I. OUTLOOK
Global Economic Outlook
The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in
2023, before settling at 3.0 percent in 2024. Advanced economies are expected to see an
especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In
a plausible alternative scenario with further financial sector stress, global growth
declines to about 2.5 percent in 2023 with advanced economy growth falling below 1
percent. Global headline inflation in the baseline is set to fall from 8.7 percent in 2022
to 7.0 percent in 2023 on the back of lower commodity prices but underlying (core)
inflation is likely to decline more slowly. Inflations return to target is unlikely
before 2025 in most cases. (Source: WORLD ECONOMIC OUTLOOK)
Indian Economic Outlook
Policymakers are currently facing a predicament. The last two years have seen the
global economy struggling to deal with overlapping crises, the latest being the liquidity
troubles after a series of global bank crises. While the impact appears to have been
contained, these uncertainties continue to undermine the confidence among consumers and
businesses to spend, therefore impacting economic growth.
The World Bank now fears that the ongoing slump in global economic growth will likely
result in a “lost decade.” Despite this gloom, many market analysts believe that
this could well be Indias decade. There are enough reasons and data to back this claim.
Recent data revisions by India suggest the economy has fared better than previously
believed despite continuing global uncertainties. The International Monetary Fund (IMF)
expects India to grow by 5.9% in FY 2023-24 and by an average rate of 6.1% over the next
five years.
While betting on consumption-driven growth is obvious given Indias large, young, and
rising share of the upper middle-income population, we believe that investment will play
an important role over the next two years. It is investments that will provide India with
necessary momentum to take off on a path of sustained domestic demand-led growth for
decades to come.
Our overall outlook for the Indian economy remains positive. We expect investments to
see a turnaround and thrust the economy into sustainable growth. India will likely grow at
a moderate pace of 6.0%-6.5% in FY 2023-24, as the global economy continues to struggle.
Growth in the next year will likely pick up as investments kick start the virtuous circle
of job creation, income, productivity, demand, and exports supported by favorable
demographics in the medium term.
It looks like the world has come out of the shadow of the pandemic and has, in fact,
learned to live with it. However, geopolitical crises, supply chain reorientations, global
inflation, and tight monetary policy conditions will weigh on the outlook. We have delved
into these challenges in detail in our previous outlooks.
(Source: Deloitte insights)
II. INDUSTRY STRUCTURE AND DEVELOPMENTS
a. Coffee Business:
Market Analysis
Coffee has been a beloved beverage in the western world for ages, but its popularity
extends far beyond those borders. The demand for this delicious drink is at an all-time
high worldwide, and India has long been a significant producer, consistently ranking in
the top 10 coffee-producing countries.
Multiple factors drive the coffee market, a few being the increasing demand for
certified coffee products, the acceptance of single-serve coffee brew systems by
consumers, and the constant innovation led by the top players in the coffee market. In
developed economies, some consumers are expected to switch from instant coffee to
premium coffee due to its quality and flavor. Instant coffee was once considered a
high-end product but has begun to lose its base of younger consumers, which is changing
the market dynamics.
Over the last few years, consumers have become more aware of the manufacturing of the
products they buy and where their purchases are coming from. This is applicable especially
in the case of the supply chains of food and beverage products, such as coffee. Consumers
are looking for certified coffee products to ensure the credibility of their coffee
purchases.
The consumers concerns about poverty, social injustice, and environmental destruction
have driven the demand for certified sustainable brands and labels in the food and
beverage market. Coffee types that adhere to various combinations of social,
environmental, and economic standards and are independently certified by an accredited
third party have been collectively termed “sustainable coffee.”
Certified coffee is also an assurance to the consumer about the products reliability,
as coffee is becoming an increasingly common target for food counterfeiters. A number of
certification organizations are checking the production procedures and the supply chains
of coffee. Some of these organizations include UTZ Certification, Fair Trade
Certification, Rainforest Alliance Certification, and USDA Organic Certification.
(Source: Mordor Intelligence)
Opportunities
The profitability in this sector depends on the ability to secure prime locations,
drive store traffic, and deliver high-quality products along with services. The Cafe
industry is predominantly driven by millennials, full-time workers, parents of under-18s,
city dwellers, and teenagers. Moreover, people who lead busy city lives or have more
disposable income by living at the family home into adulthood drive the demand for
eat-outs at cafe.
The Cafe Market has been witnessing extremely significant growth in the urban areas
where a comparatively larger working population is inclined to accept western cuisines,
including baking, thus accelerating the bakery products demand upsurging the market
growth. The cafe industry is having increasing demand as businesses are creating a
consumers perception of third place. The working population already spends considerable
time at home and work. Their vision of a third place is not only to consume coffee and
food but to invest significant personal time.
For this reason, industry marketing efforts are closely bound to the lifestyle
projected by the businesses propelling the growth of the Cafe Market. The Cafe Market
depends on word of mouth and customer retention. Furthermore, a customers opinion,
preferences, and shopping habits are influenced very easily creating a big threat to
businesses. Substitutes can be considered a restraint in this industry. Consumers have a
limited discretionary budget to spend on consumer goods such as cigarettes, beer, coffee,
and food. Cafes, therefore, fight for a fraction of this budget.
Risks, Concerns, and Threats
There is an emergence of inflation be it input costs - spanning across packing material
and fuel which is a cause of concern to us.
Ecological concerns and responsive measures: The entire plantation industry is
dependent on climatic condition, making it susceptible to climatic parameters. The major
weather factors that influence coffee yield are rainfall, temperature, light intensity,
and relative humidity. As the plantations are susceptible to vagaries of weather, the
Company has mitigated this dependency by irrigating its Robusta areas.
Product Development and completion
One important ongoing trend in this industry remains the introduction of new product
lines. A wide array of companies have developed specialty coffees
Market Segmentation
Coffee is one the most popular caffeinated drink, which is brewed from roasted coffee
beans that are harvested from certain species of the Coffee plant. It is served both hot
and cold and is prepared in a variety of ways. In addition, some of the popularly consumed
coffee variants available in the market include arabica and robusta. All commercially
grown coffee is harvested in the coffee belt region of the world, located along the
equatorial zone. This is because the coffee belt provides the best suitable conditions for
the coffee crop to thrive, such as rich soil, mild temperature, shaded sun, and frequent
rain. Moreover, coffee is associated with health benefits, including reduced risk of
cardiovascular diseases, increased alertness and concentration levels, and increased
energy levels, among others.
b. Hospitality Business
As per Business Today: The Hospitality Industry, which suffered a significant setback
due to the pandemic in the past two years, has experienced a reversal of fortunes in the
fiscal year 2023 and is now steadily heading towards its growth path. According to a new
report by CareEdge Ratings, the domestic hospitality sectors demand outlook is positive,
indicating a promising future for the industry.
The sectors Average Recurring Revenue (ARR) should continue to rise in FY24, boosted
by Indias G-20 presidency, the ICC Cricket World Cup, and the resumption of foreign
inbound travel, along with robust domestic leisure travel, the sectors ARR should
continue to inch higher in FY24, boosting Revenue Per Available Room (RevPAR). CareEdge
estimates that RevPAR should grow 3-5 per cent over FY23 levels.
All key performance indicators, including RevPAR, ARR, and occupancy rate, are higher
than pre-pandemic levels, indicating that the industry is on its way back to
profitability. Domestic hotel players are now in a better position to resume pending
projects and start new ones, thanks to increased revenues and accruals cushioned by the
players cost restructuring. This, in turn, will increase supply in the sector.
Market Size
The Indian Tourism sector ranks among the fastest-growing economic sectors in the
country. The industry significantly impacts employment and drives regional development,
while also creating a multiplier effect on the performance of related industries.
India is a large market for travel and tourism. It offers a diverse portfolio of niche
tourism products - cruises, adventure, medical, wellness, sports, MICE, eco-tourism, film,
rural and religious tourism. India has been recognized as a destination for spiritual
tourism for domestic and international tourists. In his Independence speech from Red Fort,
Prime Minister Mr. Narendra Modi urged people to visit 15 domestic tourist destinations in
India by 2022 to promote tourism. India ranked 34 in the Travel & Tourism
Competitiveness Report 2019 published by the World Economic Forum. India is the most
digitally advanced traveler nation in terms of digital tools being used for planning,
booking, and experiencing a journey. Indias rising middle class and increasing disposable
income has supported the growth of domestic and outbound tourism.
The Indian hotel market including domestic, inbound and outbound was estimated at ~US$
32 billion in FY20 and is expected to reach ~US$ 52 billion by FY27, driven by the surging
demand from travelers and sustained efforts of travel agents to boost the market.
The Tourism & Hospitality sector has seen some major developments, investments and
support from the Government in the recent past.
Investments
• In the Union Budget 2022-23, Rs. 2,400 crore (US$ 309.13 million) has been
allocated to the Ministry of Tourism which is 18.42 % higher than the allocation for FY
2021-22, Rs. 1,181.30 crore (US$ 152.16 million) is allocated for the Swadesh Darshan
Scheme, Rs. 235 crore (US$ 30.27 million) for the Pilgrimage Rejuvenation and Spiritual
and Heritage Augmentation Drive (PRASHAD) Scheme
• In Union Budget 2023-24, US$ 290.64 million was allocated to Ministry of Tourism
as the sector holds huge opportunities for jobs and entrepreneurship for youth in
particular and to take promotion of
tourism on mission mode, with active participation of states, convergence of government
programmes and public-private partnerships.
• The Emergency Credit Line Guarantee Scheme (ECLGS) covered through a liberal
definition of MSME (micro small and medium enterprises) has been expanded to include
tourism and hospitality stakeholders. Infrastructure status has been granted to
exhibition-cum-convention centres.
• FDI inflows in the Tourism & Hospitality sector reached US$ 16.48 billion
between April-June 2022.
Government Initiatives
The Indian Government has realized the countrys potential in the tourism industry and
has taken several steps to make India a global tourism hub. Some of the major initiatives
planned by the Government of India to boost the tourism and hospitality sector of India
are as follows:
In the Union Budget 2022-23:
• Visa reforms include a significantly expanded Golden Visa scheme, a five-year
Green residency and new entry permits, including one for job seekers. The new system also
offers additional benefits to sponsor family members
• To ease travels for international tourists, the Government of India has launched
a scheme wherein five lakh tourists will get free visas.
• In August 2022, Ministry of Tourism sanctioned 76 projects for Rs. 5,399.15
crore (US$ 678.39 million) under Swadesh Darshan Scheme for development of tourism
infrastructure in the country.
• In June 2022, the Ministry of Tourism along with Associations of Indian
Universities (AIU) initiated a 12 episode webinar series under ‘Azadi Ka Amrut
Mahotsav (AKAM) to engage and expose young minds of our country to the rich and diverse
heritage of the country.
RISKS CONCERNS AND THREATS Financial risk
If the Companys cash flow proves inadequate to meet its financial obligations, its
status as a going concern might be invoked.
Competition risk
With growing westernization and increase in the penetration of global players and
growing popularity of individual themed cafes, it might be a challenge for the Company to
maintain its existing consumer base.
Regulatory risks
Operating in the food industry space is subject to various regulatory risks with
respect to failure of compliance to quality standards and various regulations imposed by
the government policies. Failure to meet with the standards might result in legal
implications and loss of business.
Climatic risks
Bad monsoon might result in lower production of coffee leading to soaring high coffee
prices. Passing it to the customers would incur menu costs and loss in price sensitive
segment of consumer base. Thus, inadequate monsoon might result in falling revenues and
profit.
Economic risk
Sluggish growth of the economy impacts the spending power reducing consumption. Overall
macroeconomic instability results in a lower demand. Thus fluctuations in the economic
scenario possess a major risk to the business of the company. Performance of the backward
and forward linked industries is of vital importance for the logistics sector to perform.
Social and political risk
Government policies play a major role in determining the fate of an industry.
Relaxation of various regulations and simplification of tax regime give the much needed
push to the concerned sectors. Change in orientation with change in government possesses a
threat to the business.
Pandemic Risk:
A pandemic is a rapidly spreading infectious disease that may pose a global threat.
Pandemics can create social and economic chaos. They can severely upset business
operations by disrupting the supply chain and causing high absenteeism. This may impede
your ability to deliver products and services to your customers.
Managing the threats posed by a pandemic is critical for business survival. A business
continuity plan can help you manage the impacts of a pandemic and meet your legal
obligations to staff to ensure their safety.
Business continuity plan will detail businesss risk management strategy and business
impact analysis. It will describe how business intends to respond to an incident, sets out
a recovery plan and defines policies and procedures for managing staff and communication.
III. SEGMENT WISE PERFORMANCE
COMPANYS FINANCIAL OVERVIEW
Statement of Profit and Loss Analysis
Net Revenue
Net revenues increased by 59% to Rs.924 Crores in FY 2022-23, compared with Rs.582
Crores reported in FY 2021-22.
Operating Profit
Operating profit (EBITDA) for FY 22-23 stands at loss Rs.134 Crores compared to profit
of Rs.73 Crores in FY 2021-22. The loss during FY 22-23 is mainly due to write-off of
balance due from Sical Logistics Limited to the Company and its subsidiaries of Rs.392
crores as per the order dated 8th December 2022 passed by NCLT Chennai.
Depreciation
Depreciation for the year under review stood at Rs.161 Crores, compared with Rs. 148
Crores recorded in the previous year, up 9% on a y-o-y basis. Increase in depreciation
mainly due to some of the Fixed assets pertaining to closed cafes fully depreciated to the
tune of Rs.19.00 Crores as they obsolete or unusable.
Finance costs
Finance cost for the year under review increased by 63% from Rs.54 Crores to Rs.87
Crores. Increase in finance cost mainly due to new leases agreement entered and foreign
currency loans Mark to market provision.
Net profit
Consolidated net loss for the year under review attributable to shareholders of the
company stood at Rs.380 Crores compared with loss of Rs. 121 Crores in the previous
financial year. The loss during FY 22-23 is mainly due to write-off of balances due from
Sical Logistics Limited to the Company and its subsidiaries of Rs.392 crores as per the
order dated 8th December 2022 passed by Chennai Bench,.
Balance Sheet Analysis
Net worth
The Companys net worth stood at Rs.3,376 Crores as on 31st March, 2023,
decreased by 11%, compared with Rs.3,775 Crores as on 31st March, 2022. The net
worth comprised of paid-up equity share capital amounting to Rs.211.3 Crores as on 31st
March, 2023 (211,251,719 equity shares of Rs. 10 each fully paid up) and Noncontrolling
interests of Rs.158 Crores. The Companys reserves and surplus stood at Rs.3,007 Crores as
at 31st March, 2023.
Loan profile
As on 31st March, 2023 the total loan funds stood at Rs.1,600 Crores which
comprises of long-term borrowings of Rs.1,297 Crores and short-term borrowings of Rs.303
Crores and the Companys net debt stood at Rs.1,524 Crores.
Liabilities
Non-current liabilities (excluding borrowings) stood at Rs.212 Crores, comprising of
lease liabilities Rs.198 Crores, deferred tax liabilities Rs.7 Crores, and provisions
amounting to Rs.7 Crores.
Current liabilities (excluding current borrowings of Rs.303 Crores and current
maturities of long-term borrowings amounting to Rs.1166 Crores) stood at Rs.665 Crores,
comprising of lease liabilities of Rs.44 crores, other financial liabilities of Rs.343
Crores, trade payables of Rs.91 Crores, other current liabilities Rs.25 Crores, current
tax liabilities Rs.110 Crores, provisions Rs.31 Crores and liabilities associated with
assets held for sale amounting to Rs.21 crores.
Total assets
The Companys total assets decreased to Rs.5,853 Crores in 2022-23 from Rs.6,303 Crores
in 2021-22, representing decrease of 7%. This decrease in total assets is mainly on
account of write-off of balances due from Sical Logistics Limited to group companies of
Rs.392 crores as per the Honble NCLT Chennai Bench, order dated 8th December 2022.
Investments
The Companys investments (current and non-current) including equity accounted
investees during the year under review decreased to Rs.440 Crores from Rs. 429 Crores in
the previous year, increase of 2% over the previous year.
Current and Non-Current Assets
Inventories increased by 63% to Rs.31 Crores during the year under review from Rs.19
Crores in FY 2021-22. Inventories comprise of raw material inventory of Rs.22 Crores,
finished goods inventory of Rs.2 Crores and Stores and spares of Rs.7 crores.
Trade receivables of the Company stood at Rs.57 Crores in FY202-23, increase of 64%
over the previous year.
The Company had on its books cash and bank balances including deposits worth Rs.77
Crores as on 31st March, 2023 as compared to Rs.60 Crores in 31st March, 2022.
The company had Tax assets Rs.404 Crores during the year under review. Total tax assets
for FY 2022-23 comprise of deferred tax assets, (net) Rs.373 Crores and current tax
assets, (net) Rs.31 Crores.
Other financial assets stood at Rs.1,074 Crores as compared to Rs. 1099 Crores in the
previous year.
Details of significant changes (i.e., change of 25% or more as compared to the
immediately previous financial year) in the key financial ratios, along with detailed
explanations thereof, including:
Sl. No. Particulars |
2023 |
2022 |
1 Debtors turnover (Refer note-2) |
7.84 |
5.38 |
2 Inventory turnover (Refer note-2) |
19.13 |
11.86 |
3 Interest coverage ratio(Refer note 1) |
-3.39 |
-1.39 |
4 Current ratio |
1.72 |
1.89 |
5 Debt equity ratio |
0.55 |
0.51 |
6 Operating profit margin (%) (Refer note 1) |
-14.52% |
12.57% |
7 Net profit margin (%) (Refer note 1) |
-41.91% |
-22.48% |
8 Return on Net W orth(%) (Refer note 1) |
-10.83% |
-3.41% |
1. Interest Coverage Ratio, Operating Profit Margin, Net profit Margin and Return on
Net Worth decreased mainly due to on account of write-off of balances due from Sical
Logistics Limited to the Company and its subsidiaries of Rs.392 crores as per the order
dated 8th December 2022 passed by NCLT Chennai..
2. Inventory turnover and Debtors turnover ratio increased due to improvement in the
group business. There is no significant change (i.e. change of 25% or more as compared to
the immediately previous financial year) in the key financial ratios except as mentioned
above.
Operational Overview
Coffee Day Enterprises is present across the following sectors:
Coffee, hospitality and other operation. However, 94% of the consolidated net revenue
of the Company was contributed by the coffee business during the year under review,
followed by 5% from the hospitality and 1% from other operations.
Coffee Business
Gross Revenue from the Companys consolidated coffee business stood at Rs.869 Crores in
2022-23, contributing 94% to the consolidated topline, representing a increase of 75% over
2021-22. Consolidated Loss Before Tax is Rs. 63 Crores for FY 2022-23 compared to 111
Crores for Previous Year FY 2020-21.
Coffee Day Global Limiteds flagship cafe chain brand Cafe Coffee Day (CCD) owns 469
cafes in 154 cities and 268 CCD Value Express kiosks. There are 48,788 vending machines
that dispense coffee in corporate workplaces and hotels under the brand.
Particulars |
2020-21 |
2021-22 |
2022-23 |
No. of cafes |
572 |
495 |
469 |
No. of cities of presence |
165 |
158 |
154 |
No. of CCD Value Express kiosks |
333 |
285 |
268 |
No. of operational vending machines |
36,326 |
38,810 |
48,788 |
Hospitality Business
The Company owns and operates luxury boutique resorts, one directly through our
Company, and two through our wholly-owned subsidiary, Coffee Day Hotels & Resorts
Private Limited (CDHRPL), under the brand ‘The Serai. These resorts are located at
Chikmagalur, Bandipur and Kabini, all in Karnataka. The Company also with management
control holds equity interest in a luxury resort in the Andaman and Nicobar islands.
Revenue from our hospitality business increased by 30% from Rs.35 Crores in FY 2021-22
to Rs.46 Crores in FY 2022-23.
(Note: All information presented in Indian rupee has been rounded off to the nearest
crore unless otherwise indicated.)
Internal Control Systems and Their Adequacy:
The Company has intended to increase transparency and accountability in an
organizations process of designing and implementing a system of Internal Control. The
framework requires a Company to identify and analyze risks and manage appropriate
responses. The Company has successfully laid down the framework and ensured its
effectiveness. The Companys Internal Controls are commensurate with its size and the
nature of its operations. These have been designed to provide reasonable assurance with
regard to recording and providing reliable financial and operational information,
complying with applicable statutes, safeguarding assets from unauthorized use, executing
transactions with proper authorization and ensuring compliance of Corporate Policies.
The Company has a well-defined delegation of power with authority limits for approving
revenue as well as expenditure. Processes for formulating and reviewing annual and long
term business plans have been laid down.
M/s. Venkatesh & Co, Chennai, the Statutory Auditors of the Company have audited
the Financial Statements included in this Annual Report and have issued a report on the
Internal Control over financial reporting (as defined in section 143 of the Companies Act,
2013).
The Company has appointed ABS & Co, Chartered Accountants to oversee and carry out
Internal Audits. The Audit is based on an Internal Audit Plan, which is reviewed each year
in consultation with the Audit Committee, the conduct of Internal Audit is oriented
towards the review of Internal Controls and risks. Additionally, there
has been a continued focus on IT enablement and computerization of key process controls
through the Systems to maximize automated control transactions across key functions.
The Internal Audit function endeavors to make meaningful contributions to the
Organizations overall governance, Risk Management and Internal Controls. The Audit
Committee reviews reports submitted by Internal Auditors. Suggestions for improvement are
considered and the Audit Committee follows up on corrective actions taken by the
Management. The Audit Committee also meets the Companys Statutory Auditors to ascertain,
inter alia, their views on the adequacy of Internal Control Systems and keeps the Board of
Directors informed of its major observations periodically. Based on its evaluation (as
provided under Section 177 of the Companies Act, 2013 and applicable clause of SEBI
Listing Regulations), the Audit Committee has concluded that as of 31st March, 2023, the
Internal Financial Controls were adequate and operating effectively.
Material Developments in Human Resources/ Industrial Relations Front And Number of
People Employed:
At a Group level, we have built a reputation of being able to attract and retain key
talent.
People & Culture
Our employees make a difference to our customers. Delivering customer promise across
the Group is a critical component of our success. It therefore becomes imperative that our
employees deliver the best in class service. We are very passionate and determined about
being one of the best in the industry verticals we operate and are committed to be a
leading employer in our space.
Recruitment
We have strengthened our entry level and middle management lateral hiring process
across our businesses. We have a robust process to hire middle & senior management
staff through need-based hiring. Our selection process has innovative “practical
project” built in for senior level leadership hiring, so as to test their ability to
lead a P&L or make change happen.
Training and Development
Building skills for entry level staff has been a significant effort, and we continue to
work with skilling institutions / NGOs, our own Skilling centres as well with several
state government skilling programs. At management level, we have our well established
“Trainee” programs across businesses or direct induction at mid-levels through a
well-designed induction program for lateral hires.
Some of our popular programs have included the “Sales Trainee” program at
Vending business, OT / LDP program at CCD, Management Trainee program at Retail Logistics
to name a few. We have also partnered with five other well-known companies and formed an
“Exchange Consortium” and have offered Leadership Development / learning
opportunities for our Senior Leaders. We also continue to invest and grow our diversity
staff including the hearing challenged.
Compensation
Our employees across various business receive competitive salaries and benefits within
the industries they operate. We have started introducing a “Variable Pay”
program selectively so as to drive a Performance culture. The “Group Retention Policy
Program” is selectively used to attract and retain key talent. Increasingly we will
use sales incentive / performance bonus to drive a performance culture. There were no days
lost due to any industrial strife or labor issues.
Place: Bangalore For Coffee Day Enterprises Limited
Date: 30th May 2023
Sd/-
S.V. Ranganath
Interim-Chairman & Independent Director DIN: 00323799
Sd/-
Malavika Hegde
Whole-time Director DIN: 00136524
ANNEXURE-II
+91-9892691696
