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Jubilant Fooodworks IPO - Will Dominos dominate the stock market

Jubilant FoodWorks which operates the Dominos Pizza, has opened its IPO on 18th Jan and closes on 20th (i.e.today). Those who have an appetite ( I mean risk), you can invest in this IPO.


This is not a full fresh issue by the company. The promoters are offloading their shares to get listed and also issuing fresh shares. The ratio is Promoters offload (82%) and fresh issue (18%). So, the entire money is not going to the company and only 18% of the proceeds (i.e. Rs.54 crores, at the lowest price band of Rs.135) will be going to the company. 


The company plans to foreclose its Debts (Rs.35 crores) and use the balance  (Rs.19 crores)for Corporate expenses. What they have mentioned in their prospectus [page no. 42] sounds silly. The same is reproduced below for easy reference:

2. Fund expenditure for general corporate purposes
We intend to use a part of the Net Proceeds, approximately Rs. [●] million, towards general corporate purposes to drive our business growth. As of the date of this Red Herring Prospectus, we have not yet entered into any definitive commitment for any acquisition, investment or joint venture for which we intend to use the Net Proceeds.

Our management, in accordance with the policies of the Board, will have the flexibility in utilizing the sum earmarked for general corporate purposes and any surplus amounts from the Net Proceeds.

        They expect to utilise these funds in fiscal 2011

With no market comparison and a high PE, I would suggest wait and invest policy for this issue. We may get these shares at a better price in the market. Moreover, there is no leveraging, as they are planning to foreclose the debt and the market is very competitive in nature and more people getting into this area.

Cheers,
Gopal

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