Café coffee day ( CCD) Gets Temporary Respite as Bankruptcy Proceedings Stayed for Now 2023

Café coffee day ( CCD) Gets Temporary Respite as Bankruptcy Proceedings Stayed for Now 2023

The owner of the network of Cafe Coffee Days, Coffee Day Global, has received a temporary reprieve from bankruptcy procedures that were started by the lender IndusInd Bank last month.

The National Company Law Tribunal’s Chennai bench last week postponed till September 20 admission of IndusInd Bank’s complaint against Coffee Day Global, a division of the publicly traded Coffee Day Enterprises.

This implies that CCD will be given additional time at a time when it has finally turned a profit after battling for a few years following the untimely passing of its founder VG Siddhartha in 2019.

Compared to the net loss of Rs. 11.73 crore reported during the same period previous year, Coffee Day Global reported a net profit of Rs. 24.57 crore for the June quarter of 2023–24 (FY24).

According to CDEL figures for Coffee Day Global, operational revenue increased by roughly 18% to Rs 223.20 crore in the quarter under review. More crucially, CCD outlets have decreased from a peak of 1,752 locations in FY19 to 467 in the June quarter of FY24, showing that the corporation is closing down unproductive operations as it tries to control its debt and other expenditures.

The group’s debt has decreased from the Rs 7,214 crore disclosed in FY19 to Rs 1,711 crore, according to its most recent annual report for FY23. “Although India’s retail coffee industry is expanding, CCD’s need to reduce is due to internal problems. According to Devangshu Dutta, CEO of retail consulting firm Third Eyesight, “sometimes a smaller footprint just helps to manage operations better, especially when you are dealing with larger problems like a debt overhang.”

The financial stability of CCD is crucial for CDEL since, according to its FY23 annual report, the retail sale of coffee accounts for about 94% of the organisation’s group revenue.

In FY22, 85% of the group’s total revenue came from the retail sale of coffee. Coffee Day Global’s losses decreased from Rs 112.48 crore in FY22 to Rs 69.62 crore in FY23. The business had a net profit of Rs. 10 crore in FY19.

In addition to cafés, CCD has kiosks and vending machines set up in business centres, institutions, and corporate offices. The number of vending machines has been increasing after momentarily slowing down over the last few years, whereas the number of kiosks has decreased over the past few years and is currently at roughly 265 from a peak of 537 in FY19. According to the company’s most recent figures, it is presently at 50,870 crore, down from a peak of 58,697 crore in FY20.

According to sources within the sector, CCD is also anticipated to vigorously contest the insolvency procedures brought against it. Coffee Day Global allegedly missed a payment of Rs 94 crore on a loan from IndusInd Bank on February 28, 2020. In court, the firm contested this.

In a significant development, the beleaguered coffee giant Café Coffee Day (CCD) has received a temporary respite as bankruptcy proceedings against the company have been stayed for the time being.

This comes as a sigh of relief for stakeholders who have been anxiously watching the unfolding drama surrounding the company’s financial woes.

Café Coffee Day, the iconic Indian coffee chain founded in 1996, has been a pioneer in bringing the café culture to India. However, the company has been struggling with severe financial difficulties in recent years.

Accumulated debts, declining revenue, and stiff competition from both local and international competitors have put the company in a precarious position.

Amid these challenges, creditors initiated bankruptcy proceedings against the company, aiming to recover their investments.

The situation had raised concerns about the future of CCD’s employees, vendors, and franchise partners. Bankruptcy often comes with asset liquidation, which would have had a domino effect on everyone connected to CCD.

In a dramatic turn of events, the bankruptcy proceedings against Café Coffee Day have been stayed by the court. This stay order grants CCD a temporary reprieve, offering the management some breathing room to strategize and negotiate with creditors.

While the details of the court order are confidential, it is understood that the decision was influenced by various factors, including CCD’s historical significance, employment generation capabilities, and proposed debt restructuring plans.

The stay on the bankruptcy proceedings has led to mixed reactions. While employees and vendors see this as a hopeful sign, creditors and investors remain skeptical.

The temporary relief provides an opportunity for CCD to restructure its debts and potentially secure new lines of credit to revitalize its business.

However, for the stay to turn into a long-term solution, CCD must demonstrate its ability to execute a sustainable business model effectively.

This temporary relief is by no means an end to CCD’s challenges but a brief hiatus allowing the company to recalibrate its strategies. Stakeholders will be keenly watching CCD’s next moves, which will likely include renegotiating terms with creditors, possible downsizing, and a focus on core competencies.

Moreover, the company needs to rethink its market positioning to regain customer loyalty, perhaps by capitalizing on the growing trend of sustainability and ethical sourcing in the food and beverage industry.

The stay on bankruptcy proceedings against Café Coffee Day offers a momentary pause in an otherwise tumultuous journey for the coffee chain.

While it provides stakeholders some respite, the company’s future still hangs in the balance. The coming months will be crucial for CCD as it endeavors to navigate through the labyrinth of financial distress and stakeholder expectations.

This stay is a flicker of hope, but it remains to be seen if CCD can fan it into a flame that rekindles the company’s former glory.