- Chikkamagluru-based Coffee Day Enterprises is the largest producer of Arabica coffee beans in Asia.
- CCD has more than 1700 cafes, ten times more than Starbucks Corp.
- A successful bid will help ITC diversify its business to reduce dependence on cigarettes.
ITC Ltd., Asia’s biggest cigarette manufacturer by market value, is considering an offer to purchase a stake in Coffee Day Enterprises Ltd. as it seeks to diversify from tobacco products, according to sources.
The Classic and Gold Flake cigarette maker has been provided access for due diligence to Coffee Day’s assets and economic, said the individuals who asked not to be identified as the discussions are private. One of the individuals said that ITC could compete with Coca-Cola Co., which assessed India’s largest cafe chain but did not make a formal bid.
Shares of ITC fell as much as 2.2% in the afternoon trading in Mumbai, while CCD rose 5%, extending its three-day winning streak to almost 16%.
Deliberations are at an early point and, according to the individuals, may not lead to a formal offer. ITC got an investigation from an intermediary on Coffee Day but no progress has been made. Coffee Day has refused to comment.
A successful offer will assist ITC further diversify its company to decrease cigarette dependency as the Indian Government has increased tobacco taxes and restrictions on public smoking. Coffee Day is under pressure after its founder V.G. to settle borrowings. Siddhartha took his own life as debt strains in his businesses started to appear.
A unit of private equity firm KKR & Co. owns 6.07% of the company. Standard Chartered Private Equity holds 5.7%, while Nandan Nilekani, co-founder of Infosys Ltd., has a 2.69% stake.
Chikkamagluru-based Coffee Day Enterprises in Asia is the largest producer of Arabica coffee beans. It grows coffee on 20,000 acres of self-owned estates and set up the first cafe in 1996 in Bengaluru.
CCD has expanded through many cities in India joining new stores with more than 1700 cafes, ten times more than Starbucks Corp., open across the nation with 60,000 vending machines by 2019. It has also expanded outside India with its outlets in Austria (Vienna), Czech Republic, Malaysia, Egypt, and Nepal.