Anand Rathi Brokerage recommends buying of Coffee Day IPO
Coffee Day Enterprises (CDEL), parent company of the famous Indian café chain Café Coffee Day caused a stir in the stock exchange by launching its IPO recently. Started at Rs 328/share, the stocks were oversubscribed by 1.8 times with demand reaching Rs 2000 crore.
Anand Rathi of Anand Rathi Brokerage views CDEL as a prospective investment option. He says, “Café coffee day enjoys market share of approximately 46% in India, with their café footprint being nearly four times larger than the cumulative footprint of the next four competitors, as of December 31, 2014. The brand Café Coffee Day is ranked second in the Most Trusted Brands in the food service retail category in India, and was one of the only four indigenous Indian brands to be recognized as the Most Exciting Indian Brand in India. In addition to their coffee business, they operate other selected businesses that are aimed at leveraging India’s growth potential.
Anand Rathi Brokerage elaborates, “On valuation front company is trading at 23xs EV/EBITDA and 3.8xs EV/Sales for FY16 (Jubilant FoodWorks, which is in chained QSR segment is currently quoting at 28.8xs its EV/EBITDA and 3.8xs it’s EV/Sales as per Bloomberg Data).The fact that the IPO went oversubscribed by 1.8 times is a reflection of how well it will perform in future.”
Coffee Day Enterprise is the guardian organization of the Coffee Day Group, which houses Café Coffee Day that spearheaded the cafe culture in the fastened bistro portion in India. The organization is occupied with the coffee business through its auxiliary, Coffee Day Global Limited (before known as Amalgamated Bean Coffee Trading Company Limited) and its auxiliaries. Along with the coffee business, CDEL also operates other ventures including development of IT and ITES technology parks, logistics, hospitality and financial sectors.
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