Analysis Report: Britannia ( Estimated Price: Rs. 8300 )

Britannia

About The Company

Over the last century and a quarter, Britannia has been serving the Indian consumer with a range of fresh, nutritious and flavor-rich products. Today, Britannia is a leading food company in India with over Rs. 6000 Crores in revenues, delivering products in over 5 categories through 3.5 million retail outlets to more than half the Indian population. Britannia Dairy had its beginnings in 1997. Britannia was one of the first companies in India to pioneer category defining innovations like Cream Cheese and introducing a host of international flavors for its cubes & spreads in India.
Today Britannia Dairy products contribute close to 10% of the company’s revenue. Britannia markets its dairy portfolio on the back of a well-integrated cold chain logistics network and reaches 3 million outlets across the length & breadth of this country. The company’s relentless focus on quality and freshness has won it prestigious accolades including the Golden Peacock National Quality Award and the Ramakrishna Bajaj National Quality Award.

Shareholding Pattern

Cat Code	Category of Shareholder	Number of Share holders	Total number of shares	Number of shares held in dematerialized form	Total shareholding as a percentage of total number of shares
A	SHAREHOLDING OF PROMOTER AND PROMOTER GROUP
1.	INDIAN
	Individual / HUF	1	4551	4551	-
	Sub Total	1	4551	4551	-
2.	Foreign
	Individuals (Non-Residents Individuals / Foreign Individuals)	1	2250	2250	-
	Bodies Corporate	6	60866095	60866095	50.73
	Sub-Total	7	60,868,345	60,868,345	50.73
	Total shareholding of Promoter and Promoter Group (A)	8	60,872,896	60,872,896	50.74
B	Public Shareholding
1.	INSTITUTIONS
A	MUTUAL FUNDS/UTI	149	6526026	6524776	5.44
B	Financial institutions/Banks	21	167759	162409	0.14
C	Insurance Companies	9	3898595	3898095	3.25
D	Foreign institutional investors	268	23742585	23742585	19.79
2.	NON- INSTITUTIONS
A	Corporate Bodies (Indian/foreign/Overseas)	1545	3945956	3921706	3.29
B	Individuals(Resident/ NRI/ Foreign National)
(i)	Individual shareholders holding Nominal share Capital up to Rs.1 lakh	63697	16482944	13784606	13.74
(ii)	Individual shareholders holding Nominal share Capital above Rs.1 lakh	35	4262553	2930663	3.55
C	Any other
	Trusts	17	76501	76501	0.06
	Total Public Share Holding (B)	65741	59102919	55041341	49.26
	TOTAL(A+B)	65749	119975815	115914237	100.00

Business Description

Britannia Industries Ltd has restructured its top management to aggressively expand its small international business with growth at its core biscuit business slowing. Britannia’s Managing Director (MD) Varun Berry wants to enhance Britannia’s position to become an all-embracing foods company from a bakery/dairy company. Britannia’s plans to expand its international operations is another step by the company to diversify its business.

Products

The product line of Britannia is divided into five products. These are biscuits, breads, dairy, cakes and rusk. The biscuit category is divided into cookies, cream, jam and cookies plus cream. It comprises of Good-Day, Tiger, Crackers, Marie Gold, Pure Magic, Nice Time, Marie Gold etc. The Bread category consists of White, Whole Wheat and Bread Assortments. The Dairy category comprises of Cheese and Fresh Dairy Products. The Cakes category consists of Bar Cakes, Chunk Cake, Nut and Raisin and Muffins. The Rusk Category consist of Premium Bake and Maska Rusk.

Manufacturing/Service Process

The Company has been focusing on developing a competitive edge in manufacturing by deploying Cost Efficiency and Operational Excellence programs across the value chain and is also working on scaling up some of the existing manufacturing units which has combined capacity of 74000 tons. The company uses APO Planning tool which focuses on integrating the challenging demand-supply scenario with optimum inventory management to better serve the market. In the area of logistics the focus was on execution effectiveness, reduction in the distance travelled for products and optimum space utilization for higher throughput.

Production Capacity

The company has an annual capacity of 74,000 tons a month, of which 46 per cent is in-house manufacturing and, the remaining 54 per cent is outsourced. The company has manufacturing plants at West Bengal, Delhi, Tamilnadu, Bihar, Uttaranchal, Gujarat and Orrisa. Two more factories are under construction in Tamilnadu and Bangalore which are scheduled to complete in the next year.

Industry Analysis

The biscuits and cookies industry in India, valued at INR 145bn (~USD 2.41bn) in FY 2014, has been growing at a CAGR of ~10% over the last three years. Growth of this segment is expected to slow down as manufacturers are offering discounts to push volume sales, which in turn has slowed down the value growth of the industry. The biscuit industry is broadly divided into 3 parts: Cookies, Cream and Cookie plus Cream. India’s Biscuit Industry is expected to grow at the annual rate of 14% to reach Rs 279bn by 2019. Penetration of biscuit is Urban Market:  75% to 85% and Rural Market:   50% to 65% so it is an opportunity to manufacturers to grab more market share.

Market Analysis

The biscuit industry is broadly divided into 3 parts: Cookies, Cream and Cookie plus Cream. Britannia, according to industry sources, is the leading player in cookies with an estimated market share of 30 per cent. ITC, on the other hand, is the largest player in creams with an estimated share of around 26 per cent. Parle Products, the number two in both creams (22 per cent) and cookies (27 per cent), takes the top spot when the two segments are combined. It has a share of 25 per cent in the Rs 7,200-crore cookie-plus-cream market. The Parle has 30 percent share of the overall biscuit market. Bengaluru-based Britannia is a close second in the combined segment with a share of 24 per cent, while ITC has a share of 15 per cent. There are also many other competitors in this segment such as PriyaGold, Anmol Biscuits and Horlicks which are giving these 3 companies strong fight. There is an opportunity to tap the rural markets and to introduce niche biscuit products like Nutrichoice etc. Most of the manufacturing work is outsourced, so they have substantial power in their hand.

Financial Analysis

Britannia has shown tremendous growth in the past 5 years. Its Reserves and Surplus increased almost four times during the last five years. Its total assets increased by 32.58% from Rs. 2106.87 crores in the previous year to Rs. 2793.35 crores in 2014-15. Britannia has reduced its non-current liabilities from Rs. 624.5 Crore to Rs. 68.94 Crore. Fixed Asset also increased from Rs. 419.26 Crore to Rs. 733.39 Crores which is in line with the company’s plan for capacity expansion. Cash and Cash equivalents and other current assets also increased form 2010-11 to 2014-15 which shows the strong position of Britannia.

Balance Sheet of Last 5 years

(Rupee in crores)	2010-11	2011-12	2012-13	2013-14	2014-15
EQUITY AND LIABILITIES
Share capital	23.89	23.89	23.91	23.99	23.99
Reserves and surplus	302.15	385.28	526.85	769.84	1217.55
Non-current liabilities	624.50	210.16	64.30	60.26	68.94
Trade payables	268.03	387.04	393.51	556.69	703.42
Other current liabilities	398.16	833.50	865.53	689.43	773.45
TOTAL	1618.81	1842.05	1883.47	2106.87	2793.35
ASSETS
Fixed assets	419.26	529.97	637.58	740.58	733.39
Other non-current assets	375.87	332.19	383.80	320.19	386.98
Inventories	346.95	431.76	374.67	420.27	404.04
Trade receivables	80.96	113.01	122.81	108.70	135.81
Cash and cash equivalents	76.88	61.33	102.93	109.07	226.33
Other current assets	318.89	373.79	261.68	408.06	906.80
TOTAL	1618.81	1842.05	1883.47	2106.87	2793.35

The total revenue increased from Rs. 4668.39 Crore in 2010-11 to Rs. 7946.38 Crore which shows the CAGR of 14.26%. This growth rate is more than the industry growth of 12%. Also the profit after tax is continuously growing from 2010-11 to 2014-15 which shows the healthy financials of the company.

Profit and Loss Statement Last 5 years

(Rupee in crores)	2010-11	2011-12	2012-13	2013-14	2014-15
INCOME
Total Operating Revenue	4609.38	5485.37	6185.41	6912.71	7858.42
Other income	59.01	59.14	52.24	33.59	87.96
Total Revenue	4668.39	5544.51	6237.65	6946.30	7946.38
EXPENSES
Operating Expense	3248.73	3785.52	4129.40	4441.97	4976.25
Depreciation and amortization expense	64.91	61.83	73.15	83.18	144.48
Other Expenses	1167.60	1430.58	1676.67	1851.83	2022.12
Tax Expenses	52.94	66.85	98.55	173.58	261.11
Total Expenses	4534.18	5344.78	5977.77	6550.56	7403.96
Profit for the year	134.35	199.55	259.50	395.35	688.64

The Cash Conversion Cycle also reduced from 8.24 days in 2012-13 to -11.21 days in 2014-15.  Also return on Working Capital increased from 15.18% in 2010-11 to 48.85% in 2014-15.

Profit & Loss Statement of last Two September Quarters

(Rs In Crores)	Sept 2014	Sept 2015
REVENUE
Net Sales (Net of excise duty)	1,955.48	2,191.08
Other Operating Income	19.03	17.57
Total Income from Operations (Net) (1)	1974.51	2208.65
Other Income (2)	18.42	30.16
Total Revenue (1) + (2)	1992.93	2238.81
EXPENSES
Costs of Materials Consumed	1,053.07	1,099.09
Changes in inventories of finished goods, WIP	138.47	168.12
Employee Benefit Expenses	67.29	82.31
Other Expenses	143.48	184.68
Operating Expense (3)	1402.71	1534.2
Depreciation & Amortization (4)	30.78	27.19
Other Expenses (5)	352.08	349.47
Total Expenses (3) + (4) + (5)	1785.17	1910.86
Interest Expense	1.09	1.5
Profit Before Tax	366.59	326.49
Tax Expenses	96.41	107.84
Profit After Tax	270.18	218.61

This industry has a bright future as per our analysis and understanding. Given Britannia’s growth history, this forecasted bright future of this industry should only propel this company forward. Using the discounted cash flow method, we project the stock price of Britannia to be around Rs. 8300.

Profit and Loss Projected 5 years

(Rupee in crores)	2016	2017	2018	2019	2020
INCOME
Total Operating Revenue	8487.09	9166.06	9899.35	10691.29	11546.60
Other income	0.00	0.00	0.00	0.00	0.00
Total Revenue	8487.09	9166.06	9899.35	10691.29	11546.60
EXPENSES
Operating Expense	5370.18	5799.80	6263.78	6764.88	7306.07
Depreciation and amortization expense	88.05	186.24	201.54	220.80	244.27
Other Expenses	2183.89	2358.60	2547.29	2751.07	2971.16
Tax Expense	260.97	253.70	273.87	294.81	316.60
Total Expenses	7903.09	8598.33	9286.47	10031.56	10838.10
Profit For the Year	584.00	567.73	612.87	659.73	708.50

Balance Sheet Projected 5 Years.

(Rupee in crores)	2016	2017	2018	2019	2020
EQUITY AND LIABILITIES
Share capital	23.99	23.99	23.99	23.99	23.99
Reserves and surplus	1801.55	2369.28	2982.16	3641.89	4350.39
Non-current liabilities	25.61	25.61	25.61	25.61	25.61
Trade payables	657.50	812.29	775.08	939.28	912.23
Other current liabilities	676.57	676.57	676.57	676.57	676.57
TOTAL	3191.22	3913.75	4489.41	5313.34	5994.79
ASSETS
Fixed assets	858.26	914.71	989.85	1084.46	1199.74
Other non-current assets	386.98	386.98	386.98	386.98	386.98
Inventories	486.21	475.26	563.13	558.33	652.85
Trade receivables	131.09	157.16	154.15	182.07	181.05
Cash and cash equivalents	421.91	1072.86	1488.53	2194.74	2667.40
Other current assets	906.80	906.80	906.80	906.80	906.80
TOTAL	3191.22	3913.75	4489.41	5313.34	5994.79

 Price Performance

References

- http://britannia.co.in/

·         -  http://www.ibmabiscuits.in/

·         -  http://www.business-standard.com/article/management/the-biscuit-battles-14120800961_1.html

·         -  http://forbesindia.com/article/super-50-companies-2015/britannia-industries-the-taste-of-success/40701/1

·         -   http://business.mapsofindia.com/top-brands-india/top-biscuit-brands-in-india.html

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About The Author

This report has been prepared and drafted by Uttam Khunt and published by Aakash Raval who are pursuing MBA from Institute of Management, Nirma University located in Ahmedabad, India. The report 

Disclaimer

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The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidelines only.