Coffee Day Enterprises Ltd IPO Message Board (Page 12)

do not apply in loss making company ,
price is higher side ,

RR agree debt is manageable only if CAGR grows however trend line says topline growth is decreasing from 25% to 8% from 2011-13 to 2013-15 period....the IPO is steeply priced and debt is big overhang IMO so avoid

Alternate to CCD IPO.
There are very less chances CCD will list in positive and investors make money.
In case if listing is good, investors feel we lost the opportunity. I suggest buying Tata Global now or before CCD listing. If CCD listing is good, Tata Global will perform on same way.
I know Tata Global is not outperforming since many years but it is steady since many years. If CCD list at discount it is sure Tata Global will not go down. Tata Global is profit-making company since few decades. In addition, there is no issue about creditably of Tata Group companies. Risk is almost zero in buying Tata Global compare to CCD.

Analysis is wrong.
#1 valuation of real estate division doesn''t assign any value to 7 mn sq.ft. of undeveloped area. This equates to Atleast 700 crore of equity value.
#2 he has deducted consolidated debt. If all the segments are valued using equity value, their respective debt was already accounted and deducted. You can deduct it once again on consolidation. Completely wrong mathematical approach.
#3 These adjustments will take pricing above IPO band

Well.. many of the boarders in Moneycontrol follow a simple rule that whatever Mr. Tulsian says do its opposite and tum fayde main rahoge

Just to correct my earlier posting:-
You CANNOT deduct debt twice. What MR SP Tulsian has done is incorrect.

analysis by S P TULSIAN



Analysis of upcoming IPO of Coffee Day Entreprises has been loaded on www.sptulsian.com.

You can access it in the Free Zone in New Issue Analysis section (no login required). The section can be accessed at:
https://www.sptulsian.com/free_zone/new_issues_analysis

New issue (IPO) Analysis:

Some Other Day!

Coffee Day Enterprises is entering the primary market on Wednesday 14th October 2015, to raise Rs. 1,150 crore, via fresh issue of equity shares of Rs. 10 each, priced in the band of Rs. 316 to 328 per share. The issue represents 17.02% and 17.55% of the post issue paid-up capital at the upper and lower end respectively and closes on Friday 16th October.

Coffee Day Enterprises is the holding/associate company for bunch of unrelated businesses:
85.09% stake (reduces from 90.53%, post conversion of convertible preference shares and debenture, as stated on Pages 29 & 225 of RHP) in Coffee Day Global Limited, which runs 1,538 Café Coffee Day outlets across 219 cities in India and abroad, and operates 30,916 coffee vending machines, as at 30-06-15.
100% stake in Tanglin Development, which has IT parks in Bengaluru and Mangaluru, with current occupied / built-up area of 3.2 mn sq. ft.
52.83% stake in listed firm Sical Logistics, held since FY12.
85.53% in financial services and wealth management company Way2Wealth Securities.
100% stake in hospitality business, comprising 3 resorts under ‘The Serai’ brand in Karnataka and minority holding in an Andaman and Nicobar resort.
16.73% stake in Mindtree Limited. Company’s promoter Mr. V G Siddhartha, in his personal capacity, holds an additional 3.01% stake in Mindtree, making the latter an associate company. Coffee Day Enterprises holds 10.41% in Mindtree, while its 88.97% subsidiary Coffee Day Trading holds 6.32%, taking its effective stake in Mindtree to 16.04%, as of 30-9-15.
For FY15, on a consolidated basis, company reported total revenue of Rs. 2,549 crore and EBITDA of Rs. 445 crore (17.9% margin), but resulted in net loss after minority interest and associates of Rs. 87 crore. Even on PBT levels, loss stood at Rs. 147 crore. Indeed disappointing.
For Q1FY16, consolidated total revenue was at Rs. 635 crore, with EBITDA of Rs. 114 crore, with net loss before tax of Rs. 36 crore. Net loss after minority interest and associates stood at Rs. 20 crore for the first quarter as well. Aggregate net loss of Rs. 205 crores, in last 39 months (1-4-2012 to 30-6-2015), will spoil the taste for the prospective investors.

As of 30th June 2015, company’s equity and net worth stood at Rs. 118 crore and Rs. 456 crore respectively, with total debt at Rs. 4,475 crore, along with cash and equivalents of Rs. 893 crore, leading to a net debt of Rs. 3,581 crore. Post conversion of convertible debentures and convertible preference shares on 28th September 2015, by 2 PE firms, equity has expanded and currently stands at Rs. 171 crore, while net debt has reduced to Rs. 2,950 crore, narrowing the debt equity ratio to 2.7:1 currently.

IPO proceeds will repay debt of Rs. 633 crore and finance coffee business expansion worth Rs. 287 crore - (i) 216 new cafes and 105 new kiosks with investment of Rs. 88 crore, (ii) 8,000 new vending machines for Rs. 97 crore, (iii) refurbishing existing 240 cafes and 7,000 vending machines for Rs. 61 crore, (iv) new coffee roasting facility by May 2016 for Rs. 42 crore. Post IPO, promoter holding will shrink to 52.56% (assuming price discovery at upper band), from current 63.34%, while debt equity ratio will contract to 1:1, as net debt reduces to Rs. 2,317 crore, on account of repayment.

To value the company as a whole, one needs to understand each of its businesses, individually:
Coffee Retailing: FY15 revenue of Rs. 1,272 crore (10% YoY growth) and EBITDA of Rs. 198 crore (15.6% margin), with net loss before tax of Rs. 15 crore, on account of heavy depreciation and interest Peer Jubilant Food reports only 25% of revenue, as material cost). For Q1FY16, company just about managed to break-even with net profit of measly Rs. 49 lakh, on revenue of Rs. 342 crore and EBITDA of Rs. 55 crore.

Listed quick service restaurant (QSR) chain Jubilant Food, for FY15, clocked EBITDA of Rs. 270 crore (13% margin) on revenue of Rs. 2,074 crore (20% YoYgrowth). Its average sales per day per outlet, at ~Rs. 61,100, is over 4 times, that of Coffee Day’s Rs. 13,200, in addition to former commanding 72% market share in its segment, as against 46% for Coffee Day. Besides being debt-free, Jubilant Food has also been reporting a consistent 5% net profit margin. With 982 outlets (921 Dominos and 61 Dunkin Donuts), Jubilant Food is ruling at EV/EBITDA multiple of 34 times, based on FY16E earnings. On this basis, Coffee Day, reporting losses, sluggish topline, lower turnover per outlet, along with debt burden, deserves a much lower multiple. Applying an EBITDA multiple of 20x, Coffee Day Global’s value comes to Rs. 4,500 crore, based on expected EBITDA of Rs. 225 crore for FY16, which results in EV/Sales multiple of 3.23x, vis-à-vis 4.30x for Jubilant. 85.09% of Rs. 4,500 crore leads to a value of Rs. 3,830 crore for Coffee Day Enterprises’ stake in the coffee retailing business.

To throw some light, fancy towards QSR has been dying down among investors. Euphoria surrounding Jubilant Food has tapered in the past couple of years. So also, Mainland China owner Speciality Restaurants, which came out with an IPO at Rs. 150 per share in May 2012, is ruling close to issue price currently, even after 3 years.

Leasing IT Parks: 2.9 mn sq. ft. occupied in Bengaluru and 0.3 mn sq. ft. built-up area in Mangaluru, resulted in lease rentals of Rs. 103 crore in FY15 and Rs. 29 crore in Q1FY16. Discounting FY16 expected lease rentals of Rs.120 crore, with yield of 8% p.a., will help arrive at the Net Present Value (NPV) of Rs. 1,500 crore for both the properties of Tanglin Development. This company, along with its 99.90% subsidiary Tanglin Retail Realty Developments, had debt of Rs. 1,075 crore and Rs. 125 crore respectively, as of 31-8-15. Reducing this Rs. 1,200 crore debt from the NPV, resultant equity value of the realty leasing business comes to Rs. 300 crore.

Logistics: Shares of Sical are ruling at EV/EBITDA multiple of close to 15x, while bigger peers (2x – 5x in size) with lower debt levels (0 to 0.6:1x for peers versus 1.6:1 for Sical) are ruling at EBITDA multiples in range of 7-12x. Sical’s PE multiple of 42x is also exceptionally high, versus peers quoting at sub-20x. Shareholding structure, as of 30-6-15, reveals concentrated holding, which may explain the high valuation. While promoter holding is 69.31%, 88 HNIs control 14.95%, leaving barely 15.74% in the open market, with institution participation at 0.52% also very thin. Without digging deeper in peer valuation, Sical’s current market cap of Rs. 917 crore (which is unrealistic and too high) leads to a value of Rs. 485 crore for 52.83% stake. Applying a 20% holding company discount, stake of Coffee Day Enterprises in Sical is valued at ~Rs. 400 crore.

Financial Services: Way2Wealth posted FY15 topline of Rs. 222 crore (9% YoY growth) and operating profit of measly Rs. 14 crore. This business has shown a turnaround at the operating level, only in FY15, despite being in the existence for over a decade. Thus, despite presence across 21 states, this business has not taken-off in the true sense of the word, when all other financial services have grown manifold in the past decade. Applying operating profit multiple of 6 times, on expected FY16 operating profit of Rs. 15 crore, value for this piece is Rs. 90 crore. Company’s 85.53% stake, in turn, gets a value of Rs. 76 crore.

Hospitality: Assigning a value of Rs. 40 crore per resort, since The Serai has boutique properties, Rs. 120 crore is the value for the hospitality business, which is still reporting losses at the operating level (FY15 operating loss of Rs. 2.33 crore).

Investment in Mindtree: Mindtree has a current market cap of Rs. 11,800 crore, which leads to a value of Rs. 1,895 crore for effective 16.04% stake held by Coffee Day Enterprises. Applying 20% discount to the current price, this investment is valued at Rs. 1,515 crore.
Holding company discount becomes an important factor under consideration and can vary significantly. In some cases, it even goes up to as high as 75% ,point in case being Uniphos Enterprises, holding stakes in UPL and Advanta.

Below is the sum-of-the-parts (SOTP) value for Coffee Day Enterprises Limited:

*Represents annual lease rent

At Rs. 328 per share, company’s equity will rise to Rs. 206 crore, which will be seen very high, compared to Rs. 66 crore of Jubilant Food, thanks to its baggage of other unrelated investments, held by the company. Market cap will be at Rs. 6,757 crore and adding net debt of Rs. 2,317 crore, enterprise value will be at Rs. 9,073 crore. As against this, the equity value, based on SOTP valuation above, is Rs. 6,240 crore, which leads to a value of Rs. 303 per share. This can be considered as the share’s fair value, at which it must get listed.

Moreover, in the IPO, there must be some discount to the fair value, as the unwritten rule of primary markets suggests leaving at least 15% on the table, for the prospective investors, which translates into a price of Rs. 257 per share. Thus, in the current IPO offering, share is more than fully priced both at the upper and lower end of Rs. 328 and Rs. 316 respectively, much higher than its fair value as well, leaving no potential upside.

Company had allotted equity shares to savvy investors like RK Damani, Rakesh Jhunjhunwala, Nandan Nilekani in March 2015, at an effective price of Rs. 362.50 (after adjusting bonus issue of 7 shares for 1 share held) for total of Rs. 100 crore, and at Rs. 329 to Bennett Coleman & Co. in October 2012. The current issue is priced much lower, vis-à-vis the most recent issuance, which indicates fall in the perception, valuation and appetite. Also, historically, IPOs have always happened at the higher rates, compared to that of pre- IPO placement price. Does this mean that the froth has settled or exuberance died down in the past 7 to 12 months, given the jittery secondary market conditions?

Also, page 261 of the RHP reveals that the post of key managerial personnel of Company Secretary has seen M.S.Sharada having resigned 5 times, and has been re-appointed 4 times, within a matter of 22 months. A key compliance post being handled so lightly, having marquee global PEs like KKR and Standard Chartered! Strange.

The company has been holding investments and interests in other unrelated and undesired business, which are commanding much lower valuations, than organised retail, which may not be able to attract the institutional investors, as they don’t like this kind of investment basket and business models. Also, if the company needs money for expansion and debt reduction, what is preventing it from not exiting Mindtree investment or realty annuity-yielding assets?

The promoter group is probably quite inclined towards investment business. Pg 265 of the RHP details top 5 group companies, largest being Shankar Resources Pvt. Ltd. (having earned PAT of Rs. 17 crore on net worth of Rs. 139 crore in FY15), which incidentally has been holding 4.11% stake in listed Lakshmi Electrical Control, since March 2007, an LMW Group company. Not seen very profitable. So, is there any compulsion?

Coffee retailing business of the company, accounting for 50% of its revenues, is also growing only in the single digits, which is also seen disappointing. Few HNIs are seeing Café Coffee Day more as a place to hang out for young couples or self-employed, having no office space, by sitting for couple of hours or even more, simply with a cup of coffee. Average daily sales per outlet, as stated above, reinforces this claim.

To put it simply, an investor seeking exposure to retail business may be averse to investing in commercial lease rental business, returns of which is more like that of a debt-fund, having an annual yield of 8%, with limited scope seen for capital appreciation now as well, that too, if it is largely financed by debt. Had the coffee business been separately listed, it would have been received in a better manner by the investment fraternity – both retail and institutional.

Given the complex corporate structure, comprising a maze of 6 unrelated businesses, coupled with share being expensively priced at both the ends of the price band, the IPO looks unattractively priced.
Hence, clear advice to remain away.

Disclosure: Not applying in the IPO

To all members

If u want to apply than apply

Else stay away
Share market is risky
Ipo are risky

So y wasting time
If ipo was a money making all would have been billionaire

So members
Those who believe in promoters Company etc
And want to apply for shares
And invest in company can apply
Else stay away

Septa and RR
GUYS fighting for what

Ccd loss or debt

Many companies operating are leveraged

Many companies are having huge debts

As from 2010-2015
Loans where the only way to finance

So
Stop this


Ccd is a loss making co.
Huge debt

Though promoters are good

No gmp no activity from brokers
Many ipo where in part which had grey activity listed at discount

Even many with no activity in grey gave returns

Satta hai market bosssss


So now take yout own decision as its your money you have to that

On listing only you guys will know what will happen

Gn

Enjoy
Indigo and SH kelkar in October end

APPLY TO THIS ISSUE

pinki ji , r u appling in this issue ?

if you look deep this CCD is highly leveraged 3850 Cr is the total debt as on June 2015 not only that even after IPO will be reduced only by 16% debt equity after IPO is still high around 6.5.... Market does not reward high leverage company

Also another thing the revenue for FY13-FY15 has slowed to 8.7% from around 43.3% CAGR for FY11- FY13. Which indicate growth has slowed big time this will have adverse effect on future growth I would not be surprised CAGR could continue fall
....

Would like to once again highlight that looking at consolidated debt in this particular case will not help do meaningful analysis. Take the 4-5 business segments separately.
#1 Coffee business has only 300crore debt
#2 Real estate subsidiary generates lots of cash from rental income. Therefore it can afford to have 6-8 times leverage. As long as it can manage own cash flows without support from parent company, it makes sense to lever up.
#3 similarly Sical and Ways2wealth don''t need any capital support from parent
#4 therefore mathematically, all the parent company debt can be attribute to investment in Mindtree. If hypothetically parent sells all Mindtree investment, it will go from 1300 crore debt to 800 crore of net cash.

Still debt is a big overhang.... End of the it is debt on standalone or consolidate BS. My investment strategy is always take the worse case scenario.... Anyway more then debt the real worry is big cafes.
Fundamental the price band is high company is loss making company lot of debt CAGR was 25% to 8% which could drop further even give negative CAGR in future if you draw a trend line.... It does take much time to destroys investors value if debt.... Yes sale mind tree would help to reduce debt but it like selling ur Crown Jewels...

Any company which posts loss year after year and that too the loss increases 10 times in 3 years-is it worth investing in? Why are we even arguing. Best avoid.

At least this time the analysis RR is based on fact and figures.....and is happy to criticism and have a opinion. Fundamentally CCD IPO is over priced for me based both stand alone business and with its holdings company. In fact stand alone business is very very very weak in its present model.
However IPO post price is not always based on fundamental but post IPO institution investor buying not pre IPO buying.

In regards to applying I will still avoid based on fundamental

I like reading AMC MF to know what this highly paid managers r buying the September journal issue you will find many AMC investment IPO in big way and all these IPO r doing good

SH Kelkar Ipo
Price band 141-146
Lot 102 Shares

Date 27th-29th October

Since everybody is asking questions on Indigo, I would like to point out a couple of things. I have not read DRHP in detail yet.
* For all airlines, fuel is the biggest and most unpredicatible cost item. So quarterly numbers will be very volatile and people need risk appetite to digest this. During last 2 years, crude prices have been coming down so profits of all airlines are shooting towards sky.
* Airlines are most cyclical and competitive industry globally. Therefore, it is important to control costs as ticket prices will be very high at times and then suddenly drop due to teaser rates.

Absolutely right Roadsideji. I didn''t study draft of Indigo. But I want to say something about Aviation industry in general. Aviation industry never give returns. I studied many reports about Aviation from United States and European Countries. For example in United States more than 20 airlines but only one is in profit - Southwest Airlines. Most of all airlines files bankruptcy or chapter 11. In India most of all airlines are in huge loss i.e indian airines, jet, spicejet, kingfisher. Fuel price makes an important role. Also after 911 incident safety is major issue. This increases tax, terminal rent etc.
I will study draft papers of Indigo and provide details about this IPO later.

I think Indian investors need to start looking beyond history of historical PAT and develop ability to invest based on assessment of cashflows...CDEPL is clearly one such example...Prabhat Dairy was another...for PAT focused investors they must understand that most of these IPO''s and a few more in the future will proceeds to reduce debt which would lead to interest savings and consequentially improved PAT...if we want to make many multiples of money in the medium to long term we need to start betting on such stories where management, brand and corporate governance is high and capital structure is in the process of improvization!

Members Kya chalraha he CCD Premium ??????????????

Whats your take on Indigo ipo

Dilip ji

Mr. Roadside,does instution demand make the ipo very good,you can see what happened to Power mech,subscription was 133 times for HNI but what happened to price,I am not CCD to any company,listing will depend on the market conditon but we will have to look at the larger picture,one thing is good that promoter is good and brand has value so that will make a buy for shorter term may be

indigo ipo date..?

opens on 26th October & Closes on 28th October

indigo ipo update date 26th to 28th oct ptice band 400-418 lot 35 share retail discount Rs 13

The Company is bringing the issue at price band of Rs 316-328/Share at p/b ratio of approx 3.92-4.07 on post issue book value of approx Rs 80.53 per share. Though the company has strong promoter background, brand name , pan India presence but looking after the valuations issue looks steeply priced at present level. Also the company has posted consecutive losses from last few years which doesn’t instill confidence for investment in short term, however in long term investment is advisable only when company will start posting profits.

Your book value calculation is not correct. CCD is reporting all investment at cost value and not market value. Apart from core coffee business and Sical (becaCCD has controlling interest), the others investments like Mindtree need t to be marked-to-market. Book value will go up hugely after that.

Good inform Roadside Romeoji that CCD promoter invested in Sical Logistics in year 2010. I want to provide some analysis. In 2010 Sical was trading at around Rs. 100 and I think CCD promoter bought his stake at around Rs. 100. At present in October 2015 Sical''s price is around Rs. 170. CCD Promoter got 1.7 times return in 5 years. While all other logistics space companies gave 5 to 6 times return in last 5 years e.g gati, Patel inte, gateway di, blue dart. Even Container Corporation -PSU gave 3 times returns including bonus. At present logistics is on peak in India but Sical is not performing. Also Sical is not a new company it is in business since few decades. So it is obvious investors needs return and needs dividend. Snowman logistics declares dividend within year of listing. So I think CCD''s investment in Sical logistics is not worth and not generating any return.
Please note this is only my analysis and sorry if I hurt anyone''s feelings about CCD.

I agree that Sical looks like a dud compared to other logistics companies you mentioned. Would like to point that Sical is heavily linked to India''s global trade while most others rely on domestic shipments. Secondly, Sical doesn''t before from fall in diesel prices the way other companies did. And finally, management bought controlling interest in Sical while you and I would have been simply minority investors in other companies with option to buy or sell whenever we want.
Next, if you check my valuation analysis, I am not indicating some blue sky value for investments.

Roadsideji then if we compare Sical with Adani port, Gujarat pipavav, Essar port results are same. All these companies gave 3 to 5 times return. While Sical gave very very less. From these analysis I can''t say CCD promoter''s investment decisions is good as per today''s market . We don''t know the future. I can''t see tremendous increase in export (global logistics) in coming 3 to 5 years.
This is only my analysis.

As in 51 st msg, a proment analysis by Roadside Romeo, it is clear that the issue offer of CCD is not overpriced, we will get CCD shares cheaper than the investors bought at pre ipo. Don''t b surprised that if it is oversubscribed on it''s first day (14 th Oct) . Most of the today''s well performing bluechip Companies were loss makings at pre ipo. Who identifyd there potential then & invested, were lucky people. See most of branded Companies which r not listed yet, like Ola, Flipkart etc ate loss making Companies now but all the investors of stock market are waiting for them when they come for ipo. They r making loss to create brand n to acquire large market share which is essential for a Co to grow much higher & stay forever.CCD is one of it. I don''t want to miss this Bus, many Wise investors like Nandan Nilekhani, Rakesh Jhunjhunwala, Ramesh Damani,& Hegde family taken their ticket n reserved their seats for a great journey. V G Siddarth, d promoter of CCD, man of many firsts. He was the first person to introduce Online Lottery to India. And so as cafe culture & many more to come I belive( why I don''t know). Iam very much impressed by him I like his creativity, courage. Once I want to meet him to share my ideas with him.

Just clarify one more point here. On 2nd March, Mindtree stock price was Rs 1460 which is similar to today. However, NN/RK/RJ would have done their due diligence and negotiations much before that. If one assume that deal was verbally agreed around 2 months before actual execution on 2nd March, then Mindtree stock was around Rs 1150 - 1200. This indirectly implies that NN/RK/RJ paid significantly more valuation multiple for coffee business than what IPO investors will pay right now.
Also, coffee was still making losses at that time but seems to have just turned around this time.

Further, Debt Equity is too high, which means that there will be heavy interest burden which will be eating out the profits.

Dont raise any question on credibility
Of VG Sid.

A Nice chap and promoters

His vision will pay him
Believe in promotors

Not worth it. For a loss making company with not much of networth this is totally unjustified premium. Those who have subscribed and got allotment in the case of Speciality Restaurants, will be able to appreciate this justification.