Stock Market Update: Coffee Day Enterprises Ltd, the parent company of the popular Cafe Coffee Day chain, experienced a sharp decline in its stock price today, plummeting by 20% to an intraday low of ₹37.55. This significant drop in share value comes as the company faces bankruptcy proceedings, causing investors to rapidly offload their shares.
The downturn follows the recent decision by the National Company Law Tribunal (NCLT) to initiate bankruptcy proceedings against Coffee Day Enterprises. The Bengaluru bench of the NCLT admitted a plea filed by IDBI Trusteeship Services Limited (IDBI TSL) on August 8, 2024. The plea cited a default of ₹228.45 crore and called for the appointment of an interim resolution professional to manage the company’s operations during its financial distress.
Coffee Day Enterprises has been struggling to meet its financial obligations, particularly in relation to redeemable non-convertible debentures (NCDs). In March 2019, IDBI TSL subscribed to 1,000 NCDs through a private placement, investing ₹100 crore. However, Coffee Day Enterprises defaulted on several coupon payments due between September 2019 and June 2020, prompting IDBI TSL to issue a default notice and seek legal recourse through the NCLT.
The company, once a thriving business under the leadership of the late VG Siddhartha, has seen its stock value steadily decline. Over the past five days, shares have dropped by more than 20%. In the last month alone, the stock has fallen by 25%, and it has seen a year-to-date (YTD) decline of 40%. The current market capitalization of Coffee Day Enterprises stands at ₹862.96 crore, a stark contrast to its stock price of ₹348 in 2018—a decline of 90%.
What is the matter?
The Bengaluru bench of the National Company Law Tribunal (NCLT) on August 8 admitted a plea filed by IDBI Trusteeship Services Limited (IDBI TSL). The plea claimed default of Rs 228.45 crore and sought appointment of an interim resolution professional to look after the operations of the debt-ridden company. CDEL owns and operates a resort and is in the business of coffee beans along with providing consultancy services. CDEL had defaulted on coupon payment of redeemable non-convertible debentures (NCDs). The financial lender had subscribed to 1,000 NCDs through private placement and paid Rs 100 crore for the subscription in March, 2019. For this, CDEL entered into an agreement with IDBI TSL and agreed to appoint it as debenture trustee for the debenture holders. However, CDEL defaulted in paying the total coupon payments due on various dates between September, 2019 and June, 2020. As a result, the debenture trustee issued a notice of default to CDEL on July 28, 2020 on behalf of all debenture holders and approached the NCLT. Cafe Coffee Day was promoted by the late VG Siddhartha who allegedly died by suicide in 2019.
The shares dropped due to the initiation of bankruptcy proceedings against the company by the National Company Law Tribunal (NCLT) following a default on financial obligations.
The proceedings were triggered by a plea from IDBI Trusteeship Services Limited (IDBI TSL), citing a default of ₹228.45 crore related to non-payment of dues on redeemable non-convertible debentures.
The stock has been in continuous decline, with a 20% drop in the last five days, a 25% decline in the last month, and a 40% year-to-date decline.
In 2018, the coffee day enterprises share price was ₹348. It has since fallen by 90% to the current coffee day enterprises share price is ₹37.55.
The market capitalization of the company currently stands at ₹862.96 crore.