Asia’s Largest Cigarette Maker Considers Stake in Coffee Day
A freshly-made glass of “cappuccino” coffee with a decorative swan design in the foamed milk stands on a counter inside a coffee store. (Photographer: Simon Dawson/Bloomberg)  

Asia’s Largest Cigarette Maker Considers Stake in Coffee Day

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(Bloomberg) -- India’s ITC Ltd. is considering a bid to buy a stake in Coffee Day Enterprises Ltd. as the nation’s biggest cigarette maker seeks to diversify its businesses, according to people familiar with the matter.

The maker of Classic and Gold Flake cigarettes has been given access to Coffee Day’s assets and financial for due diligence, said the people, who asked not to be identified as the discussions are private. ITC could be vying with Coca-Cola Co., which has evaluated India’s biggest cafe chain but hasn’t made a formal offer, said one of the people.

Shares of ITC fell 2.1% in Mumbai on Wednesday, while Coffee Day rose 5%, extending its three-day winning streak to almost 16%.

A successful bid will help ITC further diversify its business to reduce dependence on cigarettes as India raises taxes on tobacco and restricts smoking in public places. Coffee Day is under pressure to pare borrowings after its founder V.G. Siddhartha took his own life as debt strains began to emerge in his companies.

Deliberations are at preliminary stage and may not lead to a formal offer, according to the people. ITC received an inquiry from an intermediary on Coffee Day and there has been no progress, its spokesman said in response to Bloomberg’s query. The news is incorrect and Coffee Day is unaware of any such developments, Coffee Day said in a filing.

Coffee Day has about 1,700 outlets, ten times more than what Starbucks Corp. runs in the world’s second most populated country, according to the National Restaurant Association of India. A unit of private equity firm KKR & Co. owns 6.07% of the company. Standard Chartered Private Equity holds 5.7%, while Nandan Nilekani, co-founder of Infosys Ltd., has a 2.69% stake.

©2019 Bloomberg L.P.

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