Coffee Day Enterprises: Company Stock Analysis

DEC 2024 UPDATES

When Fraud Auditors Become REIT CEOs If you manage other people’s money, there’s one non-negotiable rule: you shouldn’t have a fraud record. Sounds basic, right? Turns out, it’s a bit tricky because some folks love both fraud and playing with others’ money. SEBI recently told Embassy REIT to suspend its CEO, Aravind Maiya, because he was caught in a fraud scandal from his auditing days and was already banned from being an auditor. Here’s the backstory– Until 2019, Maiya worked with KPMG (BSR & Co.), auditing Coffee Day Enterprises (CCD), the company behind Cafe Coffee Day. Turns out, CCD’s founder, VG Siddhartha, had been siphoning off massive amounts of money from CCD to his family-owned company, Mysore Amalgamated Coffee Estates. How? Pre-signed blank cheques from CCD’s CFO would magically land in the deposit box of Siddhartha’s bank, and voila—money flowed to his dad’s company, which barely earned a few crores but somehow received advances worth thousands of crores for “coffee beans.” Now, Maiya was the guy who was supposed to catch these red flags as the auditor. But he didn’t. Why? Because Siddhartha was smart—he used CCD’s subsidiaries to funnel the money instead of CCD itself. Maiya claimed he didn’t audit the subsidiaries and simply trusted the other auditors. Imagine seeing a bank statement where ₹50 crore comes in and goes out repeatedly, and thinking, “This seems fine.” That’s exactly what Maiya did! NFRA (National Financial Reporting Authority)—yes, a real body—called this out. Their point: If you’re the auditor, you ask questions. Why’s money jumping back and forth between accounts like it’s practicing yoga?

Fast forward to Embassy REIT- SEBI said, “This guy isn’t ‘fit and proper’ to run your REIT.” Makes sense, right? But Embassy argued, “Actually, our CEO doesn’t need to meet ‘fit and proper’ criteria.” Bold move! SEBI wasn’t impressed and ordered them to remove Maiya. So what did Embassy do? They didn’t fire him outright. Nope, they moved him sideways to “Head of Strategy.” Seriously? When the regulator says kick someone out, you kick them out. You don’t give them a new office with a fancy title. SEBI’s likely gearing up to issue another order—this time making it clear that “fit and proper” applies to all important roles, including whatever vague title Embassy cooks up next.

If you’re running a REIT (or anything involving trust), don’t mess around with shady hires. And if SEBI tells you to do something, don’t play smart. Just do it.

Here’s the consolidated data of Cafe Coffee Day (CCD) for the last 10 years, including the number of outlets, operational vending machines, Value Express kiosks, and the number of cities where they were present:

Key Insights:

1. Outlets: CCD’s peak in terms of outlets was in 2019 with 1,752 cafes. Since then, the number has decreased significantly to 450 in 2024 due to financial challenges and restructuring.
2. Vending Machines: The number of operational vending machines has been steadily increasing, reflecting a shift toward automation. The count grew from 30,000+ in 2014 to 52,581 in 2024.
3. Value Express Kiosks: These kiosks reached their peak in 2018 with 532 kiosks but have since declined, stabilizing at 265 in 2024.
4. Cities: CCD had a presence in 243 cities in 2019 but reduced this to 141 cities by 2024 as part of its downsizing efforts.

This trend highlights CCD’s strategic shift from physical outlets to more automated solutions like vending machines, likely to reduce operational costs while maintaining a broader reach in corporate spaces and hotels.

Share Price of Last 10 Years

Sales and Margin of Last 10 years

Balance Sheet & Loan of Last 10 years

Quarterly Results

Borrowing, loans, and debt for Coffee Day Enterprises

Here’s a table detailing the borrowing, loans, and debt for Coffee Day Enterprises over the last 10 years (2014 to 2024):

Key Highlights:

• 2019 marked the peak of Coffee Day Enterprises’ debt, driven by rapid expansion and borrowing, followed by the unfortunate demise of founder V.G. Siddhartha.
• 2020 onwards saw significant debt reduction as the company sold major assets, such as its technology park, and repaid portions of its debt.

Here’s a quarterly breakdown of Coffee Day Enterprises’ borrowing, loans, and debt for 2024 based on available data:

Key insights:

• Debt Restructuring: The company has been facing significant liquidity issues, resulting in defaults on payments.