Stanchart PE, Temasek eye Coffee Day Holdings

November 28, 2009
Singapore Democrats

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Raghuvir Badrinath
Business Standard

Join race with KKR to invest Rs 465-700 crore in Bangalore firm.

Global private equity players Stanchart Private Equity and Singapore-based Temasek have joined the race with KKR to invest $100-150 million (Rs 465-700 crore) in Bangalore-based Coffee Day Holdings.

Coffee Day Holdings is the holding firm for Cafe Coffee Day, Coffee Day Hotels and Resorts, retail broking firm Way2Wealth, venture capital firm Global Technology Ventures and Tanglin Development, the real estate arm which has set up software parks at special economic zones (SEZs) in Bangalore and Mangalore.

Coffee Day Holdings is promoted by V G Siddhartha, who started out as a coffee exporter, and has estates in Chikmagalur, around 250 kms from Bangalore. The company has around 8,000 acres of coffee plantation and is the second largest such company in India. This plantation business is not under the holding arm.

The businesses are cumulatively estimated to be worth nearly $1 billion (Rs 4,655 crore).

Coffee Day Holdings Chairman V G Siddhartha confirmed they have multiple offers from a few private equity players and that a deal will be finalised within the coming months. Coffee Day Holdings, through its various companies, has raised private equity and debt funding from AIG, Sequoia Capital, IFC, Deutsche Bank, JPMorgan and Darby Investments from the stables of Franklin Templeton. Coffee Day Holdings is tapping the private equity route to fuel its investment appetite to the tune of around Rs 1,700 crore to expand its businesses over the next three to four years.

The group has said in its roadmap it will grow its plantations (coffee & banana) by investing Rs 200 crore, while the retailing business will absorb close to Rs 700 crore and infrastructure development & SEZs will envisage an investment of another Rs 750 crore.

Siddhartha detailed that the holding company has cash of $70 million (Rs 326 crore) and the additional $100 million (Rs 465 crore), which they plan to raise, will be used over a three-year period to expand globally and consolidate its coffee retailing in India.

Café Coffee Day is on an expansion spree and is estimated to touch the 1,000-mark shortly, from around 800 outlets. The chain also has a presence in the United States, Austria and in Pakistan and is planning to cover more global locations.

Siddhartha detailed that, along with its back-end operations of factories and roasters, Coffee Day Holdings controls 75 per cent of retailing operations, while the rest is financed by a clutch of private equity investors — Sequoia, Deutsche Group, Darby Investment and IFC, who over a period of time have invested $100 million for the franchise to expand. The group, in addition to its coffee exports and retailing business, is also stepping up its infrastructure arm, which manages SEZs for the software services industry in Bangalore and Mangalore spread over nearly 150 acres.

Over another three years, the company will develop near 7 million square feet on top the already functional 3 million square feet at these locations. It will also witness building of a few thousands of residential units.

Siddhartha added that this arm is also looking at getting in core infrastructure development, such as hydel power, roads, water treatment or others to build this business.

“We haven’t yet decided on the vertical. We are working on the details and we should be looking at an investment of Rs 750-1,000 crore for this expansion,” he said, adding that, for infrastructure projects such as these, debt can be easily leveraged.

http://www.business-standard.com/india/news/stanchart-pe-temasek-eye-coffee-day-holdings/377828/