Jubilant Foodworks has entered the capital market on
The company operates Domino's Pizza stores in
The paid up equity of the company, after IPO, shall be Rs. 63.62 crores, which would result in a market capitalization of Rs. 850 crores, at Rs. 135 per share. This translates into a value of Rs. 3 crore per outlet, which is definitely grossly stretched.
This is against a paltry net worth of the company, at just Rs. 35 crores, as on
Even financial performance of the company for FY 09 was nothing great, with total income of Rs. 280 crores and PAT of Rs. 6.75 crores, resulting in an EPS of Re. 1.16 for the year. As at 30-9-09.The company had a debit balance to the P&L A/c., of Rs. 62.30 crores, being accumulated losses.
It can be concluded that an exit route is being given to PE investors, who invested in the company in 1999. Along with this, the company is also trying to raise about Rs. 50 crores, to partly retire its debts. If the promoters were unable to give the exit route to these investors, as per the terms of Investment Agreement, either it needs to have been bought back by the promoters or their stake would have been exposed and may have been used by these PE investors to recover their pre-determined price, based on formula, having specified in this Investment Agreement.
By no stretch of imagination, Rs. 3 crore per outlet is feasible, with book value per share of the company being placed at Rs. 4. However, no funds will flow to the company, out of proposed IPO, of about Rs. 305 crores. So, the company needs to achieve its organic growth from its internal accruals only, which is meager at present. Also, one outlet is not even costing Rs. 50 lakhs to the company, while, value of Rs. 3 crore is being asked in this IPO.
Considering all this, issue is steeply priced and hence not recommended for investment. It is better to use your money to buy a Domino Pizza instead.