A quick note on the Cafe Coffee day IPO:
This is me being VERY VERY Late. I know. I’m sorry.
I wasn’t going to bother thinking this is another waste IPO where you won’t get anything due to oversubscription. So no point doing a detailed analysis. But apparently things don’t seem that badly oversubscribed. They only got full subscription just now.
Coffee day’s coffee isn’t great. Their Arabica variations suck. I think they need to train their buyers better.
But Coffee Day isn’t about coffee alone. It’s about hanging out with friends and a meeting place and place to read books. That’s something we are likely to grow to love. The startups love it already – any coffee day in BLR is a place to see startups pitch investors, make deals and all that. That’s the scene with all coffee shops.
It may be too late to do anything right now. I can’t – my online IPO system is not allowing me to buy. But if I could I would apply for a small quantity, around Rs. 50,000 worth. I think the retail coffee business is huge and can scale substantially.
The cost of refurbishing shops should come down as the cost of cement, paper etc. comes down. They have huge advertising potential, and the ability to bag the massive scale we will need in the highway shops, and none of their competitors are in that market.
It may be better to watch it at listing instead, with a low demand it might not list at much of a premium. This is a tiny IPO – just Rs. 1100 cr. – and hasn’t got much attention. But it could just end up being a big hit if Siddhartha pull out all stops, moves into the highways and gets a much lower real estate cost on his shops. But yes, this is so late you probably can’t act either.
Short take: Buy small, bet on longer term growth, no listing gains expected. Wait till listing.