Coffee Day share price plunged over 19% on Monday after the National Company Law Tribunal (NCLT) ordered the initiation of insolvency proceedings against Coffee Day Enterprises Ltd, the parent company of the Coffee Day Group, which operates the coffeehouse chain Cafe Coffee Day. Coffee Day’s share price opened today at ₹38 on the BSE, the stock reached an intraday low of ₹37.55 and an intraday high of 41.05 per share. Coffee Day shares were among the worst performers in the Sensex.

According to Rajesh Bhosale, equity technical and derivatives analyst at Angel One, Coffee Day’s share price has underperformed and continued to decline today, falling over 14% at the open despite heavy trading volumes.

From a technical perspective, the Coffee Day share price has broken through a key support level and is likely to remain under pressure in the short term. Although speculative traders often try to capitalize on potential price declines in such situations, we recommend avoiding this strategy.

“We expect the underperformance of the Coffee Day share price to continue and little significant gains are expected in the near future. The next support level is ₹33, with resistance at ₹47,” Bhosale said.

NCLT orders insolvency proceedings against Coffee Day Enterprises

On August 8, the NCLT Bengaluru court allowed the appeal of IDBI Trusteeship Services Ltd (IDBITSL) alleging default in payment of ₹228.45 crore. A provisional liquidator was subsequently appointed to manage the indebted company.

“This is a continuation of our disclosure dated 08 August 2024 regarding the application filed by IDBI Trusteeship Services Limited against the Company in NCLT, Bengaluru under Section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) for ₹2,284,457,4180/-,” the company said in a stock exchange announcement.

According to a PTI news report, the coupon payments on the redeemable non-convertible debentures (NCDs) of Coffee Day Enterprises Ltd. have not been made. The company also owns and operates a resort, provides consultancy services and buys and sells coffee beans.

In March 2019, the financial creditor paid ₹100 Crore for subscription of 1,000 NCDs through private placement.

In order to appoint itself as Debenture Trustee on behalf of the Debenture Holders, Coffee Day Enterprises Ltd has negotiated and entered into an agreement with IDBITSL.

However, Coffee Day Enterprises Ltd failed to make the cumulative coupon payments that should have been made on various dates between September 2019 and June 2020.

Coffee Day Enterprises is in trouble following the death of founding chairman VG Siddhartha in July 2019. Since the problems began, the company has drastically reduced its debts and is paying them off through asset settlement.

On July 20, 2023, the same NCLT court in Bengaluru allowed an insolvency petition against Coffee Day Global Ltd., the company that owns and operates the Cafe Coffee Day chain. The petition filed by IndusInd Bank sought payment of Rs 94 crore.

On August 11, 2023, the NCLAT nevertheless stayed the proceedings and the parties subsequently reached an agreement.

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