ITC may buy stake in Coffee Day; to vie with Coca-Cola

ITC may buy stake in Coffee Day; to vie with Coca-Cola

Months after the global beverage company Coca-Cola showed interest in buying stake in Cafe Coffee Day, Indian tobacco major ITC Ltd may also fight for a stake in CCD’s parent company Coffee Day Enterprises Ltd. ITC, Asia’s most valuable cigarette maker, is looking to diversify from the company’s main selling product — tobacco — and has been given access to review Coffee Day’s assets and financials so that it can contemplate on picking stake, Bloomberg reported citing unidentified sources. If ITC goes ahead with the deal, it will be able to reduce its dependence on the cigarette business. This comes at a time when the country is forming stringent laws to curb smoking in public places and has also raised taxes on tobacco.

“Deliberations are at a preliminary stage and may not lead to a formal offer,” Bloomberg cited an unidentified source as saying. ITC has received an inquiry from an intermediary on Coffee Day. However, no progress as of now has been made, ITC spokesman told Bloomberg.

Cafe Coffee Day is under tremendous debt piles and is looking for ways to pare it. The mounting debt also led to the untimely demise of CCD founder VG Siddhartha, who committed suicide few days ago. Meanwhile, CCD’s rival — Tata Starbucks– has said that it is not eyeing acquiring CCD for its expansion. “We have our plans to go in India… and we are going as per our plans. We are not looking at CCD,” Rakesh Sony, Global Head, Strategy and Mergers & Acquisitions at Tata Global Beverages, told CNBC TV-18 on Wednesday.

Cafe Coffee Day has over ten-fold more outlets than rival Starbucks. CCD is held by various owners including a unit of private equity firm KKR & Co., which owns 6.07% of the company; Standard Chartered Private Equity, which holds 5.7% and Infosys co-founder Nandan Nilekani, who has a 2.69% stake.

Coca-Cola was reportedly in exclusive talks to pick up a significant stake in Cafe Coffee Day. The global soft-drinks company may leverage the rapidly growing space if the deal is successful and the same is also expected to help the company in hedging risks associated with its carbonated drinks business, according to media reports.