Westlife price suggests Vikram Bakshi's McDonald's stake worth Rs 2,500 cr

Sep 25 2013, 08:23 IST
Comments 0
M-cap of of Westlife Development, which houses the McDonalds business via subsidiary Hardcastle Restaurants, has jumped meteorically. M-cap of of Westlife Development, which houses the McDonalds business via subsidiary Hardcastle Restaurants, has jumped meteorically.
SummaryBattle between McDonalds and its Indian partner rages on in the Company Law Board.

While the battle between McDonalds and its Indian partner for the northern and eastern regions Vikram Bakshi rages on in the Company Law Board, and Bakshi alleges McDonalds wants to buy him out cheap, the valuation of McDonalds west and southern operations suggests Bakshi could well get over Rs 2,500 crore. Ironic, since one of the charges levelled by Bakshi is that McDonalds franchisee in west and south, the Jatias, are behind the move to buy him out.

The Jatias story itself is a curious one since the market capitalisation of Westlife Development which houses the McDonalds business via subsidiary Hardcastle Restaurants has jumped meteorically from around Rs 65 crore in early 2012 to over Rs 5,644 crore on September 23, 2013. Thats a jump of 86 times in less than two years. Much of the surge, of course, happened after December 7, 2012, when Westlife informed the Bombay Stock Exchange it planned to make Hardcastle Restaurants a direct subsidiary. The share price then was just Rs 17.24 and the market capitalisation R275.84 crore. Within days, on December 11, the price jumped to R30.18 with just five shares traded.

The price stayed firm despite new shares being issued on December 12, the company allotted 22,86,010 new equity shares of R10 each as bonus shares to non-promoters to comply with Sebis minimum public shareholding norms that required promoters to bring down their holding in listed firms to a maximum of 75%.

That quick service restaurants are doing well in India with the segment expected to grow at 25% compounded in the next few years is not in doubt. Hardcastle runs 166 restaurants, while Bakshis Connaught Plaza Restaurants (CRPL) runs 154. Jubilant Foodworks which operates the Dominos chain has 602 outlets.

In FY13, Hardcastles revenues rose 25% to R674.8 crore while Jubilants revenues rose 38% to R1,407.5 crore.

Although the businesses are strictly not comparable, from a revenue per store perspective, it would appear, burgers are selling more than pizzas.

However, in terms of Ebitda margins, Jubilant is more profitable in FY13, it reported a margin of 17% compared to Hardcastles 12.5%. In fact, net profits at Hardcastle fell 27.5% to Rs 30.8 crore last year while those for Jubilant rose 28% to Rs 135.1 crore.

Nevertheless, at Rs 370, the Westlife stock a proxy for Hardcastle since thats where the bulk of its revenues

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...