According to informed sources, Karnataka Bank is poised to recoup over 50% of its outstanding dues by the end of this month through the debt sale of Coffee Day Global, an unlisted company that runs the Cafe Coffee Day chain throughout India.
A binding offer has been presented to the bank by Rare Asset Reconstruction Company (ARC), prompting a Swiss challenge auction. The ARC’s offer stands at approximately INR 50-INR 55 crore in response to the outstanding dues of INR 88 crore, as reported by one of the sources mentioned earlier.
In the past, Rare Asset Reconstruction Company (ARC) had acquired Coffee Day Global debt from both RBL Bank and Aditya Birla Capital.
Coffee Day Global, a subsidiary of the publicly traded Coffee Day Enterprises, was founded by the late VG Siddhartha, who tragically took his own life in 2019.
As per its FY23 annual report, the company’s debt stands at INR 982 crore, compared to INR 960 crore in the previous year. This INR 982-crore debt encompasses inter-corporate loans amounting to INR 146 crore from Tanglin Developments, as indicated in the report.
Both the lender and Rare ARC declined to provide any comments.
Karnataka Bank has requested expressions of interest to be submitted by October 26, with the data room accessible for a single day on the same date, as outlined in the auction notice. The e-auction is set to take place on October 27.
In mid-August, Rare ARC acquired Coffee Day Global loans totaling INR 110 crore, making an initial cash payment of INR 68 crore. In September, IndusInd Bank sold its loans to Coffee Day Global to ASREC (India), another ARC. Coffee Day Global had previously been admitted for insolvency by the National Company Law Tribunal based on a petition from IndusInd Bank. Following the sale, IndusInd Bank expressed its intention to withdraw its petition before the appellate tribunal.
According to the most recent annual report for FY23, Coffee Day Global, a privately held company, operates 469 Cafe Coffee Day outlets in 154 cities and 268 CCD Value Express kiosks. The company has also deployed 48,788 coffee vending machines in corporate workplaces and hotels, as indicated in the same report.
The sale notice, which called for Expressions of Interest (EoI), specified the principal loan amount as INR 87.8 crore. However, it did not provide details regarding the reserve price or the permissible mark-up for potential counter bids by an ARC. The RBI’s guidelines from September 24, 2021, regarding loan transfers mandated that banks disclose both the base price and the anticipated mark-up in Swiss auctions.