Britannia Industries

Introduction
Basic Company Information
Britannia Industries Limited is an Indian based food-products
corporation. It was founded in 1892 and headquarter is in Kolkata. it is one
of India's oldest existing companies. It was taken over by the the Wadia
Group which is headed by Nusli Wadia. The Wadia Group has other
subsidiaries such as Go Air, Bombay Dyeing and many more. Britannia
sells various product including, its Britannia and Tiger brands of biscuits,
breads and dairy products throughout India and in more than 60 countries
across the globe. Beginning with the circumstances of its takeover by the
Wadia group in the early 1990s, the company has been bogged down in
several controversies connected to its management. However, it enjoys a
large market share and is exceedingly profitable.[Source:Wikipedia]

Basic information about the industry

It categorized in the food processing segment of the industry.

The food industry is a colossal, worldwide cluster of businesses which

supplies a major part of the food consumed by the world's population, a
part of which is food processing. It is the process of converting the
agricultural products into food, or one form of food into other forms. The
primary food processing is essential to make the food edible, whereas the
secondary food processing is turns the basic ingredients into commercial
food such as the conversion of wheat into bread. The tertiary sector of the
latter has been criticized for the production of food containing too much salt
and sugar which causes obesity and overnutrition.[Source: Wikipedia]

Mission and Vision of the company

A vision statement is basically the ultimate goal of what they'd like to
accomplish, while a mission statement defines what an organization is
currently doing. Now, the vision of Britannia Industries is to dominate the
food and beverage market in India a distinctive range of "Tasty yet Healthy"
Britannia brands and also make every third person in India a Britannia
consumer. Whereas, the mission is to be one of the best biscuit company
and also to subjugate the Indian food and beverages market in the long
run. [Source:Slideshare]

Corporate Objectives
Corporate objective is a well defined and realistic goal set by
a company that often influences its internal strategic
decisions.[Source:Businessdictionary]

SWOT Analysis of the company

Strengths

1. Brand portfolio: Britannia is the only company in India that has

offerings in bakery products across the segment for all income
groups. Britannia holds nearly 30% market share in the India’s
biscuit category.
2. High Brand Recall: Due to its presence across range of bakery
products like biscuits, rusk, cakes & dairy products like milk, butter
& cheese etc., their shelf visibility is high. Also their focused
marketing & advertising campaigns resulted into positive word of
mouth & high TOMA (top of mind awareness).
3. Serving Indian Markets from last 120 years: 123 years ago, in a
small house in central Calcutta (now Kolkata) an intrepid baker
made a batch of delicious, golden brown biscuits. These were
meant for officers of the British Raj and their families, people used
to the high standards of English tea-time snacking. 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.
4. In depth product portfolio: It has different offering for different
income groups with large assortments across the product
 categories like in Biscuits they have tiger ,milk bikis , Good day,
Bourbon ,little hearts, crackers , nutria-choice.
5. Market Penetration and distribution: Being present in the market
with such large SKU’s and making it available through its robust
distribution system, Britannia has penetrated to every nook &
corner of the country. Besides their presence in such developed
areas, they also make their products available to the people of rural
areas.
6. Market Leader in bakery: Britannia Industries Limited (BIL) is a
major player in the Indian Foods market with leadership position in
Bakery category and has a market share of ~ 30% in the
industry. Britannia offers both delightfully indulgent and healthy
choices in biscuits, bread, cake, rusk and a range of dairy products
that include cheese, curd and specially formulated functional
beverages with a dairy base.

Weaknesses
1. Over dependency on the biscuit business: Britannia’s 75% revenue
comes from biscuit business. Although they are market leader in the
same but over dependency on the same may affect their long term
existence in the business.
2. Various brands got commoditized over time: Brands like Bourbon
& glucose biscuits of Britannia got commoditized over time such as in
case of “bourbon”, Parle also introduced “Parle bourbon”
biscuits. Brand name when used like this by other companies,
creates confusion in the mind of the consumers resulting in loss of
sale.
3. No overseas presence: Apart from India Britannia have presence in
Dubai & Oman that too through subsidiaries. But overall export of the
products is very less than its actual potential.
4. Struggling dairy business: Dairy business contributes only 5% of the
company’s overall revenues.
5. Heavy Expenditure on Advertising and Marketing: Even though they
have celebrated success in their operations relating to adverts and marketing,
they spend too much than what is necessary.

Opportunities
 1. Improving Lifestyle and Demand for healthier and premium
products: The steadily increasing literacy rate, health awareness,
changing lifestyle have all accounted for the escalation of the demand
for healthier food products. Another important feature is that the
richer class of the society has always been interested to purchase the
premium range of products. As a result, Britannia has the lead to
pursue the introduction of premium products targeted to the richer
class.
2. Emerging Dairy Industry: With taste and quality being an important
factor in the dairy industry, the company can make the most of this
chance to get a firm hold onto the dairy market and also possess the
market share.
3. Overseas Market: Expanding its business to other overseas market
can help the company to emerge as a global player in the food
products.

Threats
1. Price of Raw Materials: Increasing price of commodities will result in
further increase in the price of the end product. Further increase in
price will result in decrease in profitability or reduced consumption.
2. Buyers power: With highly diversified consumer goods market where
there are lots of brands claiming different sorts of benefits, it’s very
difficult for consumers to stick to a particular brand & hence results
into brand switching where consumer get power to select a brand
based on several factors like availability, reference group
recommendation, preference & price.

Competition in the market: With increasing number of players (local

players – Anmol, Priya & national- ITC, Parle), it’s becoming very hard
for the company to differentiate themselves from others. There is also
threat from counterfeit products destroying its brand image in the
market. [Source: marketing91]
 Finance Function
Financial Records and information(Income Statement,
Balance Sheet and Cash Flow Statement)

Income Statement

Profit & Loss account of Britannia Industries ------------------- in Rs. Cr. -------------------
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12
12 months 12 months 12 months 12 months
months

Income
Sales Turnover 11,054.67 9,990.10 9,324.11 8,626.15 8,027.51
Excise Duty 0.00 0.00 270.02 0.00 169.09
Net Sales 11,054.67 9,990.10 9,054.09 8,626.15 7,858.42
Other Income 206.45 166.37 150.54 124.35 234.02
Stock Adjustments 55.18 -6.30 54.20 4.27 30.40
Total Income 11,316.30 10,150.17 9,258.83 8,754.77 8,122.84
Expenditure
Raw Materials 6,616.64 6,123.98 5,663.17 5,036.20 4,745.76
Power & Fuel Cost 0.00 128.83 104.28 95.16 110.96
Employee Cost 441.82 401.60 352.61 341.36 280.58
Selling and Admin Expenses 0.00 411.29 385.02 446.07 0.00
Miscellaneous Expenses 2,317.97 1,340.34 1,325.03 1,268.32 1,887.61
Total Expenses 9,376.43 8,406.04 7,830.11 7,187.11 7,024.91
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12
12 months 12 months 12 months 12 months
months

Operating Profit 1,733.42 1,577.76 1,278.18 1,443.31 863.91

PBDIT 1,939.87 1,744.13 1,428.72 1,567.66 1,097.93
Interest 9.09 7.59 5.45 4.87 3.86
PBDT 1,930.78 1,736.54 1,423.27 1,562.79 1,094.07
Depreciation 161.88 142.07 119.27 113.41 144.48
Profit Before Tax 1,768.90 1,594.47 1,304.00 1,449.38 949.59
PBT 1,768.90 1,594.47 1,304.00 1,449.38 949.59
Tax 612.47 514.22 419.67 396.10 261.11
Reported Net Profit 1,156.43 1,004.14 884.33 824.36 688.48
 Balance Sheet

Balance Sheet of Britannia Industries ------------------- in Rs. Cr. -------------------

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12
12 months 12 months 12 months 12 months
months

Sources Of Funds
Total Share Capital 24.03 24.01 24.00 24.00 23.99
Equity Share Capital 24.03 24.01 24.00 24.00 23.99
Reserves 4,015.42 3,211.27 2,557.98 1,676.16 1,211.63
Net worth 4,039.45 3,235.28 2,581.98 1,700.16 1,235.62
Secured Loans 0.26 0.30 0.44 3.35 4.30
Unsecured Loans 0.00 9.01 0.00 0.00 0.00
Total Debt 0.26 9.31 0.44 3.35 4.30
Total Liabilities 4,039.71 3,244.59 2,582.42 1,703.51 1,239.92
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12
12 months 12 months 12 months 12 months
months

Application Of Funds
Gross Block 1,392.51 1,305.04 997.67 1,176.06 986.66
Less: Accumulated Depreciation 0.00 288.76 173.60 536.67 460.71
Net Block 1,392.51 1,016.28 824.07 639.39 525.95
Capital Work in Progress 0.00 215.27 45.02 0.00 48.22
Investments 1,645.67 1,186.13 599.91 894.88 661.04
Inventories 718.89 594.58 602.61 384.01 345.74
Sundry Debtors 350.96 230.32 126.41 106.70 70.98
Cash and Bank Balance 40.48 97.25 53.55 24.80 186.67
Total Current Assets 1,110.33 922.15 782.57 515.51 603.39
Loans and Advances 1,504.46 1,287.47 1,444.57 942.98 623.39
Total CA, Loans & Advances 2,614.79 2,209.62 2,227.14 1,458.49 1,226.78
Current Liabilities 1,424.74 1,211.66 939.24 871.67 811.16
Provisions 188.52 171.05 174.48 492.08 410.91
Total CL & Provisions 1,613.26 1,382.71 1,113.72 1,363.75 1,222.07
Net Current Assets 1,001.53 826.91 1,113.42 94.74 4.71
Total Assets 4,039.71 3,244.59 2,582.42 1,629.01 1,239.92

Contingent Liabilities 0.00 295.08 355.58 389.87 324.22

Book Value (Rs) 168.10 269.47 215.16 141.71 103.03
 Cash Flow Statement

Cash Flow of Britannia Industries ------------------- in Rs. Cr. -------------------

Mar '18 Mar '17 Mar '16 Mar '15 Mar '14

12 months 12 months 12 months 12 months 12 months

Net Profit Before Tax 1445.20 1251.16 1131.56 882.61 542.62

Net Cash From Operating Activities 1182.58 401.94 0.00 515.33 614.51
Net Cash (used in)/from
-822.78 -115.49 0.00 -384.29 -227.34
Investing Activities
Net Cash (used in)/from Financing Activities -304.27 -283.80 0.00 -168.11 -325.46
Net (decrease)/increase In Cash and Cash Equivalents 55.53 2.65 -9.97 -37.07 61.71
Opening Cash & Cash Equivalents 11.31 8.66 17.62 54.69 -7.02
Closing Cash & Cash Equivalents 66.84 11.31 7.65 17.62 54.69

Analysis of Capital structure of the company

Capital Structure (Britannia Industries)
Period Instrument Authorized Issued Capital -PAIDUP-
Capital
From To (Crore) (Crore) Shares (numbers) Face Value Capital
2017 2018 Equity Share 50 24.01 120059148 2 24.01
2016 2017 Equity Share 50 24 120000815 2 24
2015 2016 Equity Share 50 24 119975815 2 24
2014 2015 Equity Share 50 23.99 119925815 2 23.99
2013 2014 Equity Share 50 23.99 119925815 2 23.99
2012 2013 Equity Share 50 23.91 119525815 2 23.91
2011 2012 Equity Share 50 23.89 119450815 2 23.89
2010 2011 Equity Share 50 23.89 119450815 2 23.89
2009 2010 Equity Share 50 23.89 23890163 10 23.89
2008 2009 Equity Share 50 23.89 23890163 10 23.89

Equity and Debt

A high debt equity ratio is a bad sign for the safety of investment. A
company which has high debt in comparison to its net worth, has to spend
a large part of its profit in paying off the interest and the principal amount.
If the debt is decreasing over a period of time, it is a good sign. Vice-versa,
an increasing debt is a bad sign. The companies that have a debt equity
ratio greater than 0.5 should be avoided.

The Gearing Ratio of the company has come down over the years, from
0.19 in 2014 to 0.6 in 2018 which is a great growth in the financial side of
the company. If the company is low-geared, its credit-worthiness improves,
thereby making it easier to raise loans by means of debt.

Current Ratio(Current assets/Current liabilities)

This ratio denotes the operating financial health of the company. It
measures the capacity of the company to pay off its immediate liabilities
with the immediately liquefiable assets. Current Assets include Cash, Short
term investments, Receivables, Inventory etc.

A current ratio of 2 is considered ideal. Companies that have current ratio

less than 1 should be avoided.

A high current ratio denotes that the company has more assets than
liabilities. It has increased from 0.84 in 2014 to 1.91 in 2018. Since the
company has more assets, it can raise funds, more particularly debt, by
mortgaging their assets.

Fixed and Working Capital

Profitability of the Company

Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at
29.5% during FY18, from 32.8% during FY18. The ROE measures the
ability of a firm to generate profits from its shareholders capital in the
company.

Return on Capital Employed (ROCE): The ROCE for the company

declined and down at 43.7% during FY18, from 48.0% during FY17. The
ROCE measures the ability of a firm to generate profits from its total capital
(shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at
19.5% during FY18, from 21.7% during FY17. The ROA measures how
efficiently the company uses its assets to generate earnings.