Karnataka election results impact: Congress win helps Coffee Day shares surge 17%; here's why

Shares of Coffee Day Enterprises Ltd rose up to 17 per cent in Monday’s trading session after Congress made a stunning comeback in Karnataka assembly polls and trounced BJP on Saturday. DK Shivakumar, the Karnataka Congress chief, who was instrumental in the party's historic win, has family connections with Coffee Day owners and stock market investors are betting this might turnaround the battered stock's fortunes.

Aishwarya Shivakumar, the daughter of DK Shivakumar, is married to Amartya Hegde, son of late Café Coffee Day founder, VG Siddhartha.

Amartya Hegde is also the grandson of BJP leader SM Krishna, who was a long-time Congress leader. The couple was engaged in November 2020 and tied the knot in February 2021. Amartya Hegde has been looking at the business after his father’s death in 2019. VG Siddhartha committed suicide in July 2019, owing to a financial crisis. Siddhartha’s body was found in Mangalore after being missing for two days.

Congress emerged victorious on Saturday in the Karnataka Assembly Elections 2023 winning 136 seats in the 224-member assembly, defeating BJP, which could only manage 65 seats.

After playing a huge role in the elections to lead Congress to a victory in Karnataka Assembly Elections, DK Shivakumar will have a potential influence within the inner circles of the new government even if Siddaramaiah is made Chief Minister.

Coffee Day stock surged 17 per cent to hit a day high of Rs 39.81 over its previous close of Rs 34.10. Around 8.53 lakh shares changed hands today on BSE, which was more than four times compared to the two-week average volume of 2.01 lakh shares. The stock later pared gains and ended Monday's session 10% higher.

At today's high price of Rs 39.81, the stock traded 50.80 per cent higher from its 52-week low of Rs 26.40, a level seen on March 28 this year. That said, it has declined 45.84 per cent from its one-year high of Rs 73.50, hit on September 14, 2022.

"Ahead of Q4 FY23 (March 2023 quarter) results, Coffee Day's stock price has seen a jump and now faces strong resistance at Rs 39.50 on the daily charts. Investors should book profits at current levels as the stock price entered the overbought zone or keep a strict stop loss placed at Rs 35.50," said AR Ramachandran from Tips2trades.

Coffee Day Enterprises is engaged in the trading of coffee beans. The company owns and operates a resort and renders consultancy services. It is also engaged in the coffee business, which ranges from procuring, processing and roasting coffee beans to retailing coffee to domestic and overseas customers. As of March 2023, promoters held a 9.59 per cent stake in the company.

In April, Coffee Day Enterprises Ltd (CDEL) has reported a total default of Rs 436.06 crore for the quarter ending on March 31, 2023. Its ''total financial indebtedness of listed entity including short term and long term debt'' is Rs 461.06 crore, the company stated in an exchange filing.

According to CDEL, its total outstanding amount is Rs 220.65 crore from loans or revolving facilities like cash credit from banks or financial institutions.

Of this, CDEL defaulted on Rs 189.87 crore as well as an interest payment of Rs 5.78 crore as of date.

The company's total outstanding from unlisted debt securities such as NCDs and NCRPS is Rs 240.41 crore. Of this, the total amount of default as of date is Rs 200 crore along with interest of Rs 40.41 crore, CDEL said.

The company is pairing its debts through asset resolutions and has significantly scaled it down from the time when the trouble started after the death of Siddhartha in July 2019.

In March 2020, CDEL announced repaying Rs 1,644 crore to 13 lenders after concluding a deal with Blackstone Group to sell its technology business park. Earlier this year, market watchdog Securities and Exchange Board of India (Sebi) had directed the board of CDEL to take all necessary steps for recovery of the entire diverted amount from Mysore Amalgamated Coffee Estates Ltd, along with due interest. Mysore Amalgamated Coffee Estates Ltd (MACEL) is an entity related to promoters.

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