Profit and Loss Account for Subway Franchise

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                                             IPO NOTE
                                    Jubilant Foodworks Limited
Issue Opens                                        January 18, 2010
Issue Closes                                       January 20, 2010
Issue Size                                         19,609,937 Equity Shares of Rs. 10/- each
Fresh Issue of Shares                              4,000,000 Equity Shares of Rs. 10/- each
Offer for Sale by Existing Shareholders            18,670,447 Equity Shares of Rs. 10/- each
Anchor Investor Portion                            3,060,510 Equity Shares
Price Band                                         Rs. 135 to Rs. 145.
Market Lot                                         40 Equity Shares and Multiple
Industry                                           Food Services (Fast Food Chain Operator)
IPO Grading / Rating Agency                        Grade 3 / FITCH RATINGS INDIA PVT. LTD.
Book Running Lead Managers                         Kotak Mahindra Capital Company Limited

 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. However, 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 long term view and a price target of Rs. 200.

In India, food expenditure was earlier concentrated around the basic food items like food grains, vegetable
oils, and sugar, whereas there is now increased spending on fruits and vegetables, eggs, meat, beverages and
processed foods as a result of both increased availability and affordability. The size of the Indian food
industry estimated at US$ 200 billion in the year 2006-07, is estimated to reach US$ 300 billion by 2015.

The food service industry has two distinct sectors – the organised segment and the unorganised segment, each
with its own unique operational characteristics. Dhabas and roadside eateries comprising street stalls are the
most common forms of restaurants and have traditionally addressed eating out requirements of Indians. Such
outlets which lack technical and accounting standardisation form a part of the unorganised segment. The
organised segment is characterised by accounting transparency, organised supply chain with quality control
and sourcing norms, and multiple outlets.

                                                                  SWASTIKA INVESTMART LIMITED
The food services industry in India is in the growth phase and offers opportunities across a variety of cuisines
such as fast food restaurants, multi-cuisine food courts and home delivery. The trend towards home delivery is
fast gaining popularity with value sales increasing significantly over the last couple of years.

Additionally, the growth of middleclass and rising income levels has increased the frequency of eating out.
Approximately 80% of the population eats out at least once a month. Approximately 38% of the population
(who eat out at least once in a month) has eaten out at least 7-9 times in a month, whereas almost 28% has
eaten out 4-6 times in a month. This has led to higher demand in the food services industry.

The food services industry is emerging as a fast track growth industry. This is due in great part to the fact that
the Indian population is witnessing demographic changes which will facilitate a large young population with
median age of 24 years, nuclear families in urban areas, the growing trend of female professional and the
advent of the double-income household as the key growth drivers of the restaurant industry in India.

Monthly spends on food bought from outside or ordered in

The post-1990 period saw several international food chains entering the country as India was perceived as a
market with scope for rapid expansion and growth. Multinational brands ("MNCs") such as McDonalds, Pizza
Hut, Domino's, TGIF, KFC, Ruby Tuesday and Subway opened their restaurants in cities across the country.

In a market dominated by the unorganised players, the organized segment, with the presence of a handful of
players, has a count of more than 3,000 outlets. McDonald’s, Domino’s, Pizza Hut are some of the
international brands which operate in India.

Some of the Key Growth Drivers of Food Services Industry in India are changing demographic profile, rising
income levels, growth of middleclass, younger population, rising urbanization, increase in nuclear families
and increase in number of working women force.

Company Background:
Jubilant Foodworks Limited (JFL) was incorporated in 1995 under the name of Domino’s Pizza India Private
Limited, and later renamed Jubilant FoodWorks Limited in 2009. JFL has Master Franchise rights from
Domino’s Pizza Overseas Franchising B. V. for developing and operating Domino’s Pizza delivery stores in
India, Sri Lanka, Bangladesh and Nepal. The master franchise agreement was renewed in September 2009 for
the period up to 2024, extendable by another 10 years at the option of JFL. The franchise agreement provides
for the exclusivity in the territories assigned to JFL.
                                                                    SWASTIKA INVESTMART LIMITED
JFL is engaged in the business of selling Domino’s pizzas via its quick service restaurants, catering primarily
to the takeaway and delivery segments. The company leads the organized home delivery segment with a
market share of over 65% as per Food Franchising Report 2009. As of 31 October 2009, the company had 283
operational stores which are backed by its own commissaries (4 in number) located in four metros – Delhi,
Mumbai, Kolkata and Chennai to cater to its all India operations. JFL also operates in Sri Lanka through its
sub-franchisee DP Lanka Private Limited which currently operates five stores and pays royalty bases on sales
achieved, which in turn is shared between JFL and Domino’s International.

In each of the last three years, Company has received the “Distinguished Achievement Award of the
International Franchise Association” distinction from Domino’s International for being one of the fastest
growing Domino’s franchisees in the world. Its operations has been ranked no. 1 in the Domino’s global
operations among the countries with 100 or more stores in 2006 and 2007 and amongst the top three in 2008,
with a cumulative OER score of 89.30%, 92.40% and 85.00% for 2006, 2007 and 2008, respectively.

Objects of Issue:

      • For pre-payment of loans of Rs. 350 million. (which comprises of 64.81% or 60.34% of the Net
        proceeds from the Fresh Issue of the shares).
      • For General Corporate Puposes.

      • Jubilant Foodworks is the leader in the national “organized” pizza industry, with the largest market
        share and largest network of operation stores.
      • It has an exclusive franchisee of a global brand (Domino’s Pizza), with strong Brand Recall.
      • Company’s Net Worth, Net Sales and Net Profit have grown with a CAGR of 137.61%, 40.85% and
        84.81% in the last 4 years from the year ending 2005 to 2009.
      • Fitch Ratings India Pvt. Ltd. has awarded Grade 3 to Jubilant Foodworks Limited which translates to
        “Average Fundamentals” grade.


      • The Company has incurred Negative Cash Flows in the last five fiscal years.
      • Approximately, 64.81% or 60.34% of the Net Proceeds from the Fresh Issue of the Shares is expected
        to be utilized for pre-payment of laons.
      • The Company faces Cut Throat competition in this industry. Its competitors include international and
        domestic pizza chains operating in India, such as Pizza Hut, Papa John’s, Smokin Joe’s and Pizza
        Corner, as well as other quick service restaurant chains such as McDonald’s and Subway, and local
        restaurants in the quick service restaurant segment.

                                                                  SWASTIKA INVESTMART LIMITED
Financial Ratios:

Companies which are involved in the same operations and which are listed in the international markets, a
snapshot of their financial ratios has been presented below:

        Particulars                  CMP (15-01-10)             EPS             P/E           RONW              NAV
                                         (Rs.)                  (Rs.)          Ratio           (%)              (Rs.)
        Industry Average                     N.A.               N.A.            3.76            N.A.            N.A.
                                            $62.28              -2.23          16.18            16.68          $12.14
        Yum! Brands, Inc.                   $35.67              11.69          16.49            20.19           $1.89
        Papa Johns
                                            $24.73              82.86          12.42            19.52           $6.53
        International Inc.
        Jubilant Foodworks
                                             N.A.               4.04           35.89*           34.21            5.90
       *Calculated on the Upper Price band of Rs.145 & # Adjusted Figures


                                                                                                              (In Rupees Millions)
PARTICULARS                                                For the Financial Year / Period ended on
                                    30.09.2009    31.03.2009 31. 03. 2008      31. 03. 2007   31. 03. 2006           31.03. 2005
INCOME                                 1828.01       2807.76         2113.35         1387.44        972.03                 737.52
EXPENDITURE                            1640.28       2633.39         1970.94         1293.93        923.83                 722.88
Financial Charges                        66.63         98.95           58.11           33.97          24.66                 20.42
Profits Before Tax and
Extraordinary Items                     121.10         75.42                84.30            59.54           23.54            (5.78)
Taxation                                  0.13.         7.99                 6.73             3.74            3.34        -
Profits Before Extraordinary
Items                                   120.97          67.43               77.57            55.80           20.20            (5.78)
Extra-ordinary Items (net of tax)       -              -                -                -               -                -
Net profit after Extraordinary
Items                                   120.97         67.43                77.57            55.80           20.20            (5.78)
Balance brought forward from
previous year as restated             (744.05)       (811.48)          (889.05)         (944.85)        (965.05)         (959.27)
Profit available for
appropriation as restated               -              -                -                -               -                -
Balance carried forward as
restated                              (623.08)       (744.05)          (811.48)         (889.05)        (944.85)         (965.05)

                                                                               SWASTIKA INVESTMART LIMITED

                                                                                                    (In Rupees Millions)
PARTICULARS                                             For the Financial Year / Period ended on
                                 30.09.2009    31.03.2009 31. 03. 2008      31. 03. 2007   31. 03. 2006    31.03. 2005
FIXED ASSETS                        1320.87       1147.88           785.87         481.39         324.28         297.83
INVESTMENTS                           -             -              -              -              -              -
CURRENT ASSETS                        476.64        335.81          236.54         177.51         124.78         114.04
LIABILITIES & PROVISIONS            1447.86       1255.47           861.62         575.74         421.70         404.71
NET CURRENT ASSETS                  (971.22)      (919.66)       (625.08)        (398.23)       (296.92)       (290.67)
TOTAL                                 349.65        228.22          160.79          83.16          27.36           7.16
SHARE CAPITAL                         595.15        581.65          581.65         581.63         581.63         581.63
RESERVES                              394.98        390.62          390.62         390.58         390.58         390.58
Less : P & L Debit Balance          (623.08)      (744.05)       (811.48)        (889.05)       (944.85)       (965.05)
Less : Misc Expenditure              (17.40)        -              -              -              -              -
NET WORTH                             349.65        228.22          160.79          83.16          27.36           7.16

                           Swastika Investmart Limited
                    48, Jaora Compound, MYH Road, Indore (M.P.)
                    website:, Tel: 0731-3045000

    Research Team:
    Mr. Vaaibhav Jhaverr     Head – PMS & Value Research    0731-3049187
                             Head Technical & Derivative
    Ms. Pinky Wadhwani                                     0731-3049190
    Ms. Sonal Natani         Research Analyst – PMS         0731-3049196
    Mr. Deepak Jain          Commodity Research Analyst       0731-3049186

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The report has been prepared by Swastika Intelligence Group for private circulation only. It should not be taken as an offer to sell or a solicitation
to buy any security. While utmost care has been taken in preparing this report, we claim no responsibility for its accuracy. Investors are expected
to use the information contained herein at their own risk. Swastika Intelligence Group shall not be liable for any direct or indirect losses arising
from the use thereof.

                                                                                          SWASTIKA INVESTMART LIMITED

Description: Profit and Loss Account for Subway Franchise document sample