Bombay Burmah way to Britannia

JJoy · June 4, 2020, 8:48pm

A GEM FROM THE HOUSE OF WADIA’S…

The Bombay Burmah Trading Corp. Ltd. (BBTCL) is a part of the prestigious “WADIA Group” with a legacy of more than One and Half Centuries, having business interests in Plantations, Foods, Laminates, Electronics and Light engineering, Health care, Real Estate and Horticulture and is the HOLDING COMPANY of the Group.

After immense success in the business of Teak, BBTCL diversified its interests in Tea, Coffee, Dental Products and Formica Laminates, the Company owns large Tea, Coffee and Rubber plantations, the controlling holding in the group listed arms Britannia Industries and substantial holdings in the Flagship Bombay Dyeing & Manufacturing Company.

BBTCL through its step down subsidiaries holds 50.65% in the Biscuit Major - Britannia Industries, a BSE and NSE listed Company with a Market Capitalization of Rs. 82,971 Crs.

BBTCL which has a tiny Equity Share Capital of Rs. 13.95 Crs. (Face Value Rs. 2) holds huge treasure in terms of Wadia Group Shares with an aggregated Market Capitalization of around Rs. 69,000 Crs. – THE MARKET VALUE OF BBTCL HOLDING AT A WHOPPING RS. 41,485 CRS.

BBTCL intrinsic value of shares is pegged at Rs. 4,977 per share as against its CMP of only Rs. 1,078 per share… AN INCREDIBLE DISCOUNT OF OVER 70%.

What it means is that you can indirectly buy Britannia Industries and Bombay Dyeing and Manufacturing Company shares which are currently quoting at Rs. 3,450 and Rs. 57 per Share at 70% discount.

WADIA GROUP – A GLORIOUS PARENTAGE

Wadia Group founded by Lovji Nusserwanjee Wadia in 1736 is One of the Oldest Conglomerate in India. Wadia Group with over 280 years at the forefront of Industry in India is today broadly diversified in several growth industries that covers Textiles, Chemicals, Plantations, Foods, Electronics, Light engineering, Health, Laminates, Real estate and Consultancy. Consistently, the group companies have emerged as market leaders in the field they have entered and over the years the group has developed an enviable record of successfully managing diverse technologies.

The Group has come to be known for its Sound and Prudent Financial track record. Building Strong Fundamentals forms the basis of Growth in each company, making them top pick of Indian bourses. Two of the Group’s publicly listed Companies - Bombay Dyeing & Manufacturing Company Ltd and Bombay Burmah Trading Corp. Ltd have consistently rewarded its shareholders with consistent dividend payouts for over a hundred years, despite several recession in the Industry.

BBTCL, the Leading Wadia Group Company is the Second Oldest Publicly Listed Company in India Listed in 1863 followed by Britannia Industries Ltd. which is the Fifth Oldest Company to List in India in 1892.

Wadia Group through its Flagship Company Bombay Dyeing & Manufacturing Company Ltd. is carving a niche in the Realty Sector with rapid expansion plans. Wadia Group has access to over 10,000 acres of historically acquired land at rock bottom prices belonging to Britannia Industries Ltd., National Peroxide Ltd., Bombay Burmah Trading Corp. Ltd., Bombay Dyeing & Manufacturing Company and the Wadia Trust. Even if one excludes the agricultural land belonging to Bombay Burmah Trading Corp. Ltd., a mammoth land bank available with the Group at some of the Premium and affluent locations across Mumbai, Thane, Bengaluru and other cities.

BBTCL – THE COMPANY PROFILE

BBTCL is One of the Oldest Company of Pre - Independence Era, still flourishing with its core values, ethics and above all, the competency in trade. After immense success in the business of teak, the company has diversified its interests in Tea, Coffee and Dental Products.

The 150 years old BBTCL entered the plantation business in 1913. Today its plantations in the hills of South India cover 2,822 hectares under tea plantations (around 7,000 acres). These plantations are located in prime plantation areas, producing around 5 Million Kgs of Tea annually. BBTCL hold the distinction of being amongst most eminent and reputed manufacturers and exporters of naturally grown “ Organic Tea”. The Organic Tea which is manufactured at their Oothu Facility is appreciated across the globe and is also certified by „

BBTCL‟s group of eight estates are situated in the district of ‘Kodagu’ (Coorg) in Karnataka State, South India covering an area of approximately 4,105 sq.kms. (1585 sq. miles) covering Coffee and Pepper plantations.

edwardlobo · June 4, 2020, 10:05pm

Valuation is in the eyes of the beholder
Even Kama holding have similar discount but its not really a discount
Share prices are not a sum of parts, they are a sum of future dividends
How much dividends have Bombay Burmah given over last 5 years and how will that amount change ?

Ofcourse waren buffet also doesn’t give any dividends but he frequently sells the companies he holds, realising gains. How many of these holding companies ever be in a position to realise their gains. When they do plan on doing it, the prices rocket

nav_1996 · June 5, 2020, 2:09am

Also, BBTC’s foreign listed subsidiary in country A, holds foreign listed subsidiary in country B which in turn holds Britannia’s share.

Now unless we know for sure about why this structure is in place, what are liabilities of those subsidiaries and what are tax implications in these two countries discount may well be justified.

Thereafter comes issue of promoter’s intent. This layered structure can ensure that nothing ever reaches BBTC shareholder’s if corporate governance is not top notch. If management wanted they could have simplified the structure and passed on the dividends to unlock shareholder value. Nothing of that short has happened in last 15 years.

alexander · June 5, 2020, 2:57pm

The Wadia family is not great. Ness Wadia who is the MD of this company was accused of molestation by Preity Zinta and then got arrested in Japan for having cannabis.

The Annual Report of this company is very opaque. It doesn’t help anyone figure out the company’s true worth (probably on purpose). It has 100s of subsidiaries and step down subsidiaries. Why is it borrowing money also? Wadias are descendents of Jinnah also. Under the current regime, that is also a risk…

One of the huge plantations they have is also actually a 100 yr lease runnning out in 2028 or something (In Tamil Nadu)

peepin2me · June 5, 2020, 3:50pm

Buying at a discount to intrinsic value is great, provided there is likely to be a trigger event in the foreseeable future that will result in a re-rating and unlock the value.

Holding companies have always traded at a huge discount to their intrinsic value and I don’t see this trend changing anytime soon.

JJoy · June 5, 2020, 5:08pm

Hey, nice to know your perspective, its not just dividends that defines a stock, there are many bluechips that dont provide any dividends however compounds on 20% year on year.

The value of Bombay Burmah is highly correlated with that of Britannia, rather than performance of its standalone business.

Bombay Burmah holds 50.75 per cent stake in Britannia Industries and 15.28 per cent in Bombay Dyeing.

JJoy · June 5, 2020, 5:13pm

Noted the way the arrangements are done, its not too great. But the numbers are pretty impressive.

Also look at the stock price movements.

Unlike the holding companies, Bombay Burmah has lesser investments and higher unlocking possibility, while it has land parcels and huge plantations too.

JJoy · June 5, 2020, 5:25pm

Yes, there were two cases , the first case against Preity Zinta is dropped and chapter closed. The second case is also sorted out. The family have been in business for more than 250 years. So for suer they know the business.

Bombay Burmah is the ultimate holding company and its various subsidiaries held 50.7 per cent stake in Britannia as on quarter ended June. Given today’s market capitalisation of Britannia at ₹83,341 crore on the BSE, valuation of the stake stands at ₹41,670.5 crore, compared to Bombay Burmah’s market capitalisation of ₹7638 crore, which is less than one forth. Plus the 15.28 per cent in Bombay Dyeing. Hence, a further upside potential in the latter.!

Holding companies have always traded at discounts like 40 to 50 % , but if this becomes like 75% there is a good chance the valuations will catch up.

edwardlobo · June 5, 2020, 5:52pm

Yes go for it
Probably easy 25pc after all others have risen, if you’re willing to wait out patiently which is a great quality !

JJoy · June 5, 2020, 5:58pm

This is not part of my core holding of 10 stocks, they dont change in years. These are cigar butts

edwardlobo · June 5, 2020, 6:09pm

There are many. I’d probably go with the one that gives away most profit as dividends and keeps admin cost lowest. You have w chance of it turning into another “eclid investments ltd”

JJoy · June 5, 2020, 6:21pm

JJoy · June 5, 2020, 6:26pm

https://www.businessinsider.in/business/corporates/news/wadia-family-with-6-billion-net-worth-to-sell-britannia-stake-plan-boosts-bombay-burmah/articleshow/76215256.cms

sujay85 · July 7, 2020, 6:09pm

This document talks about the holding discount of BBTC.

JJoy · July 10, 2020, 5:29pm

BBTC:
Why such a holding company structure for Brittania? The objective can’t be shareholder value creation. Are there any vested interests/ malafide intentions? How will minority shareholders get justice?
Dsc: Not holding

Source

Rafi_Syed · October 4, 2020, 8:42pm

Image Courtesy : Venkatesh Jayaraman
@EWFA_

reem · January 15, 2021, 5:46pm

I think this current structure is a legacy of the erstwhile Wadia - DANONE JV, which ran into problems with Wadias eventually buying out Danone stake in Britannia in 2008-09. This allowed Danone to pursue Indian market independently.

Check this 2009 piece.

rahulchauhan007 · June 8, 2021, 5:34am

do we have more clarity on this :
https://trendlyne.com/posts/2981869/bombay-burmah-to-exit-plantations-business

Disc : Invested

Chaitanya_Motani · November 28, 2021, 12:53pm

Hi Everyone, I am new to this thread.

I would suggest all of you to watch this video. Most of you must have heard about SOIC and @Worldlywiseinvestors . This will give you a lot of clarity about holding cos.

I personally think that investing it would be very unwise as of now. If you want to buy a holding co. at a discount, I think you should buy Bajaj Holdings & Investment which is at a 70% Discount and the Bajajs are renowned for their corporate governance. It has been passing on nearly 50% of the dividends that they get as against BBTC which passes on only 3-5 %.

I have BBTC on watchlist and maybe the Go Air IPO can provide a boost to it in the short term as BBTC wouldn’t have to extend loans to Go air. They along with their subsidiaries also own 24.81% of Go Air according to this statement that I found in their Q2 FY22 result documents.

Disc: Invested in Bajaj Holdings & Investment

Niranjan_Bhat · August 7, 2022, 12:19pm

BBTC now has 40% around stake holding in Go airline and 44% around stake in Bombay dyeing and also BBTC has small investments in Tata chemicals, Tata consumer , ultra tech cement , Tanfac industry , GNFC , L&T