Coffee Day in talks with private equity funds for investment opportunities

INDIA – Indian cafe chain operator and subsidiary of the listed Coffee Day Enterprises, Coffee Day Global has appointed EY Restructuring LLP to provide interim business support services and to scout for potential proposals for investment.

According to an ET Retail update, the coffee chain is in talks with two private equity funds are to explore investment opportunities in the company. ET Retail reports that the KKR-backed company is in negotiations with Singapore-based SSG Capital Management and Affirma Capital for a possible investment in the company.

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If the coffee chain manages to settle on an investment deal, sources cited in the report said that the investments will be either structured credit or pure equity infusion.

The funds are learnt to have proposed to infuse working capital, restart operations in full swing, rebrand the coffee retail business and reignite its business which has been hit by the Covid-19 outbreak.

SSG, sources said, has offered to invest only on condition; that other existing PE funds also participate, though with varying degrees. Its executives are said to have engaged the three PE investors in talks, and any fresh infusion depends on the four players reaching an agreement.

Coffee Day has been battling hard times after the tragic death of its founder Siddhartha last year. The company had, in March, cleared a third of its debt to banks and other lenders, with about US$225 million it received as the first tranche of money from its deal to sell Global Village Tech Park to US private equity firm Blackstone.

To further pivot its business and expand into newer categories, Coffee Day recently partnered with Wow! Momo Foods to sell momos at their cafes, in an effort to piggyback on their stores network and their widen menu.

Companies in the market are also innovating to allow customers engage with their brands in a more safer way amid the pandemic. Coffee Day’s rival, Starbucks recently announced that it will be launching drive-through outlets and home deliveries as it works on a new business models to mitigate the economic impact of Coronavirus pandemic.

Startups in the quick restaurant service market have also unveiled plans of using Internet of Things and hardware solutions to automate high-touchpoint tasks, like tea counters and manual kitchen processes.

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In the short term, players in the sector say that the industry will undergo a transformation of a type the world has not experienced before adding that the current situation is going to drive digital, new ways of working and connecting with customers.

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