Will sustain 16-18% margins ahead: Jubilant FoodWorks

Speaking to CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee, Ajay Kaul, CEO of the company said the growth momentum is likely to continue in coming quarters. “We see rise in discretionary food spending,” he added.

Kaul informed that same store sales stood at Rs 18-19% CAGR for the past six-years. “The same stores growth helped topline growth this quarter,” he disclosed.

Going forward, he expects to maintain 16-18% margin range. “Price increase was implemented in November 2010,” he stated.

Below is the verbatium transcript of the interview. Also watch the accompaning video.

Q: Great Q3, given what you have delivered in the first 9 months which is just shy of Rs 500 crore on the revenue line what do you think you could finish the year with in terms of sales?

A: We have had a fantastic quarter which continues our performance for the first 9 months as you rightly said. We are the largest MNC food brand today in the country and the fastest growing also. I think the momentum would continue in the next quarter also. If I look at specifically at numbers 58.2% is our system level growth in this quarter which takes our full 9 month at around 58-59%. Our same store growth which is the true health of franchise measure stands at around 35% in this quarter, which is a shade lower than it has been in the earlier two quarters.

We believe the momentum will continue, I will not put any numbers to this. But from a consumer sentiment level if that is a question would probably want to answer more upfront, we see no change in the consumer sentiment. On the contrary we see a high optimism from a consumer uptake level which means, I think the discretionary spend on food consumed out of home we believe is only on the rise and for products like ours which are consumed at home, predominantly delivered at home which are low ticked in nature around USD 7-8 and in rupee terms around Rs 300 outlay we are very upbeat about the future.

Q: As you look into FY12 without going into any kind of numbers and guidance, the one thing that your investors would want to know is whether this kind of core same store growth which is generally regarded by the market as sustainable growth whether you see any reason for the trajectory to change around as you go into the next year?

A: If I look at the last six years other than this year, our compounded annual same store growth has been around 18-19%. This year has been unprecedented by any standards and by our own standards; we have in the first 9 months delivered around 37% same store growth. We believe such a large number is not sustainable. But whatever we have done over the last 6 years, we believe such numbers are doable. Without putting any number to it, I think this years performance probably is a bit of a one off. But what we have done over the last 6 odd years is something which we should look at.

Q: How much of your incremental revenue growth, going by the example of the last nine months is coming in from new store additions or new franchises. Just want to figure out on top of this core growth that you are talking about same store how much can get added on by new additions even next year?

A: Looking at this quarter itself, our same store growth is around 35.2% and our system level growth is 58.2%. So the differential between the two which is around 23% is clearly stores which have come either last year, or the stores which we have added this year. But to put a number to the new store additions this year, we have added 25 new stores in Q3, which is the highest we have done in the last 3-4 years. So the net new store additions this year so far has been 58. During the full financial year, we hope to add at least 70 new stores and are clearly on track of that.And we believe by March end we will be able to exceed that number.

Going forward we believe such numbers are sustainable and we should be able to add similar numbers even in years to come. What is interesting out of this new store opening is that a fair bit of these come from new cities. As I have always maintained new cities is where potential is and we have been getting lot of good response from these cities. In the quarter three itself we have got cities as diverse as from Saharanpur to Patna to Bhubeneshwar, capital cities to Howrah to Zirakpur, so it’s a fair mix. And we have been getting good response from all sorts of these mired cities. So 22 new cities is what we have gone into in the last one year. And even going forward that is something which we would look into getting into more an more new cities in India.