November 3, 2015

Cafe Coffee Day crashes 17% on listing day

Cold debut for Coffee Day as stock crashes nearly 18%

The stock of Coffee Day Enterprises (CDEL), which runs the Cafe Coffee Day chain of outlets, tanked nearly 18% on its debut on Monday, making it the worst opening for a company listing on the bourses in calendar 2015.

Mumbai-based Ambit Capital had observed “the coffee is frothy’, further highlighting that the coffee business had posted a very limited operating leverage despite being the largest coffee retailer in the country.
“All the businesses have a history of poor RoCE. Capital allocation to and utilisation of free cash flows from the coffee business to non-coffee businesses is a risk… The company plans to use these funds for mostly repayment of debt and that too for the holding company which took on debt to acquire additional stakes in the coffee retailing business or other businesses such as Mindtree,” the brokerage wrote in a note.

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