JP Morgan and India Private Equity Fund (IPEF), a joint venture between Chase Capital Partners and Oppenhiemer, who together hold 31% stake in Jubilant Foodworks, are exiting their decade-old investment with returns in the region of 5x. Jubilant Foodworks, the master franchisee that operates Domino’s Pizza chain in India, is coming with its IPO that would provide an exit route to the PE firms besides raising around Rs 55 crore for the company.
The issue (involving equity dilution of 35%) has been priced in the bracket of Rs 135-145/share. At the lower end of the price band, the company will be valued at Rs 860 crore ($180 million).
One of the few IPOs necessitated by the desire to exit by the existing PE investors will raise over Rs 306 crore, a major portion of which will be encashed by the PE investors. The IPO will make it the first restaurant chain in the country to be traded publicly. The firm had been, reportedly, looking to sell the stake but has not been able to find a buyer at the valuation it was seeking. So, it decided to go ahead with the public float.
As per VCCircle calculations, the two financial investors are hoping to pocket 4x ‘net’ return for their 10-year-old investment of around Rs 53.2 crore ($11.6 million) that was spread over three tranches (1999, 2001 and 2003). Both investors could pocket over Rs 250 crore together against the estimated investment of Rs 53.2 crore. IPEF accounts for around two thirds of the total money invested by the two financial investors.
Jubilant Foodworks is coming up with a proposed issue with 22.67 million shares comprising fresh issue of 4 million shares and offer for sale by IPEF and Indocean Pizza Holdings (JP Morgan investment entity) cumulating to 18.67 million shares. Kotak Mahindra Capital is managing the issue.
The Delhi-based Bhartias owns close to 67% stake in the company that operates 274 Domino’s Pizza fast food outlets in 55 cities the country and is looking to prepay loans worth Rs 35 crore (out of total Rs 83.6 crore). It is the master franchisee of Domino’s Pizza in India until December 31, 2024.
Domino’s Pizza competes with Pizza Hut and Papa John’s in the pizza space and McDonald’s and KFC in organised fast-food market in India. For the year ended March’09, it had net sales of Rs 280 crore with net profit of Rs 6.7 crore. For the quarter ended June’09, it had revenues of Rs 85.5 crore with net profit of Rs 4.1 crore.
There have been a slew of PE deals in the limited organised restaurant and fast food chain business in India. IHC had acquired Mars Restaurants and SkyGourmet Catering and SAIF Partners had picked up 20% stake in Mainland China.
Malaysian private equity firm Navis Capital has been looking to partially exit from Delhi-based restaurant chain Nirula’s for over a year now, but the transaction has been delayed due to a similar issue of big difference over valuation
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