Shares of Coffee Day Enterprises Ltd fell sharply in Monday's trade after IDBI Trusteeship Services Ltd filed an insolvency application against the company for an alleged default of Rs 228.45 crore. The stock slumped 18.32 per cent to hit a day low of Rs 43.35 over its previous close of Rs 53.07.
"This is to inform you that an application has been filed against the Company under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy Rules, 2019 by IDBI Trusteeship Services Limited before the National Company Law Tribunal (NCLT), Bengaluru for alleged default of Rs 228,45,74,180," the firm stated in an exchange filing.
The company is seeking appropriate legal advice and will take all appropriate steps to protect its interest in the aforesaid matter, Coffee Day added.
Bourses BSE and NSE have put the securities of Coffee Day under the short-term ASM (Additional Surveillance Measure) framework. Exchanges put stocks in short-term or long-term ASM frameworks to caution investors about high volatility in share prices.
On technical setup, analysts largely suggested that the counter looked 'bearish'.
Osho Krishan, Senior Analyst, Technical & Derivative Research at Angel One, said, "Coffee Day is in a corrective phase from a broader point of view. Of late, the stock has gained some traction from the lows of Rs 29 and soared to Rs 55, but failed to withhold the gains. At present, the crucial support lies around the Rs 40-odd zone, and any breach below could disrupt the chart patterns once again. On the higher front, the bearish gap is placed around Rs 48-52.50, which could be a daunting task to conquer in the near period, followed by the Rs 55-57-odd zone."
Vaishali Parekh, Vice-President - Technical Research at Prabhudas Lilladher, said, "The stock has witnessed a gap-down opening with weak bias. It has a near-term support around Rs 42.45 zone. To improve the bias, the stock would need to breach above Rs 48.50 level."
Ganesh Dongre, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers, said, "On the weekly charts, the stock has given a falling window candlestick pattern, which is bearish in nature. We may see further selling in this stock in upcoming days. We advise traders to book profit. Fresh longs are not advised at the current levels."
AR Ramachandran from Tips2trades said, "Due to corporate governance issues relating to an alleged embezzlement of funds, Coffee Day stock price has seen a sharp gap-down session and now faces strong support at Rs 41.5 on the daily charts. Investors should book profits at current levels as a close below this support could lead to target of Rs 37 in the near term. Strong resistance will be at Rs 48.2."
Market expert Ravi Singh said, "As the IDBI Trusteeship Services filed a default application against Coffee Day before the NCLT, we may see increase in the volatility in the stock. The stock may undergo selling pressure to continue till the some clarification is issued by the company. It may touch Rs 40 in the near term."
Kush Ghodasara, independent market expert, CMT, said, The stock is trading below 5- and 10-day average situated at Rs 48.45. It is now in a downtrend and we could expect stock to hit sub-Rs 35."
The counter was last seen trading lower than the 5-day and 10-day simple moving averages (SMAs) but higher than the 20-day, 30-, 50-, 100-, 150-, 200-day SMAs. The counter's 14-day relative strength index (RSI) came at 51.90. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 5072.91 against a price-to-book (P/B) value of 0.37.
The scrip has a one-year beta of 1.75, indicating high volatility.
Coffee Day Enterprises is engaged in the trading of coffee beans. The company owns and operates a resort and renders consultancy services. It is also engaged in the coffee business which ranges from procuring, processing and roasting coffee beans to retailing coffee to domestic and overseas customers.
As of June 2023, promoters held a 9.83 per cent stake in the company.
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