The Coffee Day Enterprises (CDEL) will hold its board meeting in Bengaluru on Thursday where it is expected to discuss the two immediate options: whether to rope in strategic investors with managerial expertise to run the coffee retailing or pursue sale of strategic assets like that of Global Village tech park to deal with the listed firm’s debts.
The five-member board, led by former Karnataka Chief Secretary SV Ranganath, is expected to deliberate on the steps it will need to take to see the group operations do not face problems in the wake of founder VG Siddhartha’s tragic demise last week.
The ET reported last week that US-based private equity giant Blackstone and representatives of Siddhartha’s family had agreed to resume talks on the sale of 90-acre IT-focussed tech park in Bengaluru.
While the CDEL board will discuss the options, clarity on how it could move forward will emerge only after the late Siddhartha’s family takes a view. The promoter and the promoter group holds about 54%, while the PE funds including KKR have another 24% stake. The founder’s family is represented on the board by Siddhartha’s wife, Malavika Hegde.
The priority before the board as of now is to see that the business is run as usual without a compromise on profitability, said a source privy to the developments. Which will, by default, lead to protection of 20,000 direct jobs and gradual restoration of investor confidence, the source added.
The board appears to be keen to build on the strengths of the 1800-store cafe chain, and run it profitably. The late founder was in talks with global players Coca Cola and ITC to offload a stake to both pare debt as well as grow the coffee business. Besides building a vast network of vending machines and express store business, the group has also established a procurement network to source 25,000-30,000 tonnes of coffee from the local market.
According to the Coffee Board data, India grows about 95,000 tonnes of arabica and 2.25 lakh tonnes of robusta beans, and about 98% of growers are small. Karnataka itself accounts for 70% of coffee production. The Board is promoting domestic value addition and consumption, instead of export of green beans, as it will take care of grower interests and create jobs.
Former Coffee Board chairman GV Krishna Rau says domestic consumption of coffee is very critical for the sustainability of Indian coffee growers. “Cafe Coffee Day’s contribution towards this is immense, and I wish there were more such chains thriving in the Indian coffee market,” he added.
If the coffee industry is to prosper then there is need to ensure domestic demand for coffee increases, said AG Puttaraj, a former President for international coffee business at CCD.
The late Siddhartha had roped in SV Ranganath as Independent Director after the CDEL went public in view of his rich background in the coffee sector. The retired IAS officer had earlier served as Chairman of the Coffee Board, and chief coffee marketing officer years before that. In his 35 plus years of service, Ranganath had also served as Resident Director at India Investment Centre in Abu Dhabi, and worked in Space and Atomic Energy departments.
Source: Economic Times