Financial

analysis of
BRITANNIA

Contents:
1. Introdction
2. History
3. Current
4. Why Britannia
5. Compitetors
6. Awards
7. Boar of directors
8. Management team
9. Auditors
10. Bankars
11. Accounting standards
12. Balence sheets
Comparitive
Common sized
Index based
13. Statements of profit and loss
Comparitive
Common sized
Index based
14. Ratios
15. Cash flow
16. Inerpretation of financial statements
17. Ratio analysis
18. Intresting facts

INTRODUCTION:
Britannia Industries Limited (A WADIA Enterprise) is an Indian food-products
corporation based in Kolkata, India. It sells its Britannia and Tiger brands of biscuit
throughout India. Britannia has an estimated market share of 38%.
FOUNDED: 1892
INDUSTRY: FOOD PROCESSING
HEADQUARTERS: BANGALORE, KARNATAKA, INDIA
NO OF LOCATIONS: 300
PRODUCTS: Bakery products, including biscuits, bread, cakes and rusk, and dairy
products, including milk, butter, cheese, ghee and dahi

History:
The company was established in 1892, with an investment of 295. Initially, biscuits
were manufactured in a small house in central Kolkata. Later, the enterprise was
acquired by the Gupta brothers mainly Nalin Chandra Gupta, a renowned attorney,
and operated under the name of "V.S. Brothers." In 1918, C.H. Holmes, an English
businessman in Kolkata, was taken on as a partner and The Britannia Biscuit
Company Limited (BBCo) was launched. The Mumbai factory was set up in 1924
and Peek Freans UK, acquired a controlling interest in BBCo. Biscuits were in high
demand during World War II, which gave a boost to the companys sales. The
company name finally was changed to the current "Britannia Industries Limited" in
1979. In 1982 the American company Nabisco Brands, Inc. acquired the parent
of Peek Freans and became a major foreign shareholder.

The 'Biscuit King'

Kerala businessman Rajan Pillai secured control of the group in the late 1980s,
becoming known in India as the 'Biscuit King'. In 1993, the Wadia Group acquired a
stake in Associated Biscuits International (ABIL), and became an equal partner
with Groupe Danone in Britannia Industries Limited.
In what The Economic Times referred to as one of [India's] most dramatic corporate
sagas, Pillai ceded control to Wadia and Danone after a bitter boardroom struggle,

then fled his Singapore base to India in 1995 after accusations of defrauding
Britannia, and died the same year in Tihar Jail.

Current:
The rally was an outcome of the operational turnaround brought about by the
company's new management. Sales growth improved 14% - driven by a healthy mix
of volume as well as value, at a time when the biscuits category and the overall
FMCG market are facing sluggish growth. The operating margins have improved
from 9% to over 12% (in the latest quarter). The steadily improving performance
stoked bullish expectations on the Street since most of the other players in the
consumption sector are struggling to boost volumes. The stock price has almost
tripled in the past one year, even as the ET FMCG Index has just gained 18%.
Britannia stock is currently trading at 48 times its earnings of the last financial year,
against the average sector P/E multiple of 44. The Rs 25,000 crore biscuits market has
seen some shake up in the last couple of months with the Nusli Wadia run Britannia
Industries overtaking Parle Products by a slender margin to become a leader.

Why Britannia?
The first thing that comes in to mind when we think of a biscuit is Britannia biscuits,
also which has a wide varieties of biscuits like Good day, Little hearts, Pure magic,
Digestive biscuits, etc. Britannia also has high Market share in such high competition.

Competitors:
Parle
Nestle
Cadbury
ITC
Amul
Mother Dairy

Awards:
The Platinum Award (Packaged Foods category) in the Reader's Digest
Trusted Brand Awards 2014

 Bronze award winner for Best Brand Campaign (Britannia Tiger) at Times of
India, Big Bang Awards 2013
The Most Attractive Brand 2013 (F & B- Diversified Category) in the TRAIndias Most Attractive Brands Survey 2013
Indias 2nd Most Meaningful Brand 2013
In 2012 Britannia won National Quality Award, Global & Quality Excellence
Award, Golden Peacock National Quality Award, APQO best in class Large
Manufacturing Organization, Global Performance & Excellence Award.
In 2011 Britannia won 7th Most Trusted Brand Economic Times Brand Equity
Trusted Brands Survey, Manufacturing Performance Excellence Trophy by
IMCRBNQA (Indian Merchant Chambers Ramakrishna Bajaj National
Quality Award), Business World Most Respected Company Award 2011
In 2010 Britannia won 5th Most Trusted Brand in Economic Times Brand
Equity Trusted Brands Survey, The Master Brand 2010 Award by CMO
Council of India

BOARD OF DIRECTORS :
CHAIRMAN: Mr. Nusli N Wadia
MANAGING DIRECTOR: Mr. Varun Berry
DIRECTORS:
Mr. A K Hirjee
Mr. Avijit Deb
Mr. S S Kelkar
Mr. Nimesh N Kampani
Mr. Jeh N Wadia
Mr. Keki Dadiseth
Dr. Ajai Puri
Mr. Nasser Munjee
Mr. Ness N Wadia
Dr. Vijay L Kelkar
Mrs. Ranjana Kumar
MANAGEMENT TEAM:

Mr. Amlan Datta Majumdar - Chief Financial Officer

Mr. Vinay Singh Kushwaha - Vice President-Supply Chain
Mr. Hemant Rupani - Vice President-Sales
Mr. Manjunath Desai - Vice President-Strategy & Business Development
Mr. Sudhir Nema - Vice President-R&D and Quality
Mr. Ali Harris Shere - Head-Marketing
Mr. Ritesh Rana - Head-Human Resource
Mr. Anindya Dutta - Head-Dairy Business
Mr. Manoj Balgi - Head-Procurement
Mr. Gunjan Shah - Head-International Business
COMPANY SECRETARY: Mr. Rajesh Arora
AUDITORS: B S R & Co. LLP Chartered Accountants Maruthi Info-Tech Centre,
11-12/1, Inner Ring Road, Koramangala, Bangalore - 560 071
BANKERS;
Bank of America
N. A. Indian Bank
Bank of Tokyo-Mitsubishi UFJ A
Standard Chartered Bank
Citibank N. A.
State Bank of India
HDFC Bank Limited
The Hong Kong and Shanghai Banking Corporation Limited
ICICI Bank Limited
The Royal Bank of Scotland N. V

Accounting standards:
AS-2 (INVENTORIES): Inventories are valued at the lower of cost (including prime
cost, excise duty and other overheads incurred in bringing the inventories to their
present location and condition) and estimated net realizable value, after providing for
obsolescence, where appropriate. The comparison of cost and net realizable value is
made on an item-by-item basis. The net realizable value of materials in process is
determined with reference to the selling prices of related finished goods. Raw
materials, packing materials and other supplies held for use in production of
inventories are not written down below cost except in cases where material prices
have declined, and it is estimated that the cost of the finished products will exceed
their net realisable value.
Finished goods are valued at lower of net realisable value and prime cost, excise duty
and other overheads incurred in bringing the inventories to their present location and
condition.

AS-6 (DEPRECIATION):
Depreciation in respect of all the assets is provided on straight-line method over the
useful lives of assets estimated by the Company. Depreciation for assets purchased /
sold during the period is proportionately charged.
Intangible assets are amortized over their respective individual estimated
useful lives on a straight-line basis, commencing from the date the asset is available to
the Company for its use.

The Company estimates the useful life of fixed assets as follows:

Assets classification
Plant and equipment
Furniture and fixtures
Motor vehicles
Computer software
Office equipment
Buildings
Leasehold land
Molders, cutters and spare parts

Useful life
* 7.5 - 15 years
10 years
8 years
6 years
3 - 5 years
60 years
Lease period
* 1 year

AS-9 (REVENUE RECOGNITION): Revenue from sale of goods and sale of scrap
is recognized on transfer of all significant risks and rewards of ownership to the buyer.
The amount recognized as sale is exclusive of sales tax and net of trade discounts and
sales returns. Sales are presented both gross and net of excise duty.
Income from royalty is accounted based on contractual agreements.
Dividend income is accounted for in the year in which the right to receive the same is
established.
Interest on investments and deposits is booked on a time-proportion basis taking into
account the amounts invested and the rate of interest.
AS-10 (FIXED ASSETS):
Tangible assets:
Tangible assets are stated at their cost of acquisition or construction less accumulated
depreciation. Cost includes inward freight, duties, taxes and expenses incidental to
acquisition and installation or construction, net of CENVAT and VAT credit, where
applicable. The cost of the fixed assets not ready for their intended use before such
date, are disclosed as capital work-in progress.
Intangible assets: Intangible assets are stated at cost of acquisition less accumulated
amortization

Interpretation of Financial Statements:

 In 2015 Reserves and Surplus have been increased by 382.16 crores i.e.
46.07% mainly because of increase in profits for the year by almost 65%, if
we look at trend, even trend analysis shows there was almost 2.5 times
increase in current year reserves and surplus comparing it with base year.
In 2015 Long-term borrowings have been increased by 114.71%. This will
help in increasing companys cash flow. Although company increased its long
term borrowings in current year when we see trend analysis company long
term borrowings were very low i.e. 2.59% of base year.
In 2015 Deferred tax liability have been decreased by 100% i.e. company has
made actual tax payment in current year to government. When we compare
with trend analysis in previous years it shows, increase in deferred tax
liabilities indicates company may failed to pay tax in previous years.
In 2015 Total non-current liabilities have been decreased by 7.92 crores i.e.
28.01% this is mainly because of complete elimination of deferred tax
liabilities this is a good sign to company because investors are interested in a
companys non-current liabilities because they want to see that it does not
have too much debt relative to its cash flow.
In 2015 Trade payables have been increased by 130.53 crores i.e. 26.93%, it
almost equals to 25% of total liabilities and also trend analysis shows increase
in trade payables year by year, it may be because of change in supplier or
company decided to make more credit purchases rather than cash.
In 2015 Short -term provisions have been increased by 85.53 crores i.e.
26.28%, it almost equals to 16.7% of total liabilities and trend analysis shows
that current year provisions are almost equal to 3.3 times of 2012 year
provisions. This increase had been mainly due to increase in various taxes like
excise and service, sales tax, income tax etc., also increase in proposed
dividend and tax on proposed dividend
In 2015 total liabilities have been increased by 617.55 crores i.e. 33.84% and
according to trend analysis total liabilities have been increased by almost 1.5
times of 2012 total liabilities. That is mainly due to increase in reserves and
surplus, this indicates that company achieved high profits and also company
has increased their current liabilities
In 2015 Tangible assets have been decreased by 16.57 crores i.e. 3.12%.
Which in turn increased the cash inflow of company and total fixed assets

have been decreased by 68.72 crores i.e. 10.69% which shows that company is
not interested in long term benefits.
In 2015 Short term loans and advances have been increased by 208.33 crores
i.e. 90.70% mainly due to increase in inter corporate deposits i.e. company
newly deposited in Bajaj Finance ltd, Bombay Dyeing, Bombay Burma
Trading Corporation, HDFC Ltd, Macrofil Investments Limited.
In 2015 other income have been increased by 52.71 crores i.e. 151.379% this
increase is mainly due to gain on sale of investments by company.
In 2015 Other expenses have been increased by 182.27 crores i.e. 10.54%
which is mainly due to increase in Advertising expenses, Conversion charges
and company recently started expending on corporate social responsibility.
In 2015 Net cash flow from operating activities has been decreased mainly due
to actual tax payment in the current year.
In 2014 other current liabilities have been decreased by 62.12 crores i.e.
29.51% mainly because company repaid bank overdraft
In 2014 short term borrowings have been decreased by 189.24 crores it might
be due to repayment of short term borrowings
In 2014 long term loans and advances have been decreased by 40.88 crores i.e.
28.92% mainly due to decrease in capital advances.
In 2014 current investments have been increased by 98.54 crores i.e. 216.57%
because company invested in 13 new mutual funds companies.
In 2014 other income have been decreased by 20.65 crores mainly because of
decrease in interest income.
In 2014 other expenses have been increased by 146.57 crores mainly due to
rise in advertising and sales promotion expenses and conversion charges.
In 2014 net cash flow from operating activities has been increased by 342.5
crores mainly due to increase in profits.

 In 2014 net cash flow from investing activities has been decreased by 281.23
crores i.e. mainly due to in 2013 Britannia had sold investments worth 164.07
crores but where as in 2014 they have purchased investments worth 109.92
crores and also they have placed inter corporate deposits worth 50 crores.
In 2013 net cash flow from finance activities has been decreased due to
repayment of secured loans worth 400.58 crores.
In 2013 Long term provisions have been decreased by 116.82 crores due to
certain provisions were not created with comparing to previous year

Ratio Analysis:
Operating profit ratio: The operating profit ratio is a profitability ratio that
measures what percentage of total revenues is made up by operating income.
In other words, the operating margin ratio demonstrates how much revenues
are left over after all the variable or operating costs have been paid. A higher
operating margin is more favorable compared with a lower ratio because this
shows that the company is making enough money from its ongoing operations
to pay for its variable costs as well as its fixed costs.
Operating profit ratio = (PBDIT/Net Sales)*100
In Britannia operating profit ratio has been increased from 9.45 in 2014 to 10.75 in
2015 which means company is doing well in its operations.
Gross Profit Ratio: Gross profit ratio is the good indication of financial
health. Without an adequate gross margin, a company will be unable to pay its
operating and other expenses and build for the future. In general companys
gross profit should be stable. Higher ratios refer that the company is selling at
higher profit percentage.
Gross profit ratio = (Net Sales-COGS /Net Sales)*100
Britannias gross profit ratio rose from 8.45 in 2014 to 9.11 in 2015, which was a
steady increase, compared to previous year it is due to mainly increase in sales.
Net Profit Ratio: The net profit percentage is the ratio of after-tax profits to
net sales. It reveals the remaining profit after all costs of production,
administration, and financing have been deducted from sales, and income
taxes recognized. As such, it is one of the best measures of the overall results
of a firm it is also used to compare the results of a business with its
competitors.
Net profit ratio = (PAT/Net Sales)*100

Britannias net profit rose from 5.86 in 2014 to 8.67 in 2015, this increase is mainly
due to increase in revenue from operations.
Return on Capital Employed: Return on Capital Employed (ROCE) is a
financial ratio that measures a company's profitability and the efficiency with
which its capital is employed. ROCE is calculated as:
ROCE = Earnings before Interest and Tax (EBIT) / Capital Employed
A higher ROCE indicates more efficient use of capital. ROCE should be higher than
the companys capital cost; otherwise it indicates that the company is not employing
its capital effectively and is not generating shareholder value.
Britannias Return on capital employed has been decreased from 66.20 to 59.82
Return on Net Worth: The net worth ratio states the return that shareholders
could receive on their investment in a company, if all of the profit earned were
to be passed through directly to them. Thus, the ratio is developed from the
perspective of the shareholder, not the company, and is used to analyze
investor returns. The ratio is useful as a measure of how well a company is
utilizing the shareholder investment to create returns for them, and can be used
for comparison purposes with competitors in the same industry.
Return on Net Worth = (PAT/Net Worth)*100
Britannias Net worth has been increased from 43.33 in 2014 to 50.37 in 2015.

Return on Total Assets: An indicator of how profitable a company is relative

to its total assets. ROA gives an idea as to how efficient management is at
using its assets to generate earnings. This is also called as Return on
Investment.
Return on Total Assets = (Net Sales/ Total Assets)*100
Britannias Return on total assets increased from 71.17 in 2014 to 103.03 in 2015, it is
a sign of solid financial and operational performance.

Current Ratio: The current ratio is used to test a companys liquidity by

deriving the proportion of current assets available to cover current liabilities.
The concept behind this ratio is to ascertain whether a company's short-term
assets are readily available to pay off its short-term liabilities. The higher the
current ratio, the better the liquidity position.

Current ratio = Current Assets/Current Liabilities

Britannias current ratio in 2015 was 1 though company is not meeting its ideal ratio
1.5 it is performing better compared to previous year ratio i.e. 0.84.
Quick Ratio: The quick ratio is an indicator of a companys short-term
liquidity. The quick ratio measures a companys ability to meet its short-term
obligations with its most liquid assets. For this reason, the ratio
excludes inventories from current assets, and is calculated as follows
Quick ratio = (Current Assets Inventories) / Current Liabilities
Britannias Quick ratio was 0.7 which is almost equal to ideal ratio 1 by comparing it
with previous year i.e. in 2014 it is doing good in current year to attain ideal quick
ratio.
Interest Coverage Ratio: Determines how easily Company can pay interest
on outstanding debt.

There was huge increase in Interest coverage ratio by Britannia in 2015 ratio was
613.02, where as in 2014 it was 104.42 only, this shows company is effective with
their debts.

Inventory turnover ratio: Inventory turnover is a ratio showing how many

times a company's inventory is sold and replaced over a period.
Inventory turnover ratio = COGS/Average Inventory
Britannias Inventory turn over ratio has been increased from 17.19 in 2014 to 21.24
this a good sign to company.

Debtors turnover ratio: Accounts receivables or debtors turnover ratio

measures how many times the debtors are collected during the particular
period. This tool measures the liquidity of the receivables. High ratio shows
that the debtors of the company are paying frequently to the company and the
liquidity of the company is good. Low ratio indicates the debtors are not
paying in the time or the credit limit should be revised to receive the
collections frequently.

Debtors turnover ratio = Net credit sales/Average debtors

Britannias Debtor turn over ratio has been increased from 96.44 in 2014 to 115.12 in
2015 this shows that liquidity position of company is good enough to recover
receivables.

Fixed assets turnover ratio: A financial ratio of net sales to fixed assets. The
fixed-asset turnover ratio measures a company's ability to generate net sales
from fixed-asset investments - specifically property, plant and equipment
(PP&E) - net of depreciation.
Fixed assets turnover ratio = Net Sales/Average Fixed Assets
Britannias Fixed assets turn over ratio rose from 6.91 in 2014 to 7.37 in 2015 which
shows that the company has been more effective in using the investment in fixed
assets to generate revenue.
Debt equity ratio: Debt Equity Ratio is a debt ratio used to measure a
company's financial leverage, calculated by dividing a companys
total liabilities by its stockholders equity. The D/E ratio indicates how
much debt a company is using to finance its assets relative to the amount of
value represented in shareholders equity.
Debt - Equity Ratio = Total Liabilities / Shareholders' Equity
The Debt equity ratio for Britannia was constant i.e. 0.1

Interesting facts:
In an economic environment, wherein revenue growth in the FMCG sector has
slowed down, Britannia achieved a sales growth of 14.5% and added ` 921.41
crores to sales. Profit from operations increased by 22.7% from ` 533.24 crores
to `654.23 crores. Earnings per share (of ` 2/- each) increased from ` 30.87 to `
51.90.
Britannias focus on building new capabilities and a robust pipeline of
innovation resulted in new launches in the form of NutriChoice Heavens,
Good Day Chunkies and Britannia Nut n Raisin Romance Cake. Coupled with
leading edge go-to-market approaches, these innovations tap new sources of
growth and profitable revenue, while building brand differentiation and
relevance.

 Britannia is focused to balance cost, quality and aspiration in its brand for
consumer affordability at every price point. Cost effectiveness has been a key
pillar of Britannias value creation strategy and this was achieved through
scale in operations, technology interventions, complexity and wastage
reduction in the value chain along with efficient management of working
capital.
The Board of Directors are pleased to recommend a dividend of 800% on the
paid up equity share capital of the Company, which amounts to ` 16/- per
share, for consideration and approval by the Members at the Annual General
Meeting. The total payout amounts to ` 230.94 crores including dividend
distribution tax of ` 39.06 crores.

For Britannia, CSR means Corporate Sustainable Responsibility and this

means embedding CSR into its business model. With the enactment of the
Companies Act, 2013 and the Companies (Corporate Social Responsibility
Policy) Rules, 2014, Britannia as part of its CSR initiatives has undertaken
projects as per the CSR Policy and the details of the CSR Activities are given
as Annexure A forming part of this Report.

The Board of Directors of Britannia had appointed Mrs. Ranjana Kumar as an

Additional Director of the Company with effect from 8 July 2014, in terms of
Section 161 of the Companies Act, 2013 and Article 94 of the Articles of
Association of the Company.
The Members of the Company at the 95th Annual General Meeting held on 12
August 2014 had approved appointment of Dr. Ajai Puri, Mr. Keki Dadiseth,
Mr. Avijit Deb, Mr. Nimesh N Kampani, Mr. S S Kelkar, Mr. Nasser
Munjee, Dr. Vijay L Kelkar and Mrs. Ranjana Kumar as Independent
Directors of the Company to hold office for five consecutive years with effect
from the date of the Annual General Meeting held on 12 August 2014 up to 11
August 2019 with an option to retire from the office at any time during the
term of appointment. The Company issued letter of appointment to all the
Independent Directors as per Schedule IV to the Companies Act, 2013.
Further, no Director resigned from the Company during the year under review.
Mr. Vinod Krishna Menon, Chief Financial Officer (CFO) and Key
Managerial Personnel (KMP) ceased to be CFO & KMP of the Company with
effect from the close of business hours on 17 November 2014. Mr. Amlan
Datta Majumdar was appointed as Chief Financial Officer (CFO) and Key
Managerial Personnel (KMP) of the Company with effect from 12 March
2015.

 As per the Companies Act, 2013, all companies having net worth of ` 500
crores or more or turnover of ` 1,000 crores or more or a net profit of ` 5 crores
or more during any Financial Year will be required to constitute a Corporate
Social Responsibility (CSR) Committee of the Board of Directors comprising
three or more Directors, at least one of whom shall be an Independent
Director. Aligning with the guidelines of the Section 135 of the Companies
Act, 2013 and the Rules framed there under, Britannia have constituted a
Committee, which is responsible for formulating and monitoring the CSR
Policy of the Company.
Britannia operates in two distinct industries viz. Bakery and Dairy.
I. Bakery products
Bakery industry comprises primarily of four products viz. Biscuits, Cake,
Rusk and Bread. Biscuit is the largest category accounting for a little over twothird of the overall bakery industry growing at 10-14% per annum in the last
five years. Cake, Rusk and Bread constitute the rest. While Cake and Rusk
categories have seen growth in mid-teens, Bread category has experienced
growth of mid to high single digits over the last five years.
II. Dairy products
India remains the largest producer and consumer of dairy. However, as in the
case of other food products, Indians trail much of the world in per capita dairy
consumption. This gap is getting bridged rapidly with demand growing at a
faster pace than supply. Many industry experts opine that this is likely to cause
a supply deficit in the near future.
Largeness of the Dairy opportunity is visible to all; as a result the industry this
year saw heightened activity with several private companies announcing entry,
cooperatives expanding footprint and multinationals formally entering.
While the growth in the last few years has been on account of increasing milk
consumption; value added segments of dairy such as Cheese and Set Dahi in
which your Company participates have grown at a faster pace.