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Jubilant Foodworks Lists At A Premium

08 February, 2010

Jubilant Foodworks–from which private equity investors JP Morgan and India Private Equity Fund (IPEF-a joint venture between Chase Capital Partners and Oppenhiemer) exited their decade-old investment in its maiden public float–has made a strong debut on the bourses.

The stock of the fast food restaurant chain operator opened at Rs 161 on the BSE on Monday, over 10% premium to the issue price of Rs 145 a share.The stock closed the day at Rs 240 at NSE, almost 66% above the issue price.

The two PE investors, who together held 31% stake in Jubilant Foodworks, exited their decade-old investment with net returns of 4x. Jubilant Foodworks is the master franchisee that operates Domino’s Pizza chain in India. The issue (involving equity dilution of 35%) had valued the company at Rs 923 crore at the issue price or just about $200 million. At the closing price, the firm has a market cap of over Rs 1,500 crore ($325 million).

This was one of the few IPOs necessitated by the desire to exit by the existing PE investors. It has become the first restaurant chain in the country to be traded publicly. The firm had been, reportedly, looking to sell the PE stake but was not able to find a buyer at the valuation it was seeking. So, it decided to go ahead with the public float. Kotak Mahindra Capital managed the issue.

As per VCCircle calculations, the two financial investors pocketed 4x ‘net’ return on 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 pocketed 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.

Hypothetically, at the closing price on day one the PE firms could have been sitting on net returns of over 7x had they not sold the stake (assuming such a huge equity dilution without offer for sale would have maintained the valuation).

The Delhi-based Bhartias owns close to 67% stake in the company that operates 274 Domino’s Pizza fast food outlets in 55 cities 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 the 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 December’09, it had revenues of Rs 117 crore with net profit of Rs 11.3 crore.


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