Coffee Day Makes a Weak Debut on Stock Exchanges, Drops 14%

After the IPO got fully subscribed, the stock fell 14 per cent after listing on the Bombay Stock Exchange.

Coffee Day Enterprises, the parent company of coffee chain Cafe Coffee Day, made a weak debut on the stock exchanges on Monday, as the shares got listed at Rs 313 on the Bombay Stock Exchange (BSE), a 4.6 per cent discount to the issue price of Rs 328.

The Rs 1,150-crore issue had been subscribed 1.82 times with good response from qualified institutional buyers (QIBs). However, retail participation was muted. Most analysts believe the company’s valuations are stretched and that the initial public offering (IPO) was good only for long-term investors.

The scrip fell 14.4 per cent to hit a low of Rs 280.70 on the BSE, before recovering some of the lost ground.

After the IPO, promoter holding in the company has fallen to 52.56 per cent. Institutional investors—FIIs and DIIs—hold 6.49 per cent and 10.68 per cent respectively in the company as of October 28, BSE data showed.

The company competes with Tata Global Beverages-Starbucks joint venture and Barista, among the others, in the fast-growing Indian coffee outlet business. It intends to use the IPO proceeds to finance expansion of its coffee business, repay and pre-pay loans of the parent firm and subsidiaries and general corporate needs.

Ahead of the IPO, the company had raised over Rs 334 crore from anchor investors. It had mobilised Rs 100 crore in a round of pre-IPO funding from Nandan Nilekani and Rakesh Jhunjhunwala, among others in March. At the issue price of Rs 328 per share, the company’s coffee business was available at 25-26 times its FY2015 EV/Ebitda, which experts said was is in line with some of the listed comparable companies and thus was not cheap.

Meanwhile, shares of MindTree, the midcap IT firm where Coffee Day Enterprises holds a 10.41 per cent stake, were trading 1.8 per cent lower intraday.

(With inputs from PTI)