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Coffee Day Holdings to raise $100-$150 million from PE firms

Coffee Day Group, the Bangalore-based company with interests in coffee plantations, coffee retailing, infrastructure development and technology investments, has detailed an investment appetite for about Rs 1,700 crore to expand its businesses over the next 3-4 years.

The group, better known for its Café Coffee Day chain of coffee bars across the country, in its roadmap has said it will grow its plantation (coffee and banana) by investing Rs 200 crore, retailing business will absorb close to Rs 700 crore and infrastructure development and SEZs will envisage an investment of another Rs 750 crore.

The group has set up a holding company — Coffee Day Holdings, which holds the retailing arm Café Coffee Day, the infrastructure development arm and the investment business. The agriculture arm, which controls 8,000 acres of coffee plantation, is not under the holding arm.

V G Siddhartha, chairman, Coffee Day detailing the growth aspects to Business Standard said that the plantation business will see an investment of Rs 200 crore to expand its acreage and also step up its activities in the banana farming and furniture segments.

“Based on the assets of this arm, it will not be difficult for us to leverage debt and fund the expansion through cash flows,” he detailed.

The coffee plantations yield nearly 3,000 tonnes of coffee beans (mostly Arabica) annually. The agriculture arm on top of growing coffee, also sources another 10,000 tonnes and channels them for exports and to its retailing arm which consumes 5,000 tonnes per annum.

The coffee retailing arm includes Café Coffee Day chain of coffee bars, Coffee Day Express (the coffee vending machine business) and coffee powder retailing arm. The company has 850 coffee bars and is looking to touch 2,000 mark over the next 3-4 years.

Siddhartha detailed that along with its backend operations of factories and roasters, Coffee Day Holdings controls 75 per cent while the rest is held by a clutch of private equity investors — Sequoia Capital, Deutsche Group, Darby Investment and IFC, who over a period of time have invested $100 million for the franchise to expand.

“We are growing the retailing business quite aggressively and we should be closing the 1,000 mark by March-April 2010. We are also looking at 200 cafes at various overseas locations over a period. The coffee vending machine business and the coffee powder verticals too are pretty much on track to dot more locations in India,” Siddhartha noted.

The group, in addition to its coffee exports and retailing business is stepping up its infrastructure arm which manages special economic zones for software services industry in Bangalore and Mangalore spread over nearly 150 acres.

Over a period of about three years, the company will develop nearly 7 million square feet on top the already functional 3 million square feet at these locations. It will also witness building of a few thousand residential units.

Siddhartha added that the arm is also looking to enter core infrastructure development like hydel power, roads, water treatment or others to build the business.

“We haven’t yet decided on the vertical. We are working on the details and we should be looking at an investment of Rs 750-1000 crore for the expansion,” he said adding that for infrastructure projects such as these, debt can be easily leveraged.

Coffee Day Holdings as part of these efforts to expand its business, is closing in on a private equity deal to raise $100-$150 million.

“We are talking to 4-5 large private equity funds that have the capability to write $100 million cheque and the deal should be finalised within two months,” Siddhartha added.

Source: Business Standard

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