Jubilant Foodworks – Buying In-The-Money Options: ICICI Direct

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We believe that Jubilant Foodworks Ltd.’s recent acquisition of stakes in DP Eurasia (DPEU) and Barbeque Nation (BN) as well as the investments in new ventures (Hong’s Kitchen and Ekdum!) are steps in the right direction.

We like this utilisation of cash on balance sheet (Rs8.4 billion as of Sep 2020) to buy potentially in-the-money options. Some investors believe that the stakes in DPEU and BN are likely for trading purposes; however, we believe it’s strategic.

Furthermore, we reckon there can be structural benefits –

(1) turnaround of DPEU (replicating India execution) and

(2) better dine-in experience in India ventures (using learnings from BN).

That said, our biggest concern is limited management bandwidth to handle such diverse, multiple opportunities along with the expansion of the core (Domino’s India), which in itself has the potential to be 3X by FY2030.

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