VG Siddhartha, the founder of Cafe Coffee Day (CCD) is seeking a valuation of Rs 8,000 to Rs 10,000 crore from soft drinks maker Coca-Cola for the stake sale in his coffee chain. However, he wants to retain his controlling stake in the business he had set up two decades ago.
"The promoters are asking for a valuation of between four to five times of sales (in the coffee business) on the back of some valuation trends in the industry both companies are privy to," a source told the Economic Times.
The group's coffee business is hoping to close the year ending March 2020 with sales of around Rs 2,250 crore, according to a senior company executive.
The development comes a day after the daily reported that Coca-Cola was in early talks with CCD to acquire a substantial stake in India's largest coffee chain. If the deal materialises, it would be Coca-Cola's second major investment after acquiring UK-based Costa Coffee for $5.1 billion in September 2018. The US beverage giant is eyeing a significant foothold in the fast-growing cafe business space as the core carbonated drinks segment is slowly losing sheen, a source told the news daily.
Meanwhile, according to regulatory filings the company had clocked a revenue of Rs 1,777 crore and Rs 1,814 crore in FY 2018 and 2019, respectively.
Both the companies are exclusively discussing the contours of the deal which is being led by Coca-Cola's head office in Atlanta.
"The potential stake acquisition is being driven by Coca-Cola's headquarters in Atlanta and officials from the beverage maker's global team are engaged in active talks with the Coffee Day management," the source had told the news daily.
"It would give Coca-Cola significant scale in the fast-growing cafe business, compared to aerated soft drinks, which have been slowing down," he added.
Founded by VG Siddhartha, CCD is India's largest coffee chain and is owned by Coffee Day Global which is a subsidiary of Coffee Day Enterprises. The coffee chain as of March 2019 had a footprint of 1,752 cafes in the country and is a market leader in organised cafe space.
Siddhartha is the elder son-in-law of former Karnataka Chief Minister SM Krishna. He is credited with creating India's largest coffee empire.
All the coffee served at Coffee Day outlets comes from the 10,000 acres of plantations that Siddhartha owns in Chikmagalur, Karnataka.
He opened CCD's first outlet on Bangalore's upscale Brigade Road in 1996. The coffee chain's first launch came at a time when Bangalore was on the cusp of a transformation from a pensioners' paradise to an IT and lifestyle haven.