Foreign investors more than double their holdings in the company over five quarters.
Last February, when Jubilant Foodworks hit the equity markets, few could have foreseen its potential as a multi-bagger. But, on the very first day, it rose 60 per cent – from its issue price of Rs 145 to 229 – belying critics’ views. In the next one year, the share price tripled.
The good performance has continued. Despite some correction in recent months, the company continues to do better than broader indices. From an all-time high of Rs 1,021.80 on September 6, it is down almost 25 per cent to 768.50. But for investors in this company, the going could not have been better.
No wonder, investors have kept their faith in the stock. Foreign institutional investors (FIIs), who have been bearish on many counters this year, have continued to show their interest in this company.
During the last five quarters, FIIs have more than doubled their holdings in the company from 17.39 per cent in June 2010 to 35.84 per cent last quarter. During this period, domestic institutions have reduced their holdings to around a tenth from 10.74 per cent to a mere 1.28 per cent. Moreover, in the first half of the current financial year alone, FIIs increased their holdings by over 11 per cent as new investors entered the counter.
“Jubilant has caught the fancy of foreign investors, irrespective of the visibly higher valuations,” said a chief investment officer of a foreign fund house on the condition of anonymity, adding that the valuations had been high because there weren’t similar companies in the Indian listed space.
More From This Section
An international parallel is Arcos Dorados Holdings Inc, the world’s largest franchisee of restaurant chain McDonald’s, in terms of sales as well as number of outlets. The stock was listed on the New York Stock Exchange in April and received huge investor attention.
This Argentina-based company, which wanted to raise $ 874 million by issuing 62.5 million shares in the price band of $13-15, finally ended up raising $1.25 billion by issuing 73.5 million shares – 11 million more than the original plan. Even the issue price was raised by 21 per cent to $17. BofA Merrill Lynch, JPMorgan and Morgan Stanley acted as lead managers in the deal.
Even new players in the market have shown appetite for the Jubilant stock. New entrants like Goldman Sachs Investments, Morgan Stanley, Variable Insurance Products and Pioneer Asset Management, collectively picked up nearly seven per cent stake in the first half of 2011-12.
As India’s population and consumption rises, with affordability for packaged fast foods increasing, it’s an opportunity for investors, say market experts. Valuation of such businesses at an initial stage can get exorbitant, and may not necessarily be attractive at a point of time, they add.
In India, Jubilant Foodworks is the market leader, with a 50 per cent market share, in the formal pizza market (Domino’s Pizza); and a 70 per cent share in the pizza home delivery segment. It has expanded its portfolio by entering into an alliance with Dunkin’ Donuts to develop the latter’s operations in India.
Jubilant added 100 new outlets over the last 15 months. Patrick Doyle, president & CEO of Domino’s Pizza Inc, who was in India as Jubilant crossed the 400-outlet mark, said: “The India operations are doing very well. The amazing growth of Domino’s India has set new records for us globally. This will certainly inspire other countries to emulate the India story.”
“Food retail chain is a great business. It has a lot of potential. And, Jubilant has a strong franchisee element, besides global brand equity. The management quality is good, the business is strong and is growing at a sustainable rate for the longer term. It’s a scalable business,” says the vice-president of another foreign house.
In 2010-11, the company clocked revenues of Rs 678.33 crore, with net profits of Rs 72 crore. In the second quarter, it posted an increase of 47 per cent in its revenues, while its profitability grew 28.4 per cent to 23.67 crore, compared with Rs 18.43 crore in the corresponding quarter of the previous year. On the Bombay Stock Exchange, shares of Jubilant Foodworks closed strong, up 4.92 per cent at Rs 768.50, in spite of a weak overall market on Wednesday.