There were clear signs that things were not going well for Jubilant.
In the recent Q3 FY22 concall, the management received a lot of flak for doing away with SSGR reporting. It is obvious the numbers would be bad. I have never seen Pota so much on the defensive as in the latest analyst call.
Besides that, as an investor I have many other concerns. The company has been too slow in scaling up Hong’s Kitchen, for example. The Chinese food foray was announced in March 2019. Even considering that a few quarters were lost in Covid, it is disappointing that Hong’s Kitchen is yet to step out of the Delhi – NCR region. It is not clear how Chef Boss is doing, and what the company plans to do with it. We have no idea how Ekdum! has done either, which is also more than a year old now. The company’s disclosures have been lacking on many fronts.
Operationally as well, things appear to have gone downhill for Jubilant, as my recent order of a Domino’s Pizza showed. The company goofed up in delivery and it took multiple phone calls, service complaints and a severe dressing down to the customer service staff to resolve the matter a full 24 hours later. In the conference calls of course, Pota has claimed that company’s NPS scores “are strong and trending up” but again, we are not privy the actual details.
Though Pota has often been credited with turning around the company from what it was five years back, earlier last year I was surprised to see almost one-fourth of the institutional investors voting against his re-appointment. (See here)
Having said this, my concerns on company’s capital allocation remain, and this might have been another flashpoint between Pota and the Promoters. In various conference calls, Pota has given enough hints that he disowned some of company’s diversifications. For example, in the first concall after Jubilant announced its investment in Barbeque Nation, Pota made just one feeble attempt to explain the decision and then distanced himself from the same.
Even on questions about DP Eurasia investment, Pota has generally avoided defending the decision and letting Mr. Bhartia take ownership. See the questions by Vivek Maheshwari of Jefferies on how much overseas capital allocation the company would do (click here), Pota just says that nothing we do will lead us to underinvesting in Domino’s business in India, and then lets Mr. Bhartia answer the actual question. Investors are unhappy with these diversifications, and I had expressed some of my own concerns here. With the recent outbreak of war, these are clearly playing out now.
So to summarize, neither Pota nor the Promoters seem to be on a honeymoon currently. A course correction is very much in order, and Pota’s departure could trigger some of that. While Pota is seen to have done a good job, his successor may not necessarily do any worse. Only time will tell.
(Disc: Invested)