Jubilant Food close to foreign retail tie-up

Jubilant Food close to foreign retail tie-up

Mumbai: Fast-food chain operator Jubilant Foodworks Ltd is close to tying up a deal with a global food retailer, and is also moving ahead with expansion plans for Sri Lanka and Bangladesh.

The company runs the popular Dominos Pizza chain in India. “We are in discussions with more than one retailer..it should happen soon, in the next financial year we should be able to make an announcement," Ajay Kaul, chief executive officer, told Reuters in a telephone interview on Tuesday.

Kaul did not disclose the names of companies Jubilant was in talks with.

India’s highly restricted retail sector permits only 51% foreign direct investment in single-brand retail while multi-brand retail is open only to cash-and-carry outlets.

The Indian firm was earlier reported to be in talks with global coffee retailer Starbucks, which tied up with Tata Coffee to buy coffee from India and explore opening retail stores in the country.

Jubilant, which is also the master franchisee for the Dominos brand in Nepal, Sri Lanka and Bangladesh, plans to open its first store in Sri Lanka in April and also set up a manufacturing facility there, Kaul said.

“We are hopeful that by March end this year or by April next (fiscal) year we will be able to open our first store in Sri Lanka. We are also setting up one manufacturing facility there which will cater to all the stores we plan to have there."

The facility will have a capacity to cater to 40-50 stores, Kaul said, but did not reveal how much the company would invest in the facility.

Jubilant also plans to venture into Bangladesh and hopes to open its first store there by March 2012.

In India, the firm had 364 stores as of 31 Dec, 2010. In FY11, it has opened 58 stores so far out the target of 70 stores for this fiscal.

“In terms of store roll-outs in India we expect to give a similar performance in the coming years," he said.

The company, which spent Rs580 million as capital expenditure in FY10, will see it increase by 15-20% this fiscal.

Jubilant, which listed in February 2010 after raising Rs329 crore from an initial share sale, will finance the retail expansion in the coming year via internal accruals.

Growth Outlook

The fast-food chain operator is also considering a price hike of 2-2.5% in April as mounting input costs squeeze margins. Its last price hike was in November 2010.

“There is pressure from food inflation. Milk leading to cheese is our key ingredient and milk prices are shooting up... so given the state of affairs we may have to revisit pricing in April," Kaul said.

The firm expects to maintain EBITDA margins for the March quarter at 17.5% versus an average of 18% for the first nine months of this fiscal.

Late on Monday Jubilant posted a 67% jump in December quarter net profit. Net sales rose to Rs186 crore from Rs117 crore.

During the quarter, the company reported a growth of 35.7% in same store sales from 23.1% a year ago.

“In the first three quarters we were at 37% same store growth...however, to continue with this high performance will be difficult and the same store sales growth going forward will come down, Kaul said.

At 3.12 p.m., shares of the firm were down 3.4% at Rs498 in a weak Mumbai market.