Motilal Oswal
    NIFTY 50
Motilal Oswal

Maintain 'buy' on Jubilant; investors' confidence will take some time to come back, says Edelweiss

Updated : February 06, 2019 09:33 AM IST

Abneesh Roy of Edelweiss Securities is maintaining a 'buy' on Jubilant FoodWorks but admitted that investors' confidence "will take some time to come back".

Four hours after approving corporate royalty payment to its promoter, Jubilant FoodWorks Ltd, which operates Dominos Pizza and Dunkin' Donuts chains across the country, decided to withdraw its earlier decision.

“We continue to maintain buy but yesterday’s development will lead to an overhang. We currently have Rs 1,529 target price but we feel it will take one-two more quarters for the investor confidence to come back. They should have communicated this much better. They have taken the investors feedback and that is why the rollback happened but they should have gone ahead and taken the feedback before doing all this. Now investor confidence will take some time to come by,” said Roy.

“Just Rs 10-20 crore of royalty wiped out 10-20 crore marketcap yesterday. There was anti-profiteering thing also but I think the main reason was this royalty. There is no reason for Jubilant to charge royalty because already Domino's is charging. In the past, we have seen Britannia do a similar thing around 4-5 years back. In their case also, 25 basis points (bps) royalty is being paid to the Wadias. So ultimately operating performance will matter,” he added.
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