Four hours after approving corporate royalty payment to its promoter, Jubilant FoodWorks Ltd, which operates Dominos Pizza and Dunkin' Donuts chains across the country, has decided to withdraw its earlier decision.
"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revenues of the company and the same stands withdrawn," the company said in a late-night exchange filing.
Earlier on Tuesday, 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.
The decision by the management had added further pressure on the stock that was already reeling under selling pressure on account of alleged profiteering under GST.
The company has been found guilty of not passing on GST-cut benefit of Rs 41.42 crore on sale of some pizza products and has been directed to deposit the illegal gains with the government.
Shares of Jubilant on Monday ended at Rs 1,303.25 per scrip on BSE, down 6.45 percent from its previous closing.
"We need to understand in this particular instance, what are the payments for? If there is a payment, what are the contours of the payment? And in lieu of the payment what are the services which are being received," said Amit Tandon, MD, IIAS.
The first question is how Jubilant brand was created? Did anyone know this brand before Domino’s Pizza started or was it known after Domino’s has been in the game for more than 10 years? asked JN Gupta, former ED, Sebi.
"If the brand has not been created by the promoters but it has been created over a period of time by the consumers then there is no question of promoters seeking in any royalty payment on the brand," said Gupta.
"Is anyone who consumes pizza goes to Domino’s because there is Jubilant word associated with it? There is a doubt that consumers go to Domino’s pizza outlet because of Jubilant brand," Gupta added.
First Published: Feb 5, 2019 4:28 PM IST
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