Jubilant Foodworks shares fell over 5 percent on Wednesday after the company in a dramatic flip-flops on Tuesday withdrew its earlier decision to charge the corporate brand royalty. The stock fell as much as 5.18 percent to Rs 1,235.65 per share intraday on the BSE. In the opening trade, Jubilant Foodworks shares gained as much as 3.13 percent to Rs 1,344.05 per share. At 11.42 PM, the Jubilant Foodworks shares traded 4.14 percent down at Rs 1,249.30 per share, while the benchmark Sensex was up 0.54 percent at 36,814.75 points.

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Shares of Jubilant Industries were up over 5 percent, whereas Jubilant Life shares fell nearly 2 percent.

Analysts maintained positive outlook on the Jubilant Foodworks stock. CLSA recommended a ‘buy’ rating on the stock, saying that it believes “the business is on a growing path and see the reversal as a positive for the stock.”

CLSA said the royalty levy was illegal and would have been an issue for the promoter group since it may have raised concern on a structural basis. “In the context of the stake sale and pledges the past few years, this move could have added to another worry with respect to the promoter group, at a time when liquidity conditions are tight in the financial market.”

Edelweiss Securities also maintained a 'buy' rating on Jubilant FoodWorks, but admitted that investors' confidence "will take some time to come back."

"They should have communicated this much better," said Abneesh Roy of Edelweiss Securities . "They have taken the investors feedback and that is why the rollback happened but they should have gone ahead and taken the feedback before doing all this. Now investor confidence will take some time to come by.”

The Jubilant Foodworks' stock price fell over 6 percent on Tuesday after the company's board had decided to pay a corporate royalty to its promoter group, Jubilant Enpro Pvt Ltd, for use of 'Jubilant' brand. "The royalty being considered is around 0.25 percent of the company's consolidated revenue effective from FY20," the company said in an earlier exchange filing. The promoters, Bhartia family, hold 45 percent in the company.

However, in a late-night filing, the company said, "Jubilant Enpro Pvt. Ltd. (a promoter group company), has decided not to charge the corporate brand royalty of 0.25 percent of the consolidated revenues of the company and the same stands withdrawn.”

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First Published:Feb 6, 2019 9:51 AM IST