Coffee Day Enterprises shares locked in 5% lower circuit on re-listing day, experts say avoid

Coffee Day Enterprises share price was locked in a 5 percent lower circuit on April 26, eight months after trading resumed in the scrip. The stock price was fixed at Rs 50.30 in its pre-opening session on the BSE but in the opening trade, it was locked in a 5 percent lower circuit at Rs 47.80, with volumes of 2.55 lakh equity shares.

On the National Stock Exchange, the trading in Coffee Day was frozen at Rs 46.10, down 4.95 percent after opening at Rs 48.50.

The stock was trading 75 percent higher from its last trading price of Rs 26.35 on August 24, 2020.  The listing price was largely in line with the grey market price but experts are doubtful over its sustainability.

"As per the last grey ask demand before relisting buzz the trade was around Rs 40-45 and made as high as Rs 52 from Rs 26 in the last few months. The surge in demand indicates all compliances have been completed regarding the relisting process and few new developments, which shall have a lot of positive impact on the company's future growth. The sustaining around these price levels in the current downtrend markets would be doubtful," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.

Trading in Coffee Day Enterprises was stopped in August 25, 2020 for non-compliance of SEBI's listing norms and non-submission of results during the period. Recently, the stock exchanges revoked the suspension.

The attempt to relist Coffee Day Enterprises, which operates Cafe Coffee Day (CCD) chain, was a move towards generating investor confidence but experts say high debt on books remains a concern.

"There is news saying CCD may be headed for bankruptcy after defaulting on loans as lenders are considering taking the company to the National Company Law Tribunal (NCLT) for debt resolution," Tapse said.

The company said it has outstanding dues of Rs 280 crore in terms of cash credits from banks or financial institutions. It also owes Rs 200 crore in unlisted debt services, CDEL said in a BSE filing on April 6. CDEL said its total indebtedness was Rs 518 crore.

The company has also defaulted on the interest due on the payments that it delayed.

Experts largely advised against investing in the company but those who had can exit.

"I believe this relisting is an opportunity for trapped investors who have stuck post-delisting (2020) or to those who bought in grey below Rs 30," Tapse said.

According to him, high risk-takers can look to buy and hold betting on Cafe Coffee Day QSR story as it still remains the biggest retail coffee chain in the country when compared with its listed QSR peers and has the potential to tap the growth once the COVID-19 saga normalizes.

"As of now with high COVID-19 restrictions around us, fastfood, restaurants and offices which are majorly closed and people are working from home will raise eyebrows for revenue visibility in the short term. We prefer to advise new investors to avoid buying at this juncture," he said.

Gaurav Garg, Head of Research at CapitalVia Global Research, also said investors should avoid Coffee Day Enterprises and wait for at least a few quarters before trading or investing in this stock. "As far as existing investors are concerned, investors should try to get out of the stock and wait for some stability in the company performance," he added.