Coca Cola buying stake in CCD

Executive Summary
The US beverage giant is eyeing a foothold on Café Coffee Day, as they see a decline sales of
Coca cola (aerated drinks in US since they year 2002). They are planning to diversify into non
aerated drinks and the targets are water, coffee, and juices (for ex: Fair life with milk, simply
light juices) in order to attract the younger consumers.
The macro environment factors like trade war and the political uncertainties.
Coca Cola CFO john Murphy says that they have got the capabilities and the focus to pursue
their new operations that is, diversifying their product portfolio, broaden their technology and
focus on personalization.
Café Coffee Day has over 1800 stores around the world and hence would provide a great
opportunity for Coca Cola to gain the customers base.
For Café Coffee Day this acquisition would help them reduce the burden of debts on the books
of parent company coffee day enterprises.
As of 31st March 2019, the debt of Coffee Day enterprise is 6,547 crores, two and half times its
net worth. The market capitalization is said to be 4732 crores.
If Café Coffee Day manages to get valuation of Rs 10,000 crore, the implied valuation is nearly
double at 33 times FY19 Ebitda. A valuation of Rs 8,000-10,000 crore implies 4.4-5.5 times
FY19 revenues of the coffee business. At Rs 5,260 crore, it translates into 3.2 times FY19
revenues.