Understanding Britannia – Good Going, but Unsure of Expansion path

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Understanding Britannia – Good Going, but Unsure of Expansion path

  • Britannia is one of the big company of Nusli Wadia group, other big companies are Bombay Dyeing, Bombay Realty, Go-Air, Bombay Burmah Trading corp. Britannia, since its inception (125 yrs ago) has been controlled by various people at different point of time. In 1995,Wadia bought this company in partnership
  • Britannia has around 35% market share in Indian Biscuit market. Britannia’s 77% of consolidated revenue comes from Biscuits, other key segments are Bread cake, Dairy products like Cheese.
  • Its popular Brands of biscuits are: Little Hearts, Vita Marie, Good Day, Tiger, Nice, Bourbon, 50-50.
  • There exist similar products for various popular brands. ITC’s Mom’s Magic vs Good Day, Parle -G vs Tiger. With the successful entry of Patanjali, competition has intensified to some extent.
  • Though volume growth is not so impressive but, it has taken adequate price hike to result better sales and net  profit growth.
  • Net profit margin which use to be just 4-5% in 2010 is now 10% in FY2016. 
  • But ROE has not improved drastically, it remains to be around 40%. Largely on account of investments which makes balance sheet heavier and yield low returns. ROIC is high around ~80%.
  • In the last 6 years, of the total cash generated from operations, ~33 % was paid as dividend, only ~25% was used for fixed assets, ~15% in Debt repayment, rest 27% is in Balance sheet as Investment or Long Term Loans and Advances.
  • Shareholders Funds are Rs 1700 crores, Total of Investments & Loan and Advances is more than Rs 1200 crores, its almost debt free company. It made profit after tax of Rs 750 crores on shareholders’s  capital in business  of Rs 500 crores.
  • From this one can conclude that, no doubt Britannia has strong brands and in-spite of competition it can take price hike of products, but company is not sure about how to expand and use its  accumulated cash.

understanding_britannia

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