deleveraging the Coffee Day Group, and ensure smooth operations while safeguarding the interests of all stakeholders, including investors, lenders, employees, and customers," the company said.

The Bengaluru-based company has been marred with increasing levels of the debt. The company's term borrowing had come down to Rs 2,657.75 crore in March 2019 from Rs 3,192.56 crore a year ago. Siddhartha had earned Rs 3,269 crore by selling his 20.3% stake in MindTree to L&T. “There is no way he could have sold his shares in IT companies. It was very close to him,” sources said. 

In fact, Siddhartha’s balance sheet reveals that his short-term borrowings at Coffee Day Enterprises had shot up over four times in the past one year to Rs 3,889.63 crore, from Rs 810.91 crore, a year ago.

According to the sources close to Siddhartha, he had raised a personal debt of around Rs 500 crore from the private lenders to keep services the debt of his company, so that credit lines don't come to the halt.

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