Jubilant FoodWorks boosts stake in Turkey, Bangladesh ventures, eyes expansion: Report

Jubilant FoodWorks in focus: Food service company Jubilant FoodWorks recently held a conference call to provide updates on its investments in Turkey (DP Eurasia) and Bangladesh. Notably, the Noida-based company has increased its stake in both ventures to nearly 100 per cent, consolidating its position in these markets, analysts said.

Having initially acquired a 33 per cent stake in DP Eurasia in 2021, the company’s ownership has steadily risen to 94.3 per cent by November 2023. 

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The acquisition, totaling Rs 1,200 crore, was funded through Rs 950 crore in debt and Rs 250 crore in equity. Additionally, the company has upped its stake in the Bangladesh business from 51 per cent to full ownership at an incremental cost of Rs 34 crore.

Pro forma financial metrics reveal that while standalone profit after tax (PAT) stood at Rs 260 crore in calendar year 2023 (CY23), the international business, including DP Eurasia, Bangladesh, and Sri Lanka, contributed Rs 140 crore to PAT during the same period, brokerage firm Motilal Oswal said in a note. 

Adjusting for interest costs, international business PAT is estimated to be around Rs 100 crore.

Turkey emerges as a key market, driven by robust urban consumer demand and a healthy real GDP growth rate of approximately 5 per cent. 

DP Eurasia, Domino’s second-largest player in the Turkish quick service restaurants (QSR) market, registered revenue of Rs 1,750 crore in CY23, boasting a PAT margin of 9.5 per cent, outperforming India's margins. 

However, high inflation and currency devaluation pose major risks to business performance, the Mumbai-based brokerage highlighted.

Meanwhile, COFFY, a rapidly expanding coffee chain in Turkey, has become the 10th largest café brand in the country, with 89 stores, 74 per cent of which are franchised.

In Bangladesh, Domino’s is positioned as the second player in the QSR market after KFC, operating 26 stores with plans to expand to 200 stores in the medium term.

Considering these factors, analysts have maintained a ‘neutral’ rating, with a target price of Rs 480. 

Turkey's thriving Foodservice, QSR Market 

Turkey stands out as one of Europe's fastest-growing economies and a prominent member of the G20 countries, boasting an impressive average growth rate of approximately 5.5 per cent annually over the past decade.

With approximately 75 per cent of its population residing in urban areas and boasting the youngest demographic in Europe, with an average age of around 34 years, Turkey presents a vibrant market landscape.

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The country's foodservice and Quick Service Restaurant (QSR) market is valued at $18 billion, making it a major player in the culinary arena. 

Surprisingly, Turkey's QSR market surpasses even that of India, standing at $8 billion.

Lower rental costs in Turkey compared to India translate to reduced expenses for royalty fees, marketing, and technology, thereby enhancing profit margins for businesses operating in the region.

Furthermore, Turkey's foodservice sector is witnessing a notable shift towards out-of-home dining and delivery services. The transition is fuelled by increasing disposable incomes, smaller household sizes, and rapid urbanisation trends.

As of 9:56 am, shares of the Jubilant FoodWorks are trading 0.81 per cent lower at Rs 441.75 per share.