Coffee Day Enterprises shares tumble 19% today; here's why

Coffee Day Enterprises Ltd (CDEL) shares recorded a sharp cut in Monday's trade, extending their losing run for the third straight session. The stock dived 19.47 per cent to hit a day low of Rs 37.55. It was last seen trading 15.14 per cent down at Rs 39.57. At this price, the scrip has slipped 39.16 per cent on a year-to-date (YTD) basis.

Today's fall in the share price came after the National company Law Tribunal (NCLT), Bengaluru bench, initiated insolvency proceedings against CDEL. CDEL is the parent company of the Coffee Day Group that runs the Cafe Coffee Day chain of coffee houses.

"This is in continuation to our disclosure made on 08th August 2024, regarding the application filed by IDBI Trusteeship Services Limited (IDBITSL) against the Company in National Company Law Tribunal (NCLT), Bengaluru, has been admitted under Section 7 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) for Rs 2,28,45,74,180," the firm stated in a BSE filing.

"Further, the Company is planning to take the required legal action in this regard," it added.

A coram of judicial member K Biswal and technical member Manoj Kumar Dubey have appointed an interim resolution professional (IRP) to take control of the operation of the debt-ridden CDEL.

The NCLT has appointed Ashish Chhawchharia as the IRP and directed IDBITSL to deposit Rs 2 lakh to meet the expenses that the IRP will have to bear towards issuing public notices, inviting claims etc.

IDBITSL had filed the insolvency petition against CDEL in September 2023 claiming that the latter had defaulted on the payment of over Rs 228 crore.

As per the petition, IDBITSL the financial creditor (FC) in the case, and CDEL, the Corporate Debtor entered into a Debenture Trust Deed in 2019. The FC agreed to subscribe to non-convertible debentures worth Rs 200 crore and CDEL agreed to pay the FC in lieu of the subscription money raised.

However, CDEL defaulted in payment if such money on four occasions between 2019 and 2020 that were the scheduled dates of payment as per their agreement.

CDEL had argued before the NCLT that IDBITSL was a debenture holder and thus had no power to file any application seeking CIRP against the Corporate Debtor.

However, the NCLT disagreed and held that the debt which exists pursuant to the debenture was also a "financial debt."

On the stock-specific front, Coffee Day's stock saw heavy trading volume on BSE today as around 23.98 lakh shares changed hands at the time of writing this story. The figure was higher than the two-week average volume of 3.48 lakh shares. Turnover on the counter came at Rs 9.28 crore, commanding a market capitalisation (m-cap) of Rs 828.11 crore.

The counter was trading traded lower than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-day and 200-day simple moving averages (SMAs). The counter's 14-day relative strength index (RSI) came at 18.30. A level below 30 is defined as oversold while a value above 70 is considered overbought.

The company's stock has a negative price-to-equity (P/E) ratio of 0.82 against a price-to-book (P/B) value of 0.53. Earnings per share (EPS) stood at (-)57.03 with a return on equity (RoE) of (-)64.80.

As of June 2024, promoters held an 8.21 per cent stake in the company.