Cafe Coffee Day parent eyes $1.04B valuation in IPO

Coffee Day Enterprises Ltd, which runs India's top coffee chain under the Cafe Coffee Day (CCD) brand among other businesses, has fixed Rs 316-328 a share as the price band for its initial public offering (IPO).

The issue, one of the biggest in years, opens on Wednesday and will allow the firm to raise capital that it could use to maintain its lead over US coffee chain Starbucks and other rivals in the bustling Indian market.

It raised Rs 334.2 crore ($51.3 million) from anchor investors on the eve of the IPO at the upper end of the price band. As a result the overall issue size would shrink to accommodate the anchor allotment.

Besides several global and domestic institutional investors, PE firm Faering Capital and Norwegian sovereign fund Government Pension Fund Global came in as anchor investors. Faering Capital was founded by Aditya Parekh and Sameer Shroff. Aditya is son of HDFC veteran Deepak Parekh.

Interestingly, the company has chosen to fix the price band at a discount to the last share issue. The firm had raised Rs 100 crore from a group of investors including Infosys co-founder Nandan Nilekani, Rakesh Jhunjhunwala and Ramesh Damani early this year at an effective price of Rs 362.5 a share.

The Bangalore-based company is looking to raise Rs 1,165 crore in its IPO, including Rs 15 crore from a portion reserved for employees.

The coffee chain counts a string of private equity backers including KKR, New Silk Route and Standard Chartered Private Equity. Notably, none of the PE investors is looking to cash out in the IPO.

At the issue price band, the company would be looking at a post-listing market capitalisation of Rs 6,551 crore to 6,800 crore ($1-1.04 billion).

CCD, an early mover in the coffee chain business, successfully fended off competition from Barista (later acquired by Italy's Lavazza) among others. However, it now faces a challenge as Starbucks, the world's top coffee chain, is aggressively expanding in the country in a joint venture with Tata Global Beverages.

Kotak Mahindra Capital, Citigroup, Morgan Stanley, Axis Capital, Edelweiss and YES Bank are bankers to the IPO.

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