Jubilant Food lists at 58% premium

The shares of Jubilant FoodWorks, the Indian franchisee of US-based pizza company Domino’s, today listed at a premium and closed 58 per cent higher to the issue price of Rs 145. At today’s closing price of Rs 229 on the Bombay Stock Exchange (BSE), Jubilant’s market capitalisation stood at Rs 1,456 crore (or $315 million) – slightly more than half of Domino’s Pizza Inc market cap of Rs 2,875 crore ($620.5 million).

The stock opened 11.4 per cent higher to the issue price, touching Rs 161.60, at the start of trade. Investor activity at the counter was fairly hectic and 31.7 million shares were traded on BSE, of which 13.51 per cent were marked for delivery. On the National Stock Exchange (NSE), 56.9 million shares were traded and almost 18 per cent were marked for delivery.

Some big investors to have purchased shares in today’s trading included Reliance Mutual Fund, Arisaig India and Capital Group, according to BSE data.

“We are impressed by Jubilant’s ability to grow stupendously on internal accruals. The business model offers scope for operating leverage, promising expansion in operating margins and return ratios in ensuing years,” said Ajay Parmar, head of institutional research, Emkay Global Financial Services.

The listing is significant as investors, particularly small ones, have in recent past not shown much interest in initial public offers (IPOs). For example, power major NTPC’s recent follow-on-public offer received a lackluster response.

Jubilant raised Rs 329 crore through the IPO. Of the 22.67 million shares on offer, 18.67 million were offered by private equity investors India Private Equity Fund (Mauritius) and Indocean Pizza Holding Ltd. The balance four million were fresh shares, which at the upper end of the price band worked out to Rs 58 crore, said the company.

The company wanted to retire Rs 35 crore debt with the proceeds and use the balance for general corporate purposes. The issue was subscribed 31 times, with high net worth individual and retail portions being subscribed 52 and four times, respectively. Kotak Mahindra Capital Company Ltd was the sole book running lead manager to the issue. Jubilant sold 1.8 million pizzas per month in 2009. It ventured into non-pizza products like pasta recently.