Jubilant FoodWorks IPO opens; should you subscribe?

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Jubilant FoodWorks IPO opens; should you subscribe?

Jubilant FoodWorks, Domino's business operator in India, has opened its IPO (initial public offering) of 22,670,447 equity shares for subscription. While talking about this IPO, experts were mixed in their opinion

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Brokerages' views

Nirmal Bang

The company is available at a price-to-earnings (PE) multiple of 35.46 times and 38.08 times its FY10 earnings at the lower and upper price band respectively, which looks expensive as compared to some of its peers.

Growth in this year's first half was exceptional when compared to the last few years, which is a positive sign for the company. However, the sustainability of such growth remains to be seen in the coming quarters.

The company looks all set to grow in the next few years with a huge number of new stores expected to open in next two-three years.

However, the current valuations look steep though we believe good growth in the next few quarters may justify valuations going forward.

Swastika Investmart

Jubilant Foodwork's IPO shall be first of its nature in Indian stock markets. There does not exist any comparable listed company in India, which is purely into fast food restaurant business. The company's business model is expected to find good place in India due to increase in nuclear families and young generation finding fast food restaurants a happening place.

Though the company had negative cash flows in past financial years, still we recommend investing into this niche industry with a long-term view and a price target of Rs 200.

Sharekhan

The company being the first of its kind to list is likely to attract premium. Additionally, with the operating cash flow of the business being comparable to consumer companies, the stock is at 14.5-15.5 times its FY2010 earnings. Operating cash flows are relatively lower (though the business dynamics with consumer companies differ) when compared to some of the consumer companies, which are trading at price to operating cash flows of 24 times FY2010 earnings. Thus, we believe the offering could find favour with investors.