ValuePickr Forum

Britannia (Buy Commodities, Sell Brands)

That’s what everyone has been doing for ages but now the trend seems to be slowly (very slowly) reversing.

This might be strange kind of valuation one may consider ( NUMBER OTHER THAN FINACIAL )
Rough Consumption Valuation ( FOOL’s Valuation )…
Total Population in india = Say 125 Crore
There are about 45 people in my office when enquired they consume average Rs 200 Per month on Britannia products This makes annually 2400 head /per year
The total pollution say 125 Crore say 50% doesn’t buy biscuit roughly say 60 crore
and assuming 25% market share by Britannia this makes 15 crore consumer
total sale 15 crore x 2400 = 3600 crore
Present sale around year 18-19 — > 2800 crore the gap is 800 crore i.e 28% Potential
in addition to gap
population growth 1.08% Income growth ( source : https://www.worldometers.info/world-population/india-population/)
minimum increase in income 16.78% 2014-2016 and 10% in 2016-17 average 13.39% ( source ; https://tradingeconomics.com/india/minimum-wages)
additional growth 1.08*13.39 i.e 14.49%
Potential rise 14.49+28 =42.49% To be more on conservative side say company achieve on 60% of projected than one can expect the stock reach minimum 25% in year

one can bet on Britannia’s robust supply chain . Berry Ex Hindustan Unilever and Ex Lay’s Frito experience can create new channel of growth and ore control on supply chain
Britannia now is the number two player in dairy, even though Amul is several times its size. In cheese slices, Britannia actually sells at a 25 per cent premium to Amul but global diary majors are already in race to take their bite in indian market such as Lactalis, Danone, Kraft, Bongrain etc
i have doubt that on biscuit front as it has threat at the premium end from ITC and at the mass end from Parle and a growing Patanjali.The concern of worry is rural market is weaker than urban market for Britannia .

In 2016 there was potassium bromate controversy decreasing Breads sale down ( https://www.firstpost.com/business/jubilant-food-britannia-industries-potassium-bromate-potassium-iodate-fssai-jp-nadda-2795950.html )

Every company faces headwinds at some point. Even the bluest of blue-chip stocks must tackle a serious threat from time to time. My quest is to find some threat in Britannia … ( It is at the bottom of the year MAY Be MARKET KNOW MORE THAN ME… )

Disc: Not holding . earlier holding the stock but exited recently looking forward to enter again waiting on side lines .this is not any recommendation to buy or sell .I am not sebi approved Analyst

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FIIs are selling. So price will drop. Add to it that we have a slowdown which will affect Britannia. Even with a 52 week low price, it is not a cheap stock.

It is impossible, if at all possible to find the the reason for market volatility. Better to look at valuation and long term

You haven’t included its overseas business. It has presence across Middle East, Africa, Americas, Asia Pacific and South Asia. Exports or Local manufacturing in this countries may not be contributing much to the topline now, but should increase going forward.

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Helo sir ,
I lived in Australia from 2014 to 2017 i want to share my experience i don’t know much about other countries .in Australia People prefer to go to coffee houses They prefer mostly local pastries shop shop and consumption of puff patisseries .

They mainly shop in Woolworth ,Coles ( It have small Asian section ) or ALDI .I don’t find Indian biscuits in their shelves .Only INDIAN Grocery shops have these on their shelf .
BEST SELLING BRAND : TIM TAM
However, several other snack categories such as nuts corn chips , chocolate coated biscuits, cream/jam filled and plain – are gaining in popularity but over all they are munching on sweet biscuits less than before.

Moreover i am only taking rough numbers if you add overseas india population in to account the figure may be bigger because as INDIAN We live in different countries but we rarely change our food habbits we cook Curry Rice CHAPATI DALS because DIL HAI HINDUSTANI .

The Biscuit Manufacturing industry is in the decline stage of its life cycle in New Zealand

Even during weakened we have Indian Barbie-queue part at my project site
Competitive landscape ;
Competition is very high in the market with virtually no entry barriers due to almost 100% penetration of the product. A lot of premium, functional biscuits have hit the market, giving the market leaders a run for their money. Manufacturers are living up to consumer demands by launching innovative products with functional properties such as high protein and by using ingredients such as nuts & seeds and dry fruits in biscuits.
Source : https://www.mordorintelligence.com/industry-reports/biscuits-market

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@yourraj This list is quoted from their latest AR. So, probably they don’t have presence in Australia or New Zealand.

And I don’t expect them to be present significantly in the quoted regions as well, as they probably have much less sales as of now, as you said, possibly from NRIs only.

Agree that Biscuits Industry is saturated and has no entry barrier, although I believe that tastes differ, which can keep customer stickiness even in basic biscuits category. However, growth will come from innovating value added premium biscuits, salty snacks, cakes, dairy, wafers, croissants etc., which they are very much committed to in the path of becoming a Total Foods Company.

Gradually they will export / locally manufacture all of these products to the overseas market too, and grow accordingly. Understandably, it’s a far fetched plan that I am talking about, but this is actually my thesis for qualitatively valuing the company and adding it in my long term holding.

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to an extend i agree with you but with every new product or new launch THE advertisement expense will shot up giving pressure on the margins I may be wrong There are several variable on the input side of the product
inputs : GRAINS How much they can control the Quality over long time this is a debatable question . I had seen personally in their DELHI PLANT ( biscuit plant ) they way they mange the raw material is questionable standards also the crop yield will change with detoriating quality of land .
NUTs : The limited area on the crops
Sweeteners: There won’t be much problem on this .
Packaging : People are dumping the wrappers overall threat to environment .
TO BE FOOD PLAYER THEY NEDD TO BE more BACK INTEGREATED …and HOW MUCH are they ?? I don’t know I may need to dig more

They have survived with much lesser capabilities for 100 odd years. Suddenly land quality will deteriorate, environment is threatened? If plastics are banned, they will switch to a biodegradable alternative. The issue will be present for every manufacturer.

If you go to Singapore, the non Indian shops too have Britannia products. Africa and South America could be possible entry points. We have to wait for next 2 decades to see how it pans out. Having lived in US for a long time, I can say with confidence that the taste of Indian biscuits have never been replicated by the west.

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Simple reason why stock is near 52 week low is because market anticipate low growth in volumes. If growth is there, all issues will vanish. Market is indeed so one track mind, it’s only us who complicate matters by looking at next Britannia or infy or value or reasons…i wish in some of my picks i would not have thought much and only looked one track like markets…

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There was earlier some false news about Mr Berry resigning that turned out to be rumour . But hypothetically speaking , if such a thing happens , what would be the effect on shares and in the long term ? As he is the main driving force behind the great performance in the past .
Also the case of non reporting and violation of sebi listing norms as referred to in article above , how should one consider this information from long term view as to whether can it have material impact ?

I completely agree as they are innovating under Mr Berry leadership and adding new product lines and innovation so growth seems quite possible.
Another thing is Mr Berry , ex Pepsi co has augmented the distribution lines greatly from his experience ( cos like Pepsi coke have major distribution advantage and so does a company like Page ) and this results in more penetration which earlier wasn’t there and then the rising population, all this factors combined may give high scaling up and Lollapalooza outcome .
Add to this is the export market
The risk here may be of governance and mgmt change IMHO
Disclosure- Invested . I am not a sebi registered advisor and there are reasonable chances of me being wrong and often am wrong as I am an amateur . Pls do your own diligence before investing .

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what is this complicated instrument and how will it be given to shareholders. Can we liquidate it for cash immediately once received? After 3 years will it convert to equity? At what rate?
Britannia does simple business, i think it should reward its shareholders in simple manners only and not in such complicated ways. Others Pls share your thoughts

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Well it is not complicated in fact it is the best of both world kind of thing . HUL does it for the 1st time in India long back in 2001 and since then only SIX companies were able to do this.
Question is when a company does that?
Well, a company does it when they want to use the money they have in their reserve and surplus for growth without incurring additional debt but also wants to reward their shareholders at the same time and getting a tax rebate on that. So they convert their reserve and surplus balance to debt for which they pay interest to their shareholders and getting a tax benefit. In this way, they gain the trust of their shareholder alongside saving the tax amount and obviously securing a long term funding for growth. An additional benefit is it does not dilute the EPS.

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If it is not too difficult, could you please list the 6 companies?

Edit:
Got it.

Hindustan Unilever, Britannia Industries, Blue Dart Express, Dr Reddy’s Labs and NTPC

Britannia announces ex date of 23rd August for Debenture Bonus Issue

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the question arises if one hold share as on date Debenture Bonus Issue ( in case Britannia announces ex date of 23rd August ) and subsequently sold the shares in coming one or two years will the holder have rights on debentures or seizes the possession ???
because the debentures are often can be redeemed after fixed period
any views ???

Once you get dividend or bonus debentures, nobody will take it back from you.
However the price of stock would fall commensurately.

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Q1 FY2020 Results

Performance on Consolidated basis

  • Consolidated revenue rose 6% YoY to ₹2,677 crore.
  • Consolidated net profit dropped 2.78% YoY to Rs 251.03 crore.
  • consolidated margin came in at 14.6%.

Performance on Standalone basis

  • Standalone revenue rose 7.18% YoY to ₹2,579 crore.
  • Standalone net profit increased 1.61% YoY to ₹250.21 crore.
  • Standalone EBITDA rose 11.68% YoY to ₹453.74 crore.

Management Notes

  • The company witnessed moderate inflation in the prices of key raw materials for the bakery business.
  • The inordinate increase in milk prices impacted profitability of the dairy business adversely.
  • The company has strengthened its brand equity through focused campaigns and invested in building capabilities & structures for both its base business & strategic business units to drive future growth.
  • It prioritizes the scaling up of the recent product launches and achieving profitable growth.
  • The focus on the cost efficiency initiatives has been accelerated to maintain the shape of business in this phase of low growths.
  • It expects the government to take measures to boost the economy and get it back on a high growth trajectory.
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