Coffee Day Enterprises Ltd’s (CDEL) Rs 1,150-crore initial share sale sailed through on October 16 with investors bidding for 1.8 times the total shares on offer. Investors were watching the Bengaluru-based company’s offering as a key barometer of market sentiment.
While CDEL—the parent of India’s largest cafe chain Cafe Coffee Day (CCD)—was marginally oversubscribed in its initial public offering (IPO), it remains to be seen where its shares trade in the coming months.
The IPO market in the last year had a mixed record. Manpasand Beverages, the only other consumer-related offering, listed 6 percent below its issue price of Rs 320. The stock fell 11 percent on its first day of trade in July, but has since recovered.
In the past, IPOs have received better investor interest. In August 2014, Snowman Logistics’s IPO was oversubscribed 60 times. One reason for the relative lack of confidence in CDEL, among investors, was that on offer was the holding company of CCD and not the pure play coffee retail business—Coffee Day Global Ltd. CDEL has investments in IT firm Mindtree and SICAL, a logistics company, among others. It wasn’t clear whether investors would be interested in these, wrote analyst VS Fernando in moneycontrol. com.
The Rs 2,549-crore CDEL—which has earlier raised money from Rakesh Jhunjhunwala, Nandan Nilekani and PE giants KKR and New Silk Route—plans to use the IPO money to refinance its Rs 633-crore debt, open new stores and refurbish existing stores.
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Coffee day did good by reducing the size of issue. Even then, I feel investors will be cautious. I am not sure of success in marketon Oct 25, 2015