Coffee Day stocks make weak debut on bourses

Shares of Coffee Day Enterprise, which runs Cafe Coffee Day (CCD) outlets, listed on Bombay Stock Exchange (BSE) in Monday's trade at Rs 313 per share, a discount of 4.57 per cent to the issue price of Rs 328 per share.

"The Coffee Day IPO's issue price looked highly overpriced, compare it with a company like Tata Coffee with similar business model", said Kishore P Ostwal, chairman and managing director, CNI Research. The company employs more than 11,000 employees of which 10,000 work in the coffee business alone. Shares of CCDEL ended at Rs 270.45 on the NSE.

The company, which competes with global giant Starbucks in the fast-growing Indian consumer market, had fixed a price band of Rs 316-328 per share for its IPO. Pre-opening rate was at Rs 317 per share.

Monday's decline in shares in KKO - which aims to be the top cocoa producer in Ivory Coast, the top cocoa-producing and exporting country - came despite a firm performance by cocoa futures on Monday, adding 0.8% to $3,285 a tonne in late deals in New York, for the best-traded December contract.

It raised Rs. 100 crore pre-IPO funding from Nandan Nilekani and Rakesh Jhunjhunwala and Ramesh Damani owned Rare Enterprises among others, and allotted 1.03 crore equity shares aggregating to Rs. 334 crore to 17 anchor investors.

After Coffee Day, market participants are keenly watching the listing of another big ticket IPO of InterGlobe Aviation, parent company of IndiGo Airlines. Over the next 5 years, the company does not plan to use any money raised via the IPO for the growth of non-coffee retail business.

Apart from the Café Coffee Day chain, the holding company houses other businesses like development of IT-ITES technology parks (Tanglin Development Limited), logistics (Sical Logistics), financial services (Way2Wealth Services), hospitality (Coffee Day Hotels & Resorts Private Ltd) and investments in companies like Mind Tree. Coffee Day Enterprises has been posting losses for the last three years (FY15 net loss at Rs 87 crore) because of high depreciation and interest costs.