Oct 14, 2015, 03.08 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, VG Siddhartha, CMD of Coffee Day Enterprises spoke about the IPO listing and business strategy going forward.
VG Siddartha (more)
Chairman, Coffee Day |
Latha: Don’t you think that coming up with pure coffee business initial public offering (IPO) would have been better than a holding company IPO where there is a complex structure and exposure to business which investors may not want?
A: I raised money five years back from three great private equity players —KKR, Standard Chartered Bank and New Silk Route. I raised the money in the holding company so there they own 34 percent of the equity in this company and they are not disinvesting. The money that we are raising of Rs 1,150 crore, directly going to the company; in that almost Rs 625 crore will go to the repayment of the debt of holding company and coffee company. Remaining Rs 500 crore will go for the coffee business expansion.
We have clearly told everybody that the money raised in next five years will go for the coffee business expansion. So, other businesses, Mindtree and Sical Logistics put together is worth around Rs 2,500 crore in our balance sheet, but we are not going to put one pie to any of these businesses or they need any of our money because they are listed.
Sonia: You put all the money in the coffee business so why are you doing the IPO for the entire holding company?
A: I clearly told you that I got a 34 percent shareholders in my company who also own other businesses. I had promised them five years back that I will take this company public.
I believe we can build a great coffee business and any of the investments, if there is any great opportunity to grow the coffee business, we will take a right call to disinvest and grow the coffee business. As of today next two to three years I don’t see any opportunity because we are sitting with so much cash now after the issue.
Latha: Then why are you raising money? You could easily have sold 16 percent stake in Mindtree and realised Rs 2,000 crore. That would be double the amount of the IPO money.
A: It is not strategic, it is the investment. Just to tell you, Mindtree has given 40 percent internal rate of return (IRR) to me in last 16 years. It is not a bad investment, if I am right. I know I am not a great investor but it has given me a 40 percent investment and I feel it is doing well and I will be there.
At any time Mindtree or Sical or Tanglin are not going to do well or give me 15-20 percent IRR for a longer time, I will take a right call as to what is good for me and my investors.
Sonia: Will you at all look at selling the stake that is there in Mindtree, any time in the near future.
A: As I told you other than coffee business anything which is not going to grow for 15-20 percent in next two to three years I will take a right call as to what is good for the investor and me.
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