Thanks, while I understand the benefits to the company, what I dont understand is if its so good then why only 6 companies have done till date. Considering the benefits, all companies should be doing it. Why are they not doing it?
Does this mean on ex date of Bonus debenture, the price of share would fall? Any calculations for that? Thanks
With the current volatility, a 1 odd % price change may not have much significance. Theoretically one can discount and price it but it seems trivial.
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âWe have already set up a plant in Nepal, and are seriously looking at Bangladesh and other South East Asian countries. We are evaluating opportunities in Africa⌠and plan to step up our endeavour on the international side.â - Chairman Nusli N Wadia
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Britannia wants to set up a new plant in the East and step up presence in Northeast. âThe new plant could come up in West Bengal too in case we get good facilities and benefitsâ - Chairman Nusli N Wadia
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Why is it not Popular?
Despite all the inherent advantages of bonus debentures for the shareholder as well as the company, it is not a popular instrument. This is due to the fact that the issue of bonus debentures is not expressly covered under provisions of the Companies Act, 1956 or the Companies Act, 2013. Bonus debentures are therefore issued as a scheme of the arrangement under Section 391 to Section 394 of the Companies Act 1956 which involves procuring approvals of shareholders, High Court, Reserve Bank etc. Hence, the use of this way to reward shareholders gets discouraged due to lengthy and time consuming procedures.
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thinking aggresive
What is clear from above discussion is that bonus debentures, though all goody goody, gives a needed insight that the management want to preserve the capital, although being big cash flow positive and with reserves , they still went through approval hassles of it. This, as a long term investor, gives me clear cut signal of relatively more aggression, maybe acquisition, new plants, capex in near future from Britannia. Now, i have one more doubt, why give the bonus at all when you need the cash, only to please any particular set of investor? Pls note i am not looking for any answer to my question. I am just looking that we think and learn together as long term investors rathr than just read and learn. Thanks
Disc. No buy sell suggestion. Invested and discussion only academic
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I can think of the below reasons;:
- Cash is kept within the company but just changed hands in the accounting books. Liability side helps save tax from interest expense. Net net everything is within shareholders.
- RoE and asset utilization is improved.
- since debentures are listed, shareholders (including promoter) can easily trade and generate cash flow. So it becomes like a dividend but helps save tax.
- The leverage will force managers to service the debt and maintain the return ratios. I feel this is the most important thing as it affects management outlook.
- since the total amount is not much, I donât know if this scenario is pertinent. When promoters hold smaller stake (less than 50%), they can use bonus debentures to reduce the price of stock and later use leverage to buy stake. There are some examples of companies even being taken private.
It appears that many companies (apart from the 6 mentioned above) have done this. Disa, coromandel, AstraZeneca are some examples.
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These two are excellent thought provoquing points!
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The following snippet from Varun Berryâs reply on âwhy the slowdownâ summarizes consumer sentiment so correctly.
ââŚI donât think the NBFCs and all of that affects sale of a five rupee biscuit. What affects a sale of a five rupee biscuit is what the consumer feels about where they are at. And if you look at investment vehicles whether they are real estate in India or stock market or any other investment vehicle that you look at everything has been trending downwards. So consumers have been feeling a little stressed about the fact that they used to be worth a certain amount and that has come down fairly dramatically. And as a result of that (and that is my hypothesis by the way) they are going very easy with the consumption. And I think till the feel good factor comes back and the investment vehicle start to power back I do think that this slowdown is not gonna go away. It might ease up a bit, it might not be as stark as we have seen in last two quarters but I donât think it is gonna completely go away in a hurryâŚâ
Source: Q1Fy20 concall
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Edited Transcript of BRITANNIA earnings conference call or presentation 9-Aug-19 12:30pm GMT
https://finance.yahoo.com/news/edited-transcript-britannia-nse-earnings-065015689.html
Amul entering cookie market. Being a cooperative they dont care about profits much and always kept their product price very competitive.
Disc - Invested
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Company depends on commodity (weat, soya, corn, etc) and sugar. Governmentâs MSP on farm products and higher sugar price could impact bottom line as they could not transfer such cost inform of price hike in such situation. Hence, H1 will be difficult
Butter is not bad; âhigh cholesterol is bad for heartâ is a myth now. Refined oils, refined carbohydrates, ultraprocessed foods and sugars are the culprits. Biscuits have them all - whether Amul or Britannia. Meat, fats are not unhealthy - ultraprocessed food is.
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Butter is one of the best fats to consume as compared to seed oil. That said, Cookies are basically maida so not healthy at all.
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An average consumer does not care about all these ingredients. Also thanks to US government, fat is bad and Amul is digging its own grave. Britannia will not be impacted unless awareness improves.
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I think otherwise, this ad-war definitely looks in favour of Amul because there is an undertone of trust deficit with Britannia as a brand. If you sell butter cookies with vegetable oil in it and your competition points it out it is as good as catching someone who is cheating. At the end of day, what percentage of consumers care about trust is another question but there appears to be serious competition ahead and Amul can prove a point by its funny ad campaigns.
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Butter is just a flavour. We also get cashew, pista, etc. They never used the word butter in their brand name. It is just âGood dayâ. For a common man, Good day is the usual option next to a cup of tea and it is very difficult to change it. Common man wonât consider it as cheating as they get what they paid for.
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I see hugely positive for amul to enter an unhealthy segment which many in this thread were thinking will diminish. Entry of an ethical brand, at least so far no negative, a health focussed brand in a percieved unhealthy segment will be hugely positive for the segment and only says about the potential of this segment ahead
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