Entrepreneur VG Siddhartha-promoted Coffee Day group has consolidated its stake in its flagship enterprise Café Coffee Day by buying out investor Sequoia Capital India’s stake. According to separate media reports, the deal would give Sequoia 18-20 per cent internal rate of return on its six-year-old investment in Bangalore-based Amalgamated Bean Coffee Trading Company Ltd (ABCTL).
Contacted by VCCircle, a Sequoia Capital spokesperson confirmed the exit via buyback but declined to comment on returns, citing confidentiality agreements.
Sequoia Capital invested $20 million in ABCTL, a subsidiary of Coffee Day Resorts Pvt Ltd, back in July 2006. While Business Standard reported in June 2012 that Sequoia was all set to exit with 18 per cent return, Mint reported last week that the returns would be in 18-20 per cent IRR range, citing sources.
According to VCCircle estimates based on IRR and the capital invested, this would put the return at 2.5x-3x or a deal size of $50-60 million.
Earlier this year, Coffee Day Resorts had been raising Rs 125 crore through an issue of NCDs (non-convertible debentures) and loan to increase its stake in ABCTL. ABCTL had also raised funding from International Finance Corporation (IFC), Darby Asia Mezzanine Fund II and Deutsche Bank AG between 2006 and 2008.
Besides the cafe chain, ABCTL includes an Xpress division, a vending division, a packaging division and a production, procurement & exports division. In FY11, the company had PAT of Rs 16.1 crore on total income of Rs 938.5 crore, according to credit rating agency CARE. For the nine months ended Dec 31, 2011, ABCTL incurred Rs 0.2 crore loss before tax on gross revenue of Rs 666.6 crore.
As on December 2011, the company has 1,253 cafés across 130 cities of India.
The latest move could be a part of the strategy by Coffee Day Resorts to consolidate stake in its various subsidiaries before opting for an IPO while providing its investors an exit. The group has raised funding at the holding company level, which has expanded into new areas like logistics (Sical) and furniture (Daffco), besides growing the existing businesses spanning financial services (Way2Wealth) and hotels.
In 2010, Kohlberg Kravis Roberts (KKR), New Silk Route (NSR) and Standard Chartered Private Equity (SCPE) invested $200 million in Bangalore-based Coffee Day Resorts & Hotels Ltd. While VG Siddhartha and family control 71.4 per cent stake in Coffee Day Resorts, 10.7 per cent each is held by KKR and NSR and 7.14 per cent stake is held by SCPE.
(Edited by Sanghamitra Mandal)