research report britannia industries ltd

7/29/2019 Research Report Britannia Industries Ltd

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CRISIL COMPANY REPORT | 1

Britannia Industries Ltd

GICS Industry : Food Products l Sub Industry : Packaged Foods & Meats l Website : www.britannia.co.in

NSE Ticker : BRITANNIA

Bloomberg Ticker : BRIT:IN

Face value / Share: 10.0

Div. Yield (%): 6.1

CMP (as on 04 Jan 2011Rs/share): 409.6

52-week range up to 04 Jan 2011 (Rs)(H/L): 2297.95/392.60

Market Cap as on 04 Jan 2011 (Rs mn): 48,927

Enterprise Value as on 04 Jan 2011 (Rs mn): 55,124

Shares outstanding (mn) : 119.5

Free Float (%) : 49.5

Average daily volumes (12 months) : 42,422

Beta (2 year) : 0.6

Ke Stock Indicators

Britannia Industries Limited (BIL) was incorporated in 1918 as Britannia Biscuit Company Ltd. BIL

operates in two segments -- bakery products (biscuits, bread, cakes and rusk) and dairy products

(milk, butter, cheese, ghee and curd). The companys facilities are located in Kolkata, Delhi and

Uttarakhand. Dairy products sold under the Britannia Milkman brand are produced by Britannia

Dairy Pvt Ltd.

KEY HIGHLIGHTS

Dominant player in the biscuit industry

BIL is a leading player in the Rs 77 billion (as of March 2010) biscuit industry, with a market share of36%. BILs biscuit portfolio comprises of glucose, marie, cookies, crackers, cream, milk and health

biscuits. BIL mainly caters to the premium segment. However, with the launch of Tiger brand

biscuits in 1997, it diversified into the low-end category as well. Its strong brand presence,

extensive distribution channels and continuous product innovation have helped the company

sustain its leading position in the industry. It has 600,000 outlets across India and has expanded its

distribution network to rural areas as well. The company exports to the Middle East, Asia, the US

and Australia. The company primarily caters to the domestic market; export sales are not

significant.

Outsourcing model saving operational cost

BIL operates largely on the outsourcing model, sourcing nearly 65% of its total sales from contract

manufacturers spread across the country. This leads to cost savings in the form of lower capital

cost and reduced overheads (freight and labour costs), and extends the shelf-life of products as the

company saves time in transport.

Acquisitions increase footprint abroadIn FY10, BIL acquired Strategic Food International Co LLC, a leading player in the Middle East in

biscuits and wafers, and Strategic Brands Holding Co Ltd. In March 2010, it acquired Britannia and

Associates (Mauritius) Private Ltd. In April 2009, the company entered into an agreement with M/s

Fonterra Brands (Mauritius) Holdings Ltd, Mauritius, for acquiring 49% equity and preference

shareholding in their JV Britannia New Zealand Foods Pvt Ltd. With this acquisition, BIL holds 100%

stake in the dairy entity.

KEY RISKS

Intense competition from organised as well as unorganised

Volatile raw material prices mainly sugar, wheat etc

Climatic conditions, as major raw materials are sugar and wheat

YTD 1-m 3-m 12-m

B R ITANN IA 28 1 -5 23

NIF TY 16 3 0 17

Returns (%)

Note:

1) YTD returns are since April 1, 2010 to Jan 04, 2011.

2) 1-m, 3-m and 12-m returns are up to Jan 04, 2011.

Mar-08 Mar-09 Mar-10

R evenue (R s mn) 27,830.8 34,314.5 37,871.9

E BITD A margins (% ) 8.3 6.5 4.0

P AT (R s mn) 1,765.5 1,434.5 1,033.2

P AT margins (% ) 6.3 4.2 2.7

Gearing (x) 0.6 0.5 3.9

E P S (R s /s hare) 73.9 60.0 43.2P E (x) 17.9 23.3 9.5

P /B V (x) 4.9 5.1 5.3

R oC E (% ) 28.2 22.7 14.1

R oE (% ) 31.0 22.2 24.7

E V/E B ITD A (x) 14.6 16.0 10.5

n.m. : Not meaningful

Promoter

51%

FII

10%

DII

17%

Others

22%

0

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160

Jan-1

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Feb-1

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Mar-10

Apr-10

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Jun-1

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Jul-10

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Sep-1

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Oct-10

Nov-1

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(index)

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400600

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1400('000)

V olumes RHS BRITA NNIA NIFTY

BACKGROUND

Indexed price chart

Shareholding (As on December 31, 2010)

Key Financial Indicators

Stock Performances vis--vis market


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BIL was incorporated in 1918 as Britannia Biscuit Co Ltd. The company mainly operates in two segments -- bakery products (biscuits, bread, cakes and rusk) and dairy

products (milk, butter, cheese, ghee and curd). The companys facilities located in Kolkata, Delhi and Uttarakhand. Biscuits account for the largest portion of the companys

revenues, at around 77%, followed by bread at 9%, and cake and rusk at 3%. The company operates in the dairy segment via its subsidiary Britannia Dairy Pvt Ltd, which

accounts for 5% of BILs overall revenues. BIL has a presence in the Middle East markets through its subsidiaries Al Sallan Food Industries Co, Oman and Strategic Food

International Co LLC, Dubai.

COMPETITIVE POSITION

Peer Comparison

Britannia

Industries Ltd

GlaxoS mithKlineConsumer

Healthc are Nes tle India REI Agro

Mar-10 Dec -09 Dec -09 Mar-10

R evenue (Rs mn) 37,871.9 19,881.3 51,523.5 36,932.3

EB ITDA margins (%) 4.0 19.2 19.8 16.3

PAT (R s mn) 1,033.2 2,327.8 6,550.0 1,571.7

PAT margins(%) 2.7 11.7 12.7 4.3

Gearing (x) 3.9 0.0 0.0 5.2

EP S (R s/share) 43.2 66.6 74.8 2.6

PE (x) 9.5 32.0 48.4 10.1

P /BV (x) 5.3 7.8 41.2 1.1

R o C E ( % ) 14.1 41.9 152.4 10.8

R o E ( % ) 24.7 27.8 124.1 18.2

E V/E BITD A (x) 10.5 21.3 34.1 10.9 n.m: Not meaningful

FINANCIAL PROFILE

Revenue growth moderated in FY10

Top-line in FY10 grew at a rate of 10% y-o-y vis--vis 23% in FY09. Revenue

grew from Rs 3.4 bn in FY09 to Rs 3.7 bn in FY10; growth was mainly

driven by a rise in volumes and realisations. Realisations in the biscuit

segment grew by 7%, whereas realisations in bread grew 10%. Volumes in

the biscuit segment grew a mere 0.2%, while the bread segment saw

volumes grow by 11%.

However exceptional commodity price rise -- particularly in sugar, wheat

and milk products -- in the latter half of the year, coupled with intense

competition, saw operating margin decrease by 150 bps to 4% in FY10,against 6.5% in FY09.

Units Ma r-08 Mar-09 Ma r-10

R evenue R s million 27,830.8 34,314.5 37,871.9

E B ITD A m arg ins P er cent 8.3 6.5 4.0

P AT R s million 1,765.5 1,434.5 1,033.2

P AT marg ins P er cent 6.3 4.2 2.7

R evenue g rowth P er cent 22.4 23.3 10.4

E B ITD A growth P er cent 81.8 -4.0 -31.4

P AT growth P er cent 67.9 -18.7 -28.0

G earing Times 0.6 0.5 3.9

R oC E P er cent 28.2 22.7 14.1

R oE P er cent 31.0 22.2 24.7

Key Financ ial Indica tors

INDUSTRY PROFILE

Branded Foods

The branded foods industry includes units manufacturing bakery products, dairy and milk products, confectioneries and ready-to-eat products. While India ranks among the

largest food producers in the world, its share in the processed food industry is miniscule, reflecting the low penetration levels and inadequate supply chain infrastructure.

India, however, has an abundant supply of the raw materials as it is one of the world`s largest producers of milk, food grains, fruits, vegetables, spices, sugar and oilseeds.

Demand growth in the branded foods industry depends on the ability of manufacturers to offer a wide range of products that meet regional tastes at competitive prices.

Increase in the level of penetration, especially in urban areas, will depend primarily on the growth in income levels and the number of working women.

Government policies do not have a large bearing on the branded foods industry. Policy changes have, however, largely been supportive to the growth of the sector. The

industry was accorded priority status for bank lending in 1999.

Organised players in the branded foods industry face stiff competition from regional brands. Imported food products are costlier than local equivalents and are, therefore,

not competitive in the domestic market.


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ANNUAL RESULTS

Income S tatement B alance sheet

(R s million ) Ma r-08 Mar-09 Mar-10 (R s million ) Mar-08 Mar-09 Mar-10

Net S ales 27,738.6 34,214.0 3 7,707.5 E quity s hare c apital 238.9 238.9 238.9

Operating Inc ome 27,830.8 34,314.5 37,871.9 R es erves and s urplus 6,157.0 6,270.5 1,624.8

Ta ng ible net worth 6,395.9 6,509.4 1,863.7

E BITDA 2,317.7 2,225.7 1,527.4 Deferred tax liablity:|as set| -25.4 99.4 -61.0

E BITDA Marg in 8.3 6.5 4.0 L ong-term debt 2,048.9 2,494.0 6,411.3

S hort-term-debt 703.8 296.9 212.4

Deprec iation 393.6 659.1 582.3 Tota l de bt 2,752.7 2,790.8 6,623.8

Interes t 187.6 307.9 263.6 C urrent liabilities 2,929.6 3,260.5 3,881.8

Other Inc ome 232.0 213.0 403.9 Total provis ions 1,057.0 1,506.8 1,545.2

Tota l lia bilities 13,109.8 14,166.9 13,853.5

P B T 2,181.8 1,964.6 1,088.9 G ros s block 7,210.9 8,661.3 8,602.6

P AT 1,765.5 1,434.5 1,033.2 Net fixed as s ets 3,703.3 4,296.8 4,125.9

Investme nts 3,398.4 3,773.4 3,664.4

P AT Marg in 6.3 4.2 2.7 C urrent asse ts 6,008.1 6,096.7 6,063.2

R ec eivables 690.4 740.0 730.2

No. of s hares (Mn No.) 23.9 23.9 23.9 Inventories 3,293.1 2,886.9 3,042.1

C as h 534.6 688.4 427.3

E arnings per s hare (E P S ) 73.9 60.0 43.2 Tota l asse ts 13,109.8 14,166.9 13,853.5

C ash flow R atio

(R s million ) Ma r-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10

P re-tax profit 1,968.4 1,471.6 1,085.4 R evenue growth (% ) 22.4 23.3 10.4

Total tax paid -429.3 -405.3 -216.1 E B ITDA growth(% ) 81.8 -4.0 -31.4

Deprec iation 393.6 659.1 582.3 P AT growth(% ) 67.9 -18.7 -28.0

C hange in working c apital -1,501.5 846.0 432.0

E B ITDA margins (% ) 8.3 6.5 4.0

C ash flow from operating activities 431.2 2,571.4 1,883.6 Tax rate (% ) 19.6 20.5 19.8

C apital E xpenditure -700.0 -1,335.1 -925.9 PAT margins (% ) 6.3 4.2 2.7

Inves tments and others -490.8 -375.0 109.1

Dividend payout (% ) 24.4 66.6 57.8

Dividend per s hare (R s ) 18.0 40.0 25.0

C ash flow from investing a ctivities -1,190.8 -1,710.1 -816.8 B V (R s ) 267.7 272.5 78.0

E quity rais ed/(repaid) 0.0 0.0 0.0 R eturn on E quity (% ) 31.0 22.2 24.7

Debt rais ed/(repaid) 1,081.7 38.1 3,833.0 R eturn on capital employed (% ) 28.2 22.7 14.1

Dividend (inc l. tax) -503.1 -1,118.0 -1,386.7

Others (inc l extraordinaries ) 168.8 372.4 -3,774.1 G earing (x ) 0.6 0.5 3.9

Interes t coverage (x ) 12.4 7.2 5.8

Debt/E B ITDA (x) 1.2 1.3 4.3

C ash flow from financ ing activitie s 747.4 -707.5 -1,327.8

C hange in cas h pos ition -12.2 153.8 -261.0 As s et turnover (x) 4.1 4.3 4.4

Opening cas h 546.8 534.6 688.4 C urrent ratio (x) 1.8 1.8 1.5

C los ing cas h 534.6 688.4 427.3 G ros s c urrent as s ets (days ) 76 64 58

n.m:Notmeaningful;

QUARTERLY RESULTS

(Rs million) S ep-10 % of Rev S ep-09 % of Rev J un-10 % of Rev S ep-10 % of Rev S ep-09 % of Rev

No of Months 3 3 3 6 6

Revenue 11,072.4 100.0 8,711.5 100.0 9,357.4 100.0 20,393.9 100.0 16,176.6 100.0

EBITDA 653.6 5.9 863.9 9.9 635.8 6.8 1,290.3 6.3 1,616.0 10.0

Interes t 97.0 0.9 8.8 0.1 94.0 1.0 191.0 0.9 17.0 0.1

D epreciation 103.4 0.9 93.5 1.1 99.6 1.1 203.1 1.0 184.7 1.1

P BT 440.2 4.0 691.8 7.9 442.2 4.7 882.3 4.3 1,274.7 7.9

P AT 318.7 2.9 590.7 6.8 328.3 3.5 647.0 3.2 1,064.4 6.6

Profit and loss acc ount


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FOCUS CHARTS & TABLES

Mar 2010 J un 2010 S ep 2010 Dec 2010

P romoter 51.0 51.0 51.0 51.0

FII 8.6 8.6 8.5 9.9D II 18.9 18.9 18.4 17.1

Others 21.5 21.6 22.1 22.0

S hareholding Pattern (Per c ent)

Direc tor Name Des ignation

N us li Ne ville Wa dia (Mr.) N on-E xe cutive C h airm an, Prom ote r-

Director

Vinita Kunda n L a l B ali (Ms .) Ma na ging Dire ctor

K eki B om i D adis eth (Mr.) N on-E xecutive D irector

Avijit D eb (Mr.) Non-E xecutive D irector

An il K u ma r H irje e (Mr.) P ro mo te r-D ire cto r, N on -E xe cutive D ire cto r

N im e sh N a g inda s K a m pa ni (Mr.) N on-Exe c utive D i re c tor

S uka nt S a da sh iv K e lka r (Mr.) P rom ote r-D ire c tor, N on-Exec utive D i re c tor

Vija y L axm an Kelka r (D r.) N on-E xecutive Director

P ratap K hanna (Mr.) Non-E xecutive D irector

N a s s e r Mu kh ta r Mu nje e (Mr.) N on -E xe cu tive D ire cto r

Aja i P uri (D r.) Non-E xecutive D irector

J e h an g ir Nu s li Wa dia ( Mr.) P ro m ote r-D ire cto r, N on -E x ec utive D i re cto r

N es s N us li Wa dia (Mr.) N on-E xe cutive D ire ctor, P rom ote r-D ire ctor

Board of Direc tors

Additional Disclosure

This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

Disclaimer

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Quarterly sales & y-o-y growth

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research report britannia industries ltd

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