Coffee Day Enterprise LTD.

Capital Structure Analysis and the Analysis of

acquisition decision of Sical Logistics Ltd

Under guidance of Prof. Vibha Jain

Group Members
Abhilash Kumar
587
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About Company
 The company Coffee Day Global Limited (formerly Amalgamated Bean Coffee Trading Company
Limited) was incorporated in 1993. It is the parent company of the Coffee Day Group, which
houses Café Coffee Day that pioneered the coffee culture in the chained café segment in India.
 Late V. G. Siddhartha started the café chain in 1996 when he incorporated Coffee Day Global,
which is the parent of the Coffee Day chain.
 It was constituted under the Indian Partnership Act, 1932 on February 1, 2008 under the name
Coffeeday Holding Co.
 Coffeeday Holding Co. was thereafter converted from a partnership firm to a private limited
company under Part IX of the Companies Act, 1956 as Coffee Day Holdings Company Private
Limited. The name of our Company was changed to Coffee Day Resorts Private Limited and
subsequently, as Coffee Day Enterprises Private Limited.
 The vision and mission (in a nutshell) of the company : “Showing the world where coffee can
take us. OUR CULTURE IS WHAT WILL DETERMINE WHERE WE TAKE COFFEE. We are right
where coffee is. From nurturing each plant, to coaxing the perfect flavour, blend and brew into
each cup we serve in our cafés, we are also where coffee is going next.”
In a nutshell, to bring coffee from bean to cup.
Major Subsidiaries
COFFEE DAY GLOBAL
 Coffee business through their subsidiary, Coffee Day Global Limited (earlier known as Amalgamated
Bean Coffee Trading Company Limited) (“CDGL”) and its subsidiaries. In addition to having the
largest chain of cafés in India, their operations are highly optimized and vertically integrated
coffee business which ranges from procuring, processing and roasting of coffee beans, to retailing
of coffee products.
SICAL: MINING FOR NEWER POSSIBILITIES
 Founded in 1955 and with revenues in excess of Rs 1350 crore, SICAL Logistics Ltd is India's leading
integrated logistic solutions provider with over 6 decades of experience in providing end-to-end
solutions in logistics. Coffee Day Group acquired SICAL in 2011.
TANGLIN & THE BRIGHT PATH AHEAD
 Office space absorption is a domain that is expected to grow, owing to robust demand from IT/ITeS
companies in key markets such as Bengaluru.
WAY2WEALTH
 Way2Wealth is an Investments Consultancy Firm providing complete wealth management and
investing solutions. Offering a range of products and services spanning equities, derivates and
mutual funds among others.
THE SERAI
 The company owns and operate three luxury boutique resorts (one directly through the Company,
and two through the wholly-owned subsidiary.
Objective of the study

1. Stating the capital structure of the company (Conglomerate).

2. Comment on the financial positions and decision made in regard to
acquisition of Sical Logistics Ltd back in 2011.
3. The news, announcements of the promoters.

Note: We are studying the Consolidated Annual reports, to look at the impact on
the whole group as a result of actions taken by the promoters for the whole
CoffeeDay Enterprises and its subsidiaries.
 Period Authorize Issued
d Capital Capital
2013-2014 20 14.25
2014-2015 270 14.59
2015-2016 270.584 206.00
2016-2017 270.584 206.00
2017-2018 270.834 211.25
2018-2019 270.834 211.25

• In October 2015, the IPO

for the company was
announced. Therefore
the Authorized capital
was increased to Rs 270
Cr the year prior.
Please have a look at
the long term
borrowings of the firm.

The dip in the

borrowings during
2015,16 is due to the
IPO introduced in
October 2015.

The Majority of the

proceeds from the IPO
exercise, were used to
decrease the long term
debts.
 Understanding SICAL Mining & Logistics
Cafe Coffee Day retail chain owner V.G. Siddhartha has ventured into
the logistics business by acquiring majority control of SICAL Logistics Ltd
for around Rs200 crore.
In 2011 , the Group completes the acquisition of SICAL Logistics.

At the time of acquisition , the group was running into losses due to
huge debt and even after many FPOs the debts weren’t reduced
significantly.
Discounted Consolidated Profit After Tax For SICAL (Consolidated)
25.000

20.000
20.381

15.000
14.049 14.392
Profit/Loss (rs crores)

10.000 11.781 10.877

10.708
8.889
5.000 5.662

0.000
2011 2012 2013 2014 2015 2016 2017 2018 2019

-5.000

-10.000 -11.080
Sum = Rs 85.65 Cr
-15.000

Period
 Sical Logistics Ltd
A noncoffee business that is
capital intensive and the
liquidity is less.

Quick Ratio
3

2.5

Ratio
1.5

0.5

0
2014 2015 2016 2017 2018 2019 2020

Period ended
Decision to acquire SICAL logistics and
Mining
 For a non coffee business, the conglomerate must have analysed the financial health of the
company. One way to do it is to analyse the cashflows of the SICAL ltd.

Net cashflows Discounted

from Cashflows for the
Period operations IRR
2011 -12.11 -11.1102 -1

2012 54.3 45.70406 -2

2013 57.9 44.71065 -3

2014 18.41 13.04259 -4

2015 3.68 2.391857 -5

2016 98.03 58.4553 -6

2017 43.03 23.5404 -7

2018 86.71 43.52002 -8

2019 -44.08 -20.2973 -9

  0 200

IRR 8.999%
Understanding SICAL Logistics
 For the parent company Coffeeday Enterprise, the subsidiary Sical Mining and Logisitcs’s
Profit After Tax (consolidated) is a matter of concern because the operations are not held by
the parent company and is limited to the extent of appointing the head of position. If the
operations were directly into the hands of Coffeeday enterprise ltd we would have calculated
the discounted cashflows and the IRR.
 Now that we look at the Present Value of the PAT (Rs 85.65 cr) was way less than the
investment made of Rs 200 cr.
 The ambiguity in the vision of the company “ coffee from bean to cup “ which indicates the
need to fully integrate all the verticals and horizontals has proven to be detrimental to the
company.
The company could have outsourced the logistics , just like flipkart was carrying out its
operations through outsourcing the logistics and building supplier/seller network for logistics
purpose and should not have entered in the business of logistics/mining etc of which the
main promoter (late Shri VG Siddhartha) didn’t have expertise.
 This mistake was avoided by TATA Starbucks, because the logistics service was inhouse from
the beginning and the promoters had an expertise in its operations.
Note
 Due to Long term debt from the personal relations of the founder Late Shri VG Siddhartha towards the company, and the
poor performance of the company, the debts could not be repaid and the promoter committed suicide. This has led to a
CBI investigation when there were inconsistencies observed (
 The aftermath is nothing good as well . Due to lack of competent leader/promoter, the situation has come that the
personal assets of the
 The family of the late Coffee Day founder V G Siddhartha has put most of their personal assets, including 10,000 acres of
plantations, for sale to repay lenders and to address the fallout of the investigation into the entrepreneur’s suicide last
year, said multiple sources.

The family is also in talks to sell stakes held by Siddhartha in a few private enterprises — such as a pharma platform RL
Finechem — to unlock more liquidity.
 The investigation findings do not point towards any other extraneous pressure which could have led to Siddhartha’s
death, said one of the sources mentioned earlier.

After the founder’s demise, CDEL has announced plans to divest many of its assets to pare down debt of Rs 4,970 crore.
A deal to sell its technology park to Blackstone Group is expected close in the coming weeks, bringing down debt to Rs
3,200 crore.
 CDEL is also in talks to sell Sical Logistics, which could help bring down debt by another Rs 1,650 crore.

Learning
 The financial structure of the company raises a lot of red flags
 The decision of acquisition not only requires the financial analysis but also the Unbiased understanding of the
business(es).
 Diversification does not guarantee risk aversion, and can also prove to be disadvantage if not operated properly.

Thank You
 Sources: Coffeeday Enterprise ltd Annual Report , 2018-19
Sical Logistics Ltd Annual Report (2018-19)
 Some data was extracted from www.moneycontrol.com (data prior to year
ended 2018)
 Economics Times, Mint online news links.