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Trustee invokes pledged shares of Coffee Day Enterprises

Debenture holders have the right to dilute 10.55 percent of the pledged shares
Aug 7, 2019 / 10:08 PM IST

IDBI Trusteeship Services today invoked pledged equity shares of embattled Coffee Day Enterprises (CDEL), the parent company of coffee chain CCD said in an exchange filing.

Currently, debenture holders have the right to dilute 10.55 percent of the pledged shares. According to the statement, the trustee will invoke 0.45 percent of shares to recover the debt owed by borrowers.

Total number of shares pledged by the promoters increased from 75.7 percent previously to close to over 80 percent now, according to reports.

“The lenders would have invoked the pledged shares as the value of pledge has reduced dramatically and the possibility of recovering the loans seems distant,” Shriram Subramanian, founder and MD, InGovern Research Services, a proxy advisory firm, said. “The pledged shares may be sold to recover part of the loans.”

The stock price of Coffee Day Enterprises has crashed ever since news of its owner VG Siddhartha’s apparent suicide on July 31, leaving a huge debt pile behind.

Siddhartha’s letter, whose veracity is yet to be confirmed, stated that he was harassed by an investor and was forced to borrow a huge amount of money to buy back shares.

He claimed to have also been harassed by Income Tax officials before he sold his 20.32 percent stake in Mindtree to L&T for close to Rs 3,200 crore. According to reports, Coffee Day’s debt now stands at Rs 6,500 crore even after including the Mindtree stake sale.

CDEL stock prices dropped from Rs 191.70 on July 29 to Rs 81.25 on July 31, 2019 in BSE. The company market cap fell from Rs 4000 crore to Rs 2000 crore, according to reports.

Utkarsh Sinha, MD, Bexley Advisors, an advisory firm, said Siddhartha’s demise was unfortunate but added that the company can still be turned around.

As share prices fall, Sinha said the coffee chain operator could become a lucrative investment for private equity players.

"An announcement to make the company private would potentially be a good outcome for CCD’s shareholders. The move would stall the share price spiral and potentially bring about a recovery. It would ensure the company can be turned around," he said.
Swathi Moorthy
first published: Aug 7, 2019 10:08 pm