Karnataka Bank is on the brink of recuperating a substantial portion of its outstanding dues by the end of this month through the debt sale of Coffee Day Global, according to sources well-versed in the matter. Coffee Day Global, a privately held enterprise, operates the renowned Cafe Coffee Day chain across India.
The bank has received a compelling offer from the Rare Asset Reconstruction Company (ARC), which has instigated a Swiss challenge auction. As per sources, the ARC’s offer stands at approximately ₹50-₹55 crore against the dues totalling ₹88 crore.
Previously, Rare ARC had successfully acquired Coffee Day Global’s debt from RBL Bank and Aditya Birla Capital.
Coffee Day Global is a subsidiary of Coffee Day Enterprises, a listed entity founded by the late VG Siddhartha, who tragically took his own life in 2019. The company has reported a debt of ₹982 crore as of FY23, an increase from ₹960 crore in the previous fiscal year. Notably, the ₹982-crore debt encompasses inter-corporate loans of ₹146 crore extended by Tanglin Developments, as indicated in the annual report for FY23.
Both Karnataka Bank and Rare ARC declined to provide comments regarding this development.
Karnataka Bank has set a deadline for expressions of interest (EoI) until October 26, with the data room accessible for a single day on October 26. The e-auction is scheduled to take place on October 27, as per the auction notice.
In a notable transaction in mid-August, Rare ARC acquired Coffee Day Global loans amounting to ₹110 crore for an upfront cash payment of ₹68 crore. Subsequently, in September, IndusInd Bank sold its loans to the same company to ASREC (India), an ARC. This move followed the National Company Law Tribunal’s admission of Coffee Day Global for insolvency based on IndusInd Bank’s petition. Following the sale, IndusInd Bank expressed its intent to withdraw the petition.
It’s important to recognize that Coffee Day Global, an unlisted entity, operates 469 Cafe Coffee Day outlets across 154 cities, along with 268 CCD Value Express kiosks, as disclosed in the company’s latest available annual report for FY23. Additionally, the company has deployed 48,788 coffee vending machines in corporate workplaces and hotels, as detailed in the same report.
While the sale notice inviting expressions of interest mentioned a principal loan amount of ₹87.8 crore, it did not specify the reserve price or the potential markup at which an ARC can present a counter bid. In its guidelines issued on September 24, 2021, regarding the transfer of loans, the Reserve Bank of India mandated that bank disclose both the base price and the expected markup during Swiss auctions.