Friday, January 13, 2017

Cafe Day Enterprises : Coffee still tastes soar

Cafe Day Enterprises came IPO in Oct 2015 at a price of Rs 328 a share. This was one of the much hyped IPOs of 2015. It was lead managed by Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited and Morgan Stanley India Company Private Limited,Axis Capital Limited, Edelweiss Financial Services Limited and YES Bank Limited.

The stock is now trading around Rs 198, down Rs 130.

While analysing the IPO, this is what we wrote. 

MATTERS OF CONCERN:

a.    Company incurred losses in Financial Years 2013, 2014 and 2015, and the three month period ended June 30, 2015.

b.    Same store sales were muted in the last as well as in the current fiscal.
c.    The company faces competition from MNCs like Starbucks, Barista, Costa Coffee and Dunkin Donuts.

d.    In the fiscal 2014-14, the company opened 126 Coffee outlets and closed 176 outlets.

e.    As of June 30, 2015, the consolidated net indebtedness totalled Rs 2762 crores.
f.     No provision has been made with respect to Rs 290 crores of their tax liability in dispute.

g.    The average cost of acquisition of Equity Shares by the Promoter is Rs 36.35 per Equity Share.

h.    Slowdown in IT sector will affect the business fortunes of the company since techies constitutes a major segment of its customers.


  VALUATION AND RECOMMENDATIONS

The company, post IPO, will have an equity around Rs 200 cr.   It is unlikely to post any profit in this fiscal. More than  50% the IPO proceeds will go to repayment of loans.  Other than high percentage of promoter group holdings, at present, there are no positive factors which induces to apply for the IPO.


  AVOID THE IPO. And we were right this time too.


( Health concern -  by increasing coffee consumption over time may increase risk of mild cognitive impairment (MCI), early symptoms of Alzheimer's disease (AD) and dementia, says new research.

"These findings from the Italian Longitudinal Study on Ageing suggested that cognitively normal older individuals who never or rarely consumed coffee and those who increased their coffee consumption habits had a higher risk of developing MCI,” said one of the researchers Francesco Panza from the University of Bari Aldo Moro, Bari, Italy.)


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