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Coffee Day hopes to close IT park sale to Blackstone in a week

Coffee Day hopes to close IT park sale to Blackstone in a week

BENGALURU: The Coffee Day Group hopes to close its proposed sale of Global Village tech park in Bengaluru to US private equity giant Blackstone in about a week’s time, having crossed all major hurdles including government approvals and a green signal from most of its lenders.

The Ministry of Commerce cleared the proposed deal on Friday. This approval was necessary as the 90-acre IT-focussed tech park comes under the special economic zone (SEZ) regulations. Private lender

Yes Bank

has issued a no-objection certificate. Tanglin Developments, a group subsidiary and the park’s promoter, owes the bank Rs 100 crore.

Coffee Day Enterprises (CDEL), the Bengaluru-based listed group holding company, needed approvals from the central and Karnataka governments as well as NoCs from 16 banks and other financial institutions.

“We have secured most of them, and a couple of bank NoCs are expected in a day or two,” a company executive briefed on the subject told ET, on the condition of anonymity as he is not authorised to speak to the media.

Karnataka chief minister BS Yediyurappa, state officials said, personally advised his officials to fast-track his government’s approvals as Coffee Day is a coffee brand based out of the state, founded by the late VG Siddhartha, with a pan India footprint of about 1,500 stores. “The CM was keen on speedy clearances as jobs of about 20,000 people hinged on the Coffee Day group’s survival, and most of these jobs are in Karnataka,” an official privy to approvals said.

Yes Bank, the Blackstone Group and Coffee Day Group didn’t respond until press time Monday to emails seeking comment.

The Blackstone group as well as Coffee Day were in need of a couple of clearances from the state government for the deal to proceed. Section 109 of the Karnataka Land Reforms Act, 1961, posed a hurdle, and the government removed it by amending the law, and issuing a notification paving the way for the transaction. The state cabinet also exempted stamp duty and registration fee as the park is an SEZ.

In September, Coffee Day Enterprises signed definitive agreements with Blackstone and the Salarpuria Sattva Group to sell its tech park at an enterprise value of Rs 2,700 crore, after the company fell upon hard times following the death of Siddhartha in July. The buyers will give Rs 2,000 crore in the first tranche, and the rest after other formalities are completed.

The Coffee Day Group is sitting on debt of about Rs 4,800 crore. Once the sale is through, it will help the holding company clear Tanglin’s debt of about Rs 1,700 crore. “The deal will help cut the debt substantially, and bring down the total group debt to a more manageable level,” the executive said.

Coffee Day, company insiders said, also owed money to several coffee growers who supplied green beans. After clearing the debt, the company will use the balance as well as the savings from stamp duty and registration waiver to pay off growers.

The Global Village tech park has 4.5 million square feet of built up area. In a note he left behind, Siddhartha had estimated that the tech-park would earn Rs 250 crore in rentals over the next 12 months. The park has a potential to add another 5 million square feet of built up space. The group, through Tanglin, also owns Tech Bay, a 21-acre, riverfront property, in the coastal Karnataka city of Mangaluru.

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