Café Coffee Day IPO – What is leading brokerages and blogs saying?
Café Coffee Day IPO would open for subscription today. This IPO is creating some buzz in IPO Market. Myinvestmentideas is the first blog to analyse about this IPO in India and recommended “NO” to this IPO. There are mixed reactions from various top leading brokerage houses. In this article, I would give their view which would help our readers to analyse whether to subscribe Coffee Day IPO or not?
Café Coffee Day IPO – What is leading brokerages and blogs saying?
Myinvestmentideas says avoid Café Coffee Day IPO
Myinvestmentideas is the first blog in India which analysed about this stock. As indicated in my article, you should avoid such IPO where the valuations are high and investors would not get anything as it is incurring losses in the last 3 years. I already indicated that if in future such company makes profits, one can look at investing in such companies.
Also Read: Cafe Coffee Day IPO – What are positive and negative factors?
Hem Securities says – Avoid Coffee Day IPO
"The Company is bringing the issue at price band of Rs 316-328/Share at p/b ratio of approx 3.92-4.07 on post issue book value of approxRs 80.53 per share. Though the company has strong promoter background, brand name, pan India presence but looking after the valuations issue looks steeply priced at present level. Also the company has posted consecutive losses from last few years which doesn’t instill confidence for investment in short term, however in long term investment is advisable only when company will start posting profits. Hence we recommend “Avoid” on issue", says Hem Securities research report.
This recommendation is in-line with what was made on myinvestmentideas blog. If company starts posting profits, one can look to invest in such companies.
Angel Broking says “Neutral on Coffee Day IPO as valuations are expensive”
Angel Broking has analysedCoffee Day Enterprises IPO and indicated that "Considering negligible profits/reported losses of subsidiaries and the complex holding structure of the company, we are of the view that the IPO is priced at a slightly higher valuation. Thus, we recommend a NEUTRAL on the issue", says the research firm.
Angel broking comments about Coffee Day IPO is priced on higher valuation is inline with Myinvestmentideas indicating that it is asking high premium price for such loss making company.
Ajcon Global says “Avoid Coffee Day IPO”
In its report, Ajcon Global stressed “"CDEL incurred losses in Financial Years 2012, 2013 and 2014 and FY15, which may adversely affect the business and financial performance. Its operations are conducted through Subsidiaries. Therefore, its ability to pay dividends on the Equity Shares depends on its ability to obtain cash dividends or other cash payments from its subsidiaries CDEL has pledged certain equity shares held by it in certain Subsidiaries and associate companies held by it in favor of certain lenders to secure loan facilities obtained by our Company and Subsidiaries. Complex holding structure, investors getting other businesses apart from Coffee business in CDEL bouquet which are currently dragging performance on consolidated basis, limited scope to improve EBITDA margins as retail coffee accounts only 30 percent of total capital employed, high capital cost of store addition would be a burden on financials considering low pricing lower as compared to peers like Starbucks in Coffee segment, high debt/equity of 5x, Consolidated Co’sbottomline line in red for past 3 years and steep valuation despite losses we recommend to “AVOID” the issue", says Ajcon Global research report.
Sharekhan says “Long term investment”
Sharekhan says “At the higher end of the issue price, adjusting for the valuation of the listed plays like MindTree, the coffee business is available at 25-26 times its FY2015 EV/Ebitda, which is in line with some of the listed comparable companies and thus is not cheap. However, given the strong brand image, extensive distribution reach and growing disposable income in India, the company is an attractive play on urban discretionary consumption and investors can look at it with a mid- to long-term investment horizon.
Also Read: Best Mutual Funds to invest through SIP in 2016
Anand Rathi says – “Worth long term investment”
"Café coffee day enjoys market share of approximately 46% in India, with their café footprint being nearly four times larger than the cumulative footprint of the next four competitors, as of December 31, 2014. The brand Café Coffee Day is ranked second in the Most Trusted Brands in the food service retail category in India, and was one of the only four indigenous Indian brands to be recognized as the Most Exciting Indian Brand in India. In addition to their coffee business, they operate other selected businesses that are aimed at leveraging India’s growth potential. Thus, this offer is worth considering for investment on a long term basis. Hence, we recommend “Long Term Subscribe” to the issue", says AnandRathi Securities research report.
ICICI Direct says – “Subscribe to Café Coffee Day IPO”
ICICI Direct has released its analysis on Coffee day IPO. It indicates that “We believe CDEL, on the back of the Café Coffee Day business, would be a major beneficiary of a revival in urban discretionary consumption. At the price band of Rs 316-328, a target market cap and EV at the upper end of the price band would be Rs 6756 crore and Rs 10510 crore, respectively. Given the investment value of the IT, logistics, real estate & hospitality businesses is ~Rs 5025 crore, the coffee business is available at 4.3x EV/sales which is ~15% discount to global coffee chain Starbucks. We recommend SUBSCRIBE.
Aditya Birla Money says “Subscribe to Café Coffee Day IPO for long term”
AB Money in its research report on Coffee day IPO indicated that "At the higher price band of Rs 328, the stock is valued at ~2.0x its FY15 consolidated sales of ~ Rs 24.8bn. We have used SOTP methodology (Table on page 2) as an alternative approach to value CDEL. Our back of the envelope calculations suggest the stock is priced closer to its fair value at its upper price band and our one year forward Sept’2016 target is Rs 376/ share. Given a) CCD’s pan India presence, b) strong brand name and c) only listed paper (thereby giving it scarcity premium) in the space, we recommend “Subscribe” on CDEL IPO for long term investors".
Also Read: Best Stocks to invest in India in 2016
Dilip Davda at Chittorgarh says “High Risk”
Dilip Davda, freelance journalist says on Chittorgarh.com that “We have witnessed miserable performances of IPOs of companies in red post listing. Considering continued negative earnings till date and its greedy pricing this offer is a "HIGH RISK" one”
Sanyam Jain of Simpleinterest blog says “Expensive, one should avoid”
Sanyam says since Café Coffee Day is not generating any profits, the price of the IPO cannot be justified and I would suggest staying away from Café Coffee Day IPO.
GoodReturns portal says "IPO is overpriced"
“Fundamentally speaking, the issue is overpriced, simply because the company has been making losses in the last few years. The best comparison that one can do is with Jubilant Foodworks, which runs the "Dominos" Pizza brand”.
Conclusion: IPO's are no doubt are Best Investment Plans in India, however they can ruin your investment if you do not take proper decision.
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Suresh
Café Coffee Day IPO – What is leading brokerages and blogs saying
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I never had the luck with ipo allotment. Wanted to invest in this but now I am skeptical after going through all the details about this ipo in various forums. I went till the very end of applying process and cancelled.
I want to risk it but not able to proceed further.
I am really going crazy !!!
Thank you as always for sharing all available information on the IPO. Simplifies the investment decision making process.
thanks suresh for the valuable information . your blog is very informative . hope to see more future posts from you .
Thank you Swaroop
Thanks for the wealth of information on the IPO.No doubt it is expensive.The promoters appear to be greedy and want to milk the gullible retail investors.There should be some guidelines by SEBI on how to fix the price band for loss making companies.