ASSIGNMENT FOR CORPORATE FINANCE ON

Qualitative and Quantitative Analysis on Britannia

Submitted to : Prof. T.V.

By, Ishan Singne() Jennifer Viola Rebba() Puja Jha() Sachin Pandey() S.Bharadwaj() Swayamdip Das()

ACKNOWLEDGEMENTS

I take immense pleasure in thanking Prof. T.V., our course facilitator for introducing us to the basic concepts of Corporate Finance and initiating us into undertaking this topic.

CONTENTS
SUBJECT 1. Company Overview 2. Business Risk Analysis 3. Competitors and Competition 4. Market Share and preference 5. SWOT Analysis 6. Ratio Analysis of Britannia A. Profitability Ratios B. Liquidity Ratios C. Gearing/ Solvency Ratios
Conclusion for Ratio Analysis

1. COMPANY OVERVIEW
Britannia Industries Limited is an Indian company based in Kolkata that is famous for its Britannia and Tiger brands of biscuit, which are popular throughout the country. Britannia has an estimated 40% market share. The Company's principal activity is the manufacture and sale of biscuits, bread, Rusk, cakes and dairy products. In 1892, Britannia started in a nondescript house in Kolkata) with an initial investment of Rs 295. By 1910, with the advent of electricity, mechanized its operations, and in 1921, it became the first company east of the Suez Canal to use imported gas ovens. In 1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry's who till now distributed Britannia biscuits in India. In the subsequent public issue of 1978, Indian shareholding crossed 60%, firmly establishing the Indians of the firm. The following year, Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four years later in 1983, it crossed the Rs. 100 crores revenue mark. In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy, Think Better" - and made its first foray into the dairy products market. In 1999, the "Britannia Khao, World Cup Jao" promotion further fortified the affinity consumers had with 'Brand Britannia'. Britannia strode into the 21st Century as one of India's biggest brands and the preeminent food brand of the country. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top 200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd Most Trusted Brand. The brand Britannia is the trust of almost one-third of India's one billion populations and a strong management at the helm on its path of innovation and quality. Britannia is the leading biscuit manufacturer in the Rs 124 billion Indian bakery market. Its primary business is bakery consisting of biscuits, bread and cakes. In 2006, Britannia picked up a 50% stake in Daily Bread (retailer of high-end bakery Products.) from Cafe Coffee Day. The company operates in the dairy segment through its subsidiary Britannia Dairy. The dairy segment comprising of milk, butter, cheese, ghee and curds accounts for 4.7% of Britannia's group turnover.

VISION:
To dominate the food and beverage market in India with a distinctive range of Tasty Yet Healthy Britannia brands.

Mission:
To dominate the food and beverage market in India through a profitable range of Tasty yet Healthy products by making every Indian a Britannia consumer. We want to be part of our consumer- at home, out of home, a natural part of his life.

Goal:
To provide consumers the highest standards of food safety and ensure hygiene in new diversified food category

BUSINESS RISK ANALYSIS:

MARKET SHARE:
The Britannia industry had started in Kolkata in 1892 with Rs.295 In 1939 (in the time of 2nd world war) the sales raise exponentially toRs.1627202.during 1944 the sales ramp up by more than 8 times to reach 1.36 corer. In 1978 public issue Indian share holding crossed 60%. In 1983 sales crossed Rs.100 crores . In 1994 volumes crossed 1 lakh tons of biscuits. In 2004 company has crossed the sale of volume 3 lakh ton biscuit. It achieved 40% of market share in the global market. so it has known as a market leader in the file of global market. In the industry the other Players like PARLR, SUNFEAST ,ANMOL, SURYA FOOD[,PRIYAGOLD] have a great impact in the market. But Britannia has possessed the 2nd position in the world market. Parle-G has achieved 1st position in the market with 69% market share in glucose biscuit and Britannia has only 24% market share. Because parle g biscuit is one of the oldest company in glucose biscuit and Britannia had come in this field in 1997. Britannias competitors are Parle product ltd , Priya Though Britannia is the oldest company in the Indian market but the company is facing tuff competition. gold Sunfeast , and Anmol and also have some local companies Britannias biggest competitor is parle company and also have some other world wide company as Bakemans 10%,smithkline 08%, Nutrie 04%,Kwality 04% Others 4% , but Parle has 30% of market share and the Britannia has 40% market share (approximately) Parle is biggest threats for Britannia.

Nutrine 4% SmithKline Consumer 8%

Kwality 4%

Others 4%

Britannia 40% Bakeman's 10%

Parle 30%

STABILITY OF SALES:
In an environment that is becoming increasingly competitive and in a business whose profit and profitability are greatly impacted by commodity inflation, profit from operations increased from Rs. 1,248 MM to Rs. 1,794 MM. B added Rs. Britannia added 194 MM to the gross sales, which grew 23.9%. Earnings per Share was Rs.12.16. The tables below show trends in performance across key parameters:

The profit after tax and the cash profit and EPS ratios from 2005 are plotted on graph as above

Competitors and Competition

Competition
Name Nestle GlaxoSmith Con Britannia Rei Agro KRBL Kwality Dairy Heritage Foods Usher Agro Vadilal Ind LT Foods Lakshmi Energy ADF Foods Kohinoor Foods Agro Dutch Ind Sita Shree Food SKM Egg Product KLRF Last Price 4,687.85 3,721.15 494.00 11.70 27.35 32.55 467.00 61.05 247.05 61.00 23.85 65.15 29.65 4.50 8.30 6.65 27.60 Market Cap.
(Rs. cr.)

45,198.24 15,649.50 5,904.58 1,120.84 664.91 661.37 538.43 232.35 177.58 159.32 150.71 134.07 83.59 24.46 18.29 17.51 13.86

Sales Turnover 7,514.46 2,770.68 4,974.19 4,225.48 1,631.35 2,393.76 1,393.41 811.70 282.22 999.86 1,210.87 113.10 961.28 183.23 144.55 131.47 203.34

Net Profit 961.55 355.21 186.74 226.23 71.15 91.15 9.33 42.33 6.25 4.44 10.82 11.66 182.65 -43.10 0.99 -11.87 -2.21

Total Assets 2,244.83 1,144.17 548.19 7,234.11 1,545.05 830.69 233.49 557.93 185.57 972.54 1,649.05 147.41 1,169.95 237.97 91.10 124.89 77.00

MARKET SHARE AND PRESENCE

Below is a list of the Top Biscuit Brands in India
Britannia Industries Ltd
Based in Bangalore Britannia Industries Ltd is reputed as being one of the top biscuit brands in India. The company was established way back in 1892 and till today has managed to maintain a distinctive position in the Indian biscuit industry specially with its most popular brand called Tiger. Britannia holds a 38% market share in the biscuit industry in India. Some of the famous biscuit brands offered by Britannia include; Good Day, Timepass, Bourbon, 50-50, Treat, Milk Bikis, Marie Gold, NutriChoice, Little Hearts etc.

Parle Products Pvt. Ltd

Founded in 1929, Parle Products Pvt. Ltd ranks among the top biscuit brands in India. The company has 7 manufacturing units of its own and 51 manufacturing units on contract. Accounting for about 30-35% of market share in the biscuit industry this company is famous for brands like Parle - G , ,Krackjack ,Hide & Seek Milano,Hide and Seek, Magix and Monaco

Surya Food & Agro Ltd

Surya Food & Agro Ltd manufacturing and sells biscuits under the brand 'Priyagold'. Counted as among the top biscuit brands in India Priyagold is considered to be one of the best evening tea biscuits. The Company has three manufacturing units located in Greater Noida, Lucknow and Surat. They also outsource some of our. Some of the popular biscuits sold by this company include; Butter Bite ,Kids Cream ,Bourbon ,Big Boss ,Marie Lite ,Magic Gold , Cheese Cracker etc.

ITC Ltd
The famous ITC Group ventured into the biscuits market in July 2003 with the introduction of the Sunfeast range of biscuits. Sunfeast currently holds a market share of ~10% is surely on its way to becoming a top biscuit brand in India. Some of the popular biscuit brands by ITC ltd are Sunfeast Marie Light ,Sunfeast,Sunfeast Dream Cream, Golden Bakery, Sunfeast Dark Fantasy.

SWOT Analysis
1.Around 120 years in the industry 2.Indias most trusted brand with strong brand recall 3. Wide range of bakery products like biscuits, rusks, cakes and dairy products like milk, butter, cheese, etc. 4. Strong distribution network ensuring proper availability of the products even in the remotest of areas 5.Major share in biscuits industry 6.Marketing and advertising efficiency 7. Innovative products for health conscious people like oats and porridge, Nutri Choice biscuits for diabetes patients, Vita Marie Gold, etc. 8. Strong presence in rural markets Strength 9. Products for all food and snacks segments

1.Lower market share in dairy segment 2.Heavy expenditure on advertising and marketing 3.Similar products produced by many companies means high brand Weakness switching

1.Increase in purchasing power of people in India 2.Increase its share in the dairy industry 3.Product line extension Opportunity 4.Expansion in other countries

1.Lower price offering competitors 2.Local dairies and bakeries 3.Inflation can cause fall in sales and revenue Threats 4.Rise in cost of raw materials

Ratio analysis
Profitability ratio
1) Profit Margin
Profit Margin = Profit after Tax/ Sales Mar '12 Operating Profit Margin(%) 5.47 Mar '11 5.46 Mar '10 6.09

Profit margin ratio decreased from the year 2010 to 2012 because of following reasons: The unprecedented inflationary pressure on the consumer goods continued, as did commodity inflation for the food industry. Though the sales in the year 2010-2011 have increased by 23.9%, the cost of material has increased by 6mn from 21mn to 27mn in 2010-11 which affected the profit significantly. In 2010-11 the company invests significantly in its R&D program, which includes its capability building and structured innovation process. This increases its expenses in 2010-11, but the new product generated near about 20% revenue in 2011-12 which helped in maintaining the profit margin ratio.

2) Return on equity
Return on equity=net profit after tax/shareholders equity Mar '12 35.9 Mar '11 32.19 Mar '10 29.4

Return On Net Worth(%)

Return on equity is increasing year on year due to following reasons: Due to heavy demand despite of continuing commodity inflation the net profit after tax has increased near about 28%, resulting in increase of the shareholders equity by 15%. Good performance of the new arrivals which generated near about 20% revenue in 2011-12 added to the profit and net worth of the company. Export outside India continues to grow rapidly at over 30%.

Liquidity ratio
1) Current ratio
Current ratio = Current Asset /Current Liabilities Mar '12 0.7 Mar '11 1.04 Mar '10 1.08

Current Ratio

Current ratio is decreasing due to the following reasons: The net current asset has decreased by near about 0.1mn from 2010 to 11 and the current liabilities have increased significantly near about 1mn. Current liabilities have increased due to investments in different new projects for which short term provisions and loans have increased. Although all the current assets are increasing but it is significantly affected by the rise in current liabilities.

2) Quick ratio
Quick ratio = (Current Asset Inventory)/Current Liabilities

Current Ratio

Mar '12 0.7

Mar '11 1.04

Mar '10 1.08

Quick ratio is decreasing due to following reasons: Quick ratio signifies how quickly we can repay our short term debts. It is decreasing year on year due to the increase in current liabilities because of capital expenditure which has increased by 132%. The firms short terms debt paying capacity in deteriorating each passing year whose main cause is increase in liabilities by near about 114% because of huge investment.

Activity ratio
1) Debtor turnover ratio
Debtor turnover ratio = annual net credit sales/trade receivables Mar 2012 Mar 2011 Mar 2010
Debtors Turnover Ratio 90.75 87.18 76.42

Debtor turnover ratio is increasing as Net Sales has increased by higher percentage than Debtors every year. Sales have increased by 18% and at the same time the debtors have gone down by 8%. This shows that the company is good in collecting the debts.

2) Inventory turnover ratio

Inventory turnover ratio = cost of goods sold /average inventory Mar 2012 Mar 2011 Mar 2010 Inventory turnover ratio
13.15 16.68 15.08

The change in inventory turnover ratio due to the following reasons: Inventory is increasing from 311cr to 382cr which is near about 20% in 2011-12 which is due to the diversification and the product line. During 2010-11 also there is increase in inventory by 14% approximately but at the same time cost of goods sold have increased tremendously by 8000cr approximately due to which there is an increase in inventory turnover ratio in 2011 .

3) Asset turnover ratio

Asset Turnover Ratio = Net Sales / Total Assets. Mar 2012 Mar 2011 Asset turnover ratio
6.94 7.2

Mar 2010
6.28

There is a change in the Asset turnover ratio due to the following reasons: During the year 2010-11 net sales have increased by 24% but in 201112 net sales have increased by 18%, i.e it is increasing in a decreasing rate due to which the asset turnover ratio has decreased from 2011 to 2012. The value of current assets has also increased by 1mn over the years due to the expansion and diversification by launching different new products.

4) Fixed asset turnover ratio

Fixed asset turnover ratio = Net Sales / Total Fixed Assets Mar 2012 Mar 2011 Fixed Asset Turnover Ratio
6.28 6.14 5.73

Mar 2010

The Fixed turnover ratio is increasing year on year due to the following reasons: The price of fixed assets has not gone up much as compared to the sales due to which the ratio is increasing every year.

Solvency ratio
1) Debt to Equity ratio
Debt to Equity ratio= (sort term debt + long term debt)/Share holders equity Mar '12
Debt Equity Ratio 0.05

Mar '11
0.96

Mar '10
1.08

Drastic fall in ratio of debt to equity is due to the following reasons:Due to the profit scorching over 30% including the newly launched product the Reserve and Surplus in 2010-11 has increased by 5 lakh approximately and in 2011-12 it has increased by at the same time the company have reduced the secured loans.

2) Interest coverage ratio

Interest coverage ratio=PBIT/interest expense Mar '12
Interest Cover 7.44

Mar '11
5.63

Mar '10
48.28

Drastic change in the interest coverage ratio is due to fallowing reasons: In 2010-11 there is a huge investment to launch new product due to which the companys loans have increased as a result the interest expense is increase in years 2010-11 by 3 lakh approximately but during the year 2011-12 they have started repaying the loans due to which the ratio is showing some improvement.

3) Earnings Per Share

Earnings Per share = PAT/number of Equity Share Mar '12
Earnings Per Share 15.63

Mar '11
12.16

Mar '10
48.77

Change in earning per share is due to the following reasons:The book value of shares is decreasing year on year by 165 to 37 due to which the earning per share is also decreasing.