Q4 FY20 Results
https://www.bseindia.com/xml-data/corpfiling/AttachLive/894dd73e-bb79-4d15-8479-4aae47be33c5.pdf
Loans were given to varun barry himself in FY 18-19 at 7.25% even though the loan was repaid during the year. Mostly the loan was for the subscribing to the ESOP shares. But still the CEO is getting loans at cheap rate from outside. If he wanted to finance his ESOP via leverage could have taken personal loan from outside but then the interest rate would have been higher to he chose companies funds. Not sure if that is a good practice.
Moreover they have around total 600-700 cr outstanding loans to Go air + Bombay dying
Disc - Not invested(earlier was interested but now have dropped this from watchlist as well bcz of the above issues)
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Thats a real surprise. What explains 20% growth in the month of April where almost everything was shut down. Even if we assume this falls under essential category, people were looking to buy only what they cant cant live without. Has any other FMCG company shared number for April/May? .May be a number from Nestle will help since both 100% food related business.
From my personal experience, I can say it must have something to do with stocks available with the traders. Since all food companies were running out of stock, company which can restock it quickly got all the sales. For example , in our area many grocery shops ran out of Parle and Britannia biscuits.Hence ITCâs sunfeast (which generally not touched upon) was getting sold. Even today, Parle and Britannia biscuits are in shortage.
So as people sat home, they munched more biscuits and cookies 
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Just a small correction, ITC sunfeast is very much touch upon and decent brand in biscuits.
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Among snacks, biscuits and namkeens lead the way in India. These can be easily and carefreely stocked by people at home without the problem of getting perished or reaching expiry date soon. Some basic biscuits can be alternative to flour in baking and it saves you sugar and oil significantly. In severe food crisis, biscuits can be good source of not only snacks but reduce hunger. Some biscuits like threptin are excellent source of protein as well and very much filling to provide for a light breakfast in absence of nothing elseâŚ
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Also, from my personal experience, a lot of NGOs bought packaged biscuits for distribution to the stranded and poor people.
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With same logic sales should drop as lockdown gets lifted.
This is true for everything which was over stocked. Now depends how much more people ate biscuits at home and use oil to fry and bake when they couldnât hog on outside pastries and pizzas is anyoneâs guess. For me as an investor in FMCG firms, I would not be bothered much on thes ups and downs of sales because of lockdown or unlocking. These things in no way impact the long term prospects of these firms. However, lockdown moment clearly showed why these are and should be richly valued firms.
Disc. Have investment in FMCG firms so views maybe biased. This is not a buy sell recommendation.
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Management Commentary:
We have started to see good growth and solid progress on our building blocks, different from the first three quarters of last year. Covid had a 7-10% decline in both our topline and bottomline due to the shutdowns. This led to a revenue growth for the FY of 2% which translated to a 24 month of 12%. PAT growth was 26% for the FY and 13.3% for 24 months.
Our market share continues to grow, and we increased our market share. How we did it is a similar story - we have been strengthening our foundations. Very steady increase in numeric distribution. Direct reach is 22.2 lakhs. We have 21,000 rural distributors. Markets gain continued across the Hindi belt. Our campaign with Deepika for Good Day did quite well.
Bread saw high single digit growth with improvement in profitability. Dairy maintained its profitability sequentially despite upsurge in milk prices.
While the Middle East continues to be challenging, rest of the international market is growing in high double digits. We took strategic positions in commodities to limit impact of rising inflation to 4%. There was in the market very high inflation on palm oil at 18% increase in prices, and milk as well where prices rose almost 50%.
Impact of COVID19: We decided we should not have any hindsight bias, and we should take uncertainty very seriously. We worked to ensure faster approvals to be operational. Government was also caught wrong-footed, since central government directives were interpreted differently locally. We not only had to talk to central bodies but also district collectors, police etc. We got permission to operate all but four factories. We got 90% of distributors ready to accept stocks. Currently all our factories and distributors are now operational.
We realized that there was a lot of demand in the market and whoever got first to market reaped the benefits. We decided that if we needed more capacity we would look at contract packers to meet capacity needs.
We are also reviewing our costs in our current scenario. Looking at focusing advertisement, promotion & trade spends; looking at manpower productivity, direct sales from factories & lower turnaround time of vehicles. Also looking at renegotiation of contracts & avoiding discretionary spends, as well as wastage.
All these efforts have resulted in a consolidated revenue growth of 24% in the first 2 months of Q1â20-21.
Britannia shrugs off pandemic blows | Varun Berry To ET NOW:
Analyst Presentation:
Concall Audio:
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A fellow member has view on Bombay burmah as a holding company for Britannia being available at very steep discount. Find enclosed my reply on same in ITC forum. Thought it would be important for members to know same and hence sharing the link.
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âOne need to take into considerasation of various jurisdiction and tax impact of same when it finally come to Bombay Burmah (assuming all shares are liquidated by the promoters and funds are move upwards to Bombay Burmah).â - This is dd1474âs view in the other ITC forum.
But will the promoter be willing to pay such huge tax to govt while liquidating the company ? There are other possible ways by which value can be unlocked without tax cost. what we need to think about is âwill promoter share profit with minority share holders when value is unlocked ?â. If yes, then i can buy BBTC and leave it to my great grandchildren.Holds good for any holding company.
When the ultimate beneficiary of the shares is Bombay Burmah, the value unlocking has to be for all the shareholders.
In what way can the promoters unlock value for themselves without paying taxes and sharing the same with minority shareholders, is a puzzle to me. Would request you to kindly explain the means for the same.
Conference call takeaways
ď˝ Raw material inflation trending down. Britannia witnessed significant inflation in milk
and palm oil in 4QFY20âflour +2%, sugar +5%, palm oil +18% and milk inflation was
about 50%. The management indicated that RM prices have trended down significantly
in 1QFY21 (especially milk and palm oil). The company is comfortably placed on the gross
margin front thanks to reasonable RM inflation.
ď˝ Factors that contributed to strong growth in April and May. Per management,
Britannia benefited from three factorsâ(1) Britannia was the first one to start
manufacturing operations ahead of other companies, (2) Britannia benefited from
broader consumer trendâbiscuit is among the cheapest home consumption product that
has benefited from decline in eating-out, and (3) Britanniaâs brand strength. That said,
the management indicated that all companies are broadly on a similar footing as far as
execution is concerned.
ď˝ Borrowings, ICDs and loans. The management indicated that of the Rs15 bn gross
borrowings, Rs7.2 bn is redeemable debentures, Rs5 bn is commercial paper borrowing
used to buy commodities and Rs2.8 bn is other working capital loans. Related-party ICDs
stood at Rs6 bn, lower than Rs6.85 bn as at end-FY2019 but higher than Rs4-4.5 bn as at
end-1HFY20. The management indicated that rest of the loans/ICDs are to AAA+
companies such as HDFC, Bajaj Finance, etc.
ď˝ Other points.
(1) Britannia is operating at full capacity despite shortage of manpower,
(2) Britannia was on track to deliver high single-digit or low double-digit growth in March
2020 quarter just before Covid-led disruption, and
(3) capex in FY2020 was Rs2.25 bn
and the management guided Rs2-3 bn capex in FY2021E.
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It is possible for shareholders to swap shares and not trigger any tax charges. Share for share exchanges are used for a wide variety of commercial re-organisations.
Recently, Century Textiles unlocked its value in cement business to the shareholders by issuing Ultratech shares to its shareholders. i think such share swap deal is cost effective. If wadias want to sell stake in Brittania to a listed company(say ITC), then directly the ITCâs shares can be transferred to BBTCâs shareholders as share swap and no cash transfer. Obviously, there are lot of ifs and buts yet it is feasible and not a puzzle.
What I meant is as to how the promoters can unlock value for themselves without sharing the same with minority shareholders. That was a puzzle. To me it seems that the spoils if any, will be shared by all the shareholders including the minority shareholders.
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An example, they create a subsidiary fir high growth confectionery, premium biscuitsâŚgrow the subsidiary and sell it to pe or other companyâŚthey get their share of cash, rest goes to existing company and it is at mercy of company what they do with the cash, maybe create another subsidiary with high growth value added bakery.
Pls note I do not mean they would do it or have any such intention, above was just an example how any company can make minority investors suffer if they wantâŚ
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Company has posted Consolidated Statement of Related Party Transactions for the six months ended 31 March 2020 and balances as on 31 March 2020.
Here is the quick-read summary of Inter-corporate deposits (ICDs) for the second half of FY20
ICDs placed
The Bombay Dyeing & Manufacturing Co. Ltd. - 250 Crores
Go Airlines (India) Limited - 160 crores
Total - 410 Cr
ICDs redeemed/repaid
The Bombay Dyeing & Manufacturing Co. Ltd. - 200 Crores
Go Airlines (India) Limited - 60 crores
Total - 260 Cr
Can someone please summarize the total ICDs Britannia has placed till date on these related parties?
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Insider Trading Update:
Varun Berry (MD, CEO) is continuously exercising his Employee stock options (ESOs) and selling the same in the open market. Ness Wadia is slowly accumulating.
I am not able to understand why would CEO keep selling and promoter keep adding.
There maybe personal reasons for individual selling and purchasing but no clue about any reason for playing this duet 