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Reviews & Recommendations of Cafe Coffee Day IPOAmarjeet S Maurya of Angel Broking Wrote,
Considering negligible profits / reported losses of subsidiaries and the complex holding structure of the company, we are of the view that the IPO is priced at a slightly higher valuation. Thus, we recommend a NEUTRAL on the issue. Investors having conviction in the long term growth prospects of the company and wanting to tap this perceived opportunity could consider waiting for a possible correction in the stock price post the listing of the IPO.
Akanksha Tripathi of BoB Capital Markets Wrote,
The Company has posted consolidated revenues of Rs.24bn/22bn in FY15/FY14. However, it has shown a loss of Rs.872mn/770mn in FY15/FY14. We feel the Company is expensive at a price band of Rs.316-328/share led by lower ROCE, limited sight on the growth path of other business (contributing~49% of total revenue) and it may give limited to no returns. We recommend Do Not Subscribe to investors as there appear to be limited/no upside in short term.
Amnish Aggarwal and Gaurav Jogani at Prabhudas Lilladher are of the opinion,
We estimate the value per share of CCD at Rs265 which is a significant discount to offer price band of Rs316‐328/share. We believe that unproductive investments, complicated organization structure and low throughput in the Café business are a drag. We recommend investors to avoid the stock.
Akash Jain, MBA of Ajcon Global is of the view,
Investors should clearly note it is an IPO of holding Company which houses Coffee business in its subsidiary Coffee Day Global Ltd. and it would receive only dividends from its subsidiaries. With due consideration to above factors, complex holding structure, investors getting other businesses apart from Coffee business in CDEL bouquet which are currently dragging performance on consolidated basis, limited scope to improve EBITDA margins as retail coffee accounts only 30 percent of total capital employed, high capital cost of store addition would be a burden on financials considering low pricing lower as compared to peers like Starbucks in Coffee segment, high debt/equity of 5x, Consolidated Co’s bottomline line in red for past 3 years and steep valuation despite losses we recommend to AVOID the issue.
Ruchita Maheshwari at Indiainfoline
We note that CDEL has a strong promoter background, a strong brand identity, pan India presence, which instills confidence in the business model. But looking after the valuations and key metrics, issue looks richly priced. Near term upside appears limited, if any. However, investors with long term horizon must monitor stock post listing for attractive entry points.
SBI Cap Securities has the following Recommendation
The coffee business on back of its strong brand and pan India presence has bright prospect with growing urbanization and favorable demography (relatively younger population). In addition to its robust coffee business, Coffee Day Enterprise Ltd is also into other unrelated businesses activities viz, Tech Park, Financial Services, Hospitality, IT and Logistics which makes the group structure very complex. High risk appetite investors may subscribe the issue at Cut-Off price.
Ambit Capital has the following Views
Restaurant businesses (such as Jubiliant Foodworks-Dominos Pizza, Westlife Development- Mcdonalds and Speciality Restaurants) in India (with a brand recall as high as that of CCD) fetch a high multiple (40x FY15 EV/EBITDA) given high profitability and RoCE; meanwhile global small QSR formats in developing nations trade at 14x. Whilst valuing CDEL’s coffee business, one needs to consider the fact that the company is exposed to not only high competition from global entrants but also to the rising capital/operating costs/needs which will make it difficult for it to post respectable RoCEs.
