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Britannia

Industries Limited
Britannia Industries Limited
Eat Healthy, Think Better
Established in 1892
Headquarter in Kolkata
Key Personnel : Vinita Bali, Managing Director
Neeraj Chandra, Vice President Business Development
Britannia Industries Limited
Crossed 100 crore Revenue in 1983
76% of Total Revenues come from Biscuits
The Dairy segment comprises of 6.3% of total Turnover
Exports form 5% of the company's overall Sales
Britannia
33%
Parle
38%
Sunfeast
13%
Priya Gold &
Others
16%
Market Share
Industry Analysis
VAT
Biscuits - 13.5
Other food products 0% to 5%
Price
Economy (Price < Rs100 per kg)
Mid (Rs 100-150 per kg price band)
Premium (Price > Rs 150 per kg)
Region
Urban : 75%-85%
Rural : 50%-65%
Country
India - Per capita consumption is 1.8 kg
South East Asian & European countries - Per capita consumption is 2.5-5.5 kg
US - Per capita consumption is 7.5 kg
Competitors In Dairy Products
NESTLE AMUL
NDDB
Competitors In Biscuits
PARLE ITC
CADBURY
OREO
SUNFEAST
Products
BISCUITS


BREAD, CAKES
&
RUSK



GIFT



DAIRY


Segmentation
Age Group: Different products for different age groups

Niche Snacking segment: For those individuals who are on the go, the company
introduced small packs

Occasions: Britannias Shubh Kaamnayein is for special occasions like
festivals.

Targeting
Full Market Coverage: Britannia follows full market coverage pattern of target
market selection

Trend Analysis of Sales and Profit
Comparative Statement of the Balance
Sheet for the years 2011-12 and 2012-13

Liquidity Ratios
Ratio
Formula 2012-13 2011-12
Current ratio
Current assets
times 0.82

0.88
Current liabilities

Quick Ratio
Current Assets - Inventories
times 0.44 0.48
Current Liabilities
Current Ratio
Higher Current Ratio implies healthier short term liquidity comfort level.
A current ratio below 1 indicates that the company may not be able to meet its
obligations in the shorter run.
However, it is not always a matter of worry if this ratio temporarily falls below
1 as many companies squeeze out short term cash sources to achieve a capital
intensive plan with a longer term outlook.
Quick Ratio
Quick ratio measures the liquidity of a business by matching its cash and
near cash current assets with its total liabilities
It helps us to determine whether a business would be able to pay off all its
debts by using its most liquid assets (i.e. cash, marketable securities and
accounts receivable)
A quick ratio of 1 means that the most liquid assets of a business are equal to
its total debts and the business will just manage to repay all its debts by
using its cash, marketable securities and accounts receivable.
A quick ratio of more than 1 indicates that the most liquid assets of a
business exceed its total debts.
On the opposite side, a quick ratio of less than 1 indicates that a business
would not be able to repay all its debts by using its most liquid assets

Solvency Ratios
1. Debt to Equity = Debt
Equity

Long Term Debt to Equity = Long Term Borrowings
Shareholders Funds

2. Capital Gearing Ratio = Owed Funds
Owned Funds
Year
Debt to Equity
ratio
Long term Debt to
Equity Ratio
March, 2013 0.30 0.0006
March, 2012 0.05 0.05
March, 2011 0.96 0.96
March, 2010 1.08 1.08
March, 2009 0.03 0.03
Debt to Equity Ratio
It is a measure of a company's financial leverage which indicates
what proportion of equity and debt the company is using to finance its
assets
A debt/equity ratio greater than 1 generally means that a company
has been aggressive in financing its growth with debt. This can result
in volatile earnings as a result of the additional interest expense
BILs average debt to equity ratio over past 5 years is 0.48



Long Term Debt to Equity Ratio
Long term debt to equity ratio higher than 0.6 to 0.8
would affect business of a company and its results of
operations.
BILs average long term debt to equity ratio over the last
5 financial years has been 0.55 which indicates that the
company operating with a considerate level of debt.

Year Capital Gearing Ratio
March, 2013 0.30
March, 2012 0.05
March, 2011 0.96
March, 2010 1.08
March, 2009 0.03
Capital Gearing Ratio
Gearing is a measure of financial leverage, demonstrating the degree to
which a firm's activities are funded by owner's funds versus creditor's funds.
The higher a company's degree of leverage, the more the company is
considered risky.
The firm is said to be low geared if the preference shares capital and other
fixed interest bearing loans and less than equity capital and reserves
A company with high gearing (high leverage) is more vulnerable to
downturns in the business cycle because the company must continue to
service its debt regardless of how bad sales are. A greater proportion of
equity provides a cushion and is seen as a measure of financial strength.
Stock Turnover Ratio and Debtors Turnover Ratio
Ratio
Formula 2012-13 2011-12
Debtors turnover
Sale of products
times

73.3

96
Trade receivables


Stock turnover
Sale of products
times

40.7

39.2

Inventories (Finished goods
+ Stock-in-trade)

Stock Turnover Ratio
Inventory turnover is the ratio of cost of goods sold by a business to its average inventory during
a given accounting period.
Inventory turnover ratio is used to measure the inventory management efficiency of a business.
In general, a higher value of inventory turnover indicates better performance and lower value
means inefficiency in controlling inventory levels.
A lower inventory turnover ratio may be an indication of over-stocking which may pose risk of
obsolescence and increased inventory holding costs.
However, a very high value of this ratio may be accompanied by loss of sales due to inventory
shortage.
Inventory turnover is different for different industries. Businesses which trade perishable goods
have very higher turnover compared to those dealing in durables. Hence a comparison would only
be fair if made between businesses of same industry.



Debtors Turnover Ratio
It is an accounting measure used to quantify a firm's effectiveness in
extending credit as well as collecting debts.
A high ratio implies either that a company operates on a cash basis or that its
extension of credit and collection of accounts receivable is efficient.
A low ratio implies the company should re-assess its credit policies in order
to ensure the timely collection of imparted credit that is not earning interest
for the firm.

Dividend Yield Ratio
Ratio
Formula 2012-13 2011-12 2010-11
Dividend Yield
Dividend Per share
%

1.62

1.43

1.75
Current Share Price
Dividend Yield Ratio
Dividend yield is the ratio of dividend per share to current share price. It is a measure of what
percentage an investor is earning in the form of dividends.
Depending solely on dividend yield figure for making investment in a company may not be a
wise decision.
A high dividend yield percentage may be due to a recent decrease in the market price of the
stock of the company due to sever financial troubles. It may have to reduce the amount of
dividends in future that may further reduce the market value of its stock. Therefore, a
company with attractive dividend yield figure may not always be the best option.

Capital Ratio
Ratio
Formula 2012-13 2011-12 2010-11
Capital Ratio
Shareholder's Equity +
Long-term Debt


1.15

1.26

2.82
Total Fixed Assets
Capital Ratio
The Capital Ratio measures the amount of equity and debt funding that has resulted in the company
acquiring a certain level of Net Property Plant Equipment. Most long-term, fixed assets are financed by either
an infusion of equity from stockholders or from debt financed from banks.

A decreasing Capital Ratio is usually a positive sign, as this shows the company may have a higher
proportion of fixed assets when compared to its total equity and debt. The company may have paid down
some debt, or possibly bought back some of its stock while maintaining its amount of fixed assets.

An increasing ratio may indicate the company has taken on more debt or completed another round of
securing equity, but less of a proportion was spent on fixed assets. The company may have also sold some of
its fixed assets, causing the ratio to skew upwards.

Ratio
Formula 2012-13 2011-12 2010-11
Return on Equity
PAT
% 36.75 35.9 32.194
Shareholders funds
Return on Equity
Return on Equity
It is a measure of profitability of stockholders' investments. It shows net income as
percentage of shareholder equity.
Higher values are generally favorable meaning that the company is efficient in
generating income on new investment.
With BIL, we see an increasing trend from 32-35-36% over 3 years. Investors
should compare the ROE of different companies and also check the trend in ROE
over time.
However, relying solely on ROE for investment decisions is not safe.

Return on Capital Employed
Ratio
Formula 2012-13 2011-12 2010-11
Return on Capital
Employed
PAT
% 18.68 13.87 12.34
Capital Employed
Return on Capital Employed
Return on capital employed (ROCE) is the ratio of net operating profit of a
company to its capital employed.
It measures the profitability of a company by expressing its operating profit
as a percentage of its capital employed.
A higher value of return on capital employed is favorable indicating that the
company generates more earnings per rupee of capital employed.
A lower value of ROCE indicates lower profitability.
A company having less assets but same profit as its competitors will have
higher value of return on capital employed and thus higher profitability.

Price to Earning Ratio
Ratio
Formula 2012-13 2011-12 2010-11
PE Ratio as per
Book Value
Book value per share
times 2.74 2.79 3.11
EPS

PE Ratio as per Avg
Market Price
Market Value per share
times 26.55 37.19 30.33
EPS
Price to Earning Ratio
It shows how much investors are willing to pay per rupee of earnings.
If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an
investor is willing to pay Rs. 20 for Re. 1 of current earnings.
Generally a high P/E ratio means that investors are anticipating higher growth in the future.
The average market P/E ratio is 20-25 times earnings.
Book P/E is based on cost while Market P/E is based on market expectation. Gap between
these two P/E helps in deciding whether to invest or not.
In case of BIL, Market P/E is greater than book P/E, it means that shares are being traded at
a Premium.
Conclusion
Britannia continues to suffer from low profitability. Although the company
has been upgrading its product portfolio by launching more premium and
healthy offerings, these efforts are still to make a big difference to the
company's margins.
In FY13, net margin has improved, albeit slightly to around 4.2% backed
by higher realizations. However volume off take remained tepid pointing
towards intense competition and the lack of pricing power.
Going forward, margins are not expected to expand significantly on
account of reduced flexibility to hike prices in the face of inflation and
investments in brands

Thank You

Akshay Gurumoorthy
Bulbul Saha
Fabushara Wasim
Mansi Shah
Monika Nehe
Onkar Charegaonkar
Pooja Junnarkar
Rachna Gaikwad
Yash Baldev

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