Jubilant Foodworks Ltd. IPO : Too Risky, better avoid

Jubilant Foodworks was founded in 1995 and the company opened its first Domino’s pizza store in January 1996. The issue comprises of 2.27 crores equity shares of face value of Rs.10 within a price
band of Rs.135 and Rs. 145. The issue size is Rs. 306.45 crores at the lower price band and at the upper price band it is Rs. 329.15 crores. The offer comprises a fresh issue of 4,000,000 equity shares by the issuer and an offer for sale of 18,670,447 equity shares by the India Private Equity Fund (Mauritius) and Indocean Pizza Holding Limited which are looking to exit the holding in Jubilant Foodworks. Post issue the holding of promoter will reduce to 62.19% from the current holding of 66.36%.
Proceeds of the issue will be used for:
The company needs Rs. 35 crores to prepay the term loan to Axis Bank and Central Bank of India out of the aggregate Rs. 117.17 crores to reduce the interest burden on the company by FY11.
To give exit to the private equity partners viz., India Private Equity Fund (Mauritius) and Indocean Pizza Holding Limited.

Our Call

Very high P/E multiple, very high debt and intended reasons for issue proceeds deployment make this issue unattractive. Weighing the risks related to this company, we advice our readers to AVOID this issue.

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