- The company’s shares were locked at a 10% lower circuit in early trade on March 14. As compared to their 52-week high, the shares are down by 46.18%.
- He quit the company to pursue opportunities outside Jubilant FoodWorks.
- Pota has been credited for significantly improving the performance of the company after he was appointed as CEO in 2017 at a time when the company was going through a rough patch.
Shares of Jubilant FoodWorks Ltd plunged 14% as Pratik Rashmikant Pota, CEO and whole-time director of Jubilant FoodWorks, resigned last week to pursue “quasi entrepreneurial opportunities”.
The company’s share was locked at a 10% lower circuit in early trade on March 14. There were no buyers available with pending sell orders of 9,001 shares. The share is currently trading at ₹ 2,470 apiece, down 13.75%. As compared to their 52-week high, the shares are down by 46.18%.
“The board of directors of Jubilant FoodWorks in their meeting held on March 11, 2022, accepted the resignation of Pratik Rashmikant Pota as the CEO and whole-time director of the company as he wishes to pursue opportunities outside Jubilant FoodWorks,” the company said. He will continue his current role till June 15, 2022.
The resignation has surprised the Street, especially because the company’s board had approved Pratik Pota’s reappointment as CEO last June for another three years.
Pota has been credited for significantly improving the performance of the company after he was appointed as CEO in 2017 at a time when the company was going through a rough patch. He took several initiatives and improved the growth and performance of the business.
At Domino’s Pizza, he introduced concepts such as everyday affordability and offered 20-40% discounts on a daily basis, rather than offers such as ‘buy-one-get-one on Wednesdays’. He invested in product upgrades with new crusts, imported sauces, liberal amounts of cheese and toppings and visually pleasing packaging.
He closed down over 100 underperforming stores of Dunkin Donuts between FY17 and FY20 and this led to a sharp recovery in profitability
Here’s what analysts have to say:
Credit Suisse
Research house Credit Suisse has cut the target price from ₹ 3,500 per share to ₹ 2,900 per share. It has given a ‘neutral’ rating on the share.
“The CEO resignation is a setback and leadership change during challenging macro environment will be an overhang,” it said.
J P Morgan
The broking firm said that the unexpected resignation by the CEO adds to uncertainty, but it continues to believe in the mid to long term story of the company. It downgraded the stock from ‘overweight’ to ‘neutral’ and cut the target price from ₹4,025 to ₹3,000
Edelweiss
“This certainly is a negative development, as he has been instrumental in turning the business around post joining in 2017,” Edelweiss said.
“In the interim, before a new CEO is appointed, uncertainty on execution may prevail, given Dominos’ ongoing rapid expansion, and the multiple initiatives that are still in their nascent stages. We thus lower our target multiple to 36 times FY23 EV/Ebitda, a 25 per cent cut, and a revised target of Rs 3,761,” it added.
Jefferies
“Jubilant FoodWorks went through a tough phase over FY13-17. Rapid store expansions led to cannibalisation and deteriorated profitability metrics. Aggressive product price hikes along with deterioration in product quality impacted the franchise. These factors along with acute cost pressure resulted in margin contraction from 19 per cent in FY12 to 10 per cent by FY17,” said a note by Jefferies.
Phillip Capital
It has downgraded the stock from ‘Buy’ to ‘Neutral’, with a target price of ₹ 2550.
“Higher probability of a significant increase in petrol and diesel prices in coming weeks will significantly weigh on the company’s freight and delivery bill. Historically, we have seen employee cost inflation (increase in minimum wages) to follow a significant increase in food and fuel inflation,” it said.
Kotak Securities
“A leadership change at this juncture would likely slow down the growth engine due to some inevitable execution slippage. We expect continuity in strategy and would keep an eye on execution,” it said.
HDFC Securities
It slashed its target price from ₹ 3300 to ₹2400 and said, “The implied growth for Jubilant is high with rich valuation, and change in core assumptions will further impact valuations. Consistent exits at the senior management level further add a question mark on the company’s ability to retain talent. We believe this move will hurt the valuation multiple. We have been non-consensus in both, EPS and valuation.”
Macquarie
The research house has cut the target from ₹ 3550 per share to ₹2150 and has downgraded the stock to ‘underperform’.
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