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ASSIGNMENT FOR

CORPORATE FINANCEON

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()

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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.

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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 

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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 useimported 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 Indian’s 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 thepreeminent 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 TrustedBrand. 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. 

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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.

Britannia’s 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

Britannia’s biggest competitor is parle company and also have some other world wide

company as Bakeman’s 10%,smithkline 08%, Nutrie 04%,Kwality 04% Other’s 4% ,

but Parle has 30% of market share and the Britannia has 40% market share

(approximately)

Parle is biggest threats for Britannia.

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STABILITY OF SALES:

In an environment that is becoming increasingly competitive and in a businesswhose 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:

Britannia40%

Parle30%

Bakeman's10%

SmithKlineConsumer

8%

Nutrine4%

Kwality4%

Others4%

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

as above

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Competitors and CompetitionCompetition

Name Last Price Market Cap.(Rs. cr.) 

Sales

Turnover

Net Profit Total Assets

Nestle 4,687.85 45,198.24 7,514.46 961.55 2,244.83

GlaxoSmith Con 3,721.15 15,649.50 2,770.68 355.21 1,144.17

Britannia 494.00 5,904.58 4,974.19 186.74 548.19

Rei Agro  11.70 1,120.84 4,225.48 226.23 7,234.11

KRBL  27.35 664.91 1,631.35 71.15 1,545.05

Kwality Dairy 32.55 661.37 2,393.76 91.15 830.69

Heritage Foods   467.00 538.43 1,393.41 9.33 233.49

Usher Agro   61.05 232.35 811.70 42.33 557.93

Vadilal Ind  247.05 177.58 282.22 6.25 185.57

LT Foods 

61.00 159.32 999.86 4.44 972.54Lakshmi Energy 23.85 150.71 1,210.87 10.82 1,649.05

ADF Foods   65.15 134.07 113.10 11.66 147.41

Kohinoor Foods   29.65 83.59 961.28 182.65 1,169.95

Agro Dutch Ind   4.50 24.46 183.23 -43.10 237.97

Sita Shree Food   8.30 18.29 144.55 0.99 91.10

SKM Egg Product   6.65 17.51 131.47 -11.87 124.89

KLRF  27.60 13.86 203.34 -2.21 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.

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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,Hideand 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 ,BigBoss ,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.

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SWOT Analysis 

Strength 

1.Around 120 years in the industry

2.India’s 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

9. Products for all food and snacks segments

Weakness 

1.Lower market share in dairy segment

2.Heavy expenditure on advertising and marketing

3.Similar products produced by many companies means high brand

switching

Opportunity 

1.Increase in purchasing power of people in India2.Increase its share in the dairy industry

3.Product line extension

4.Expansion in other countries

Threats 

1.Lower price offering competitors

2.Local dairies and bakeries

3.Inflation can cause fall in sales and revenue

4.Rise in cost of raw materials

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Ratio analysis

 Profitability ratio

1) Profit Margin

Profit Margin = Profit after Tax/ Sales

Mar '12 Mar '11 Mar '10

Operating Profit Margin(%) 5.47 5.46 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 inmaintaining the profit margin ratio.

2) Return on equity

Return on equity=net profit after tax/shareholders equity

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%.

Mar

'12 Mar '11 Mar '10

Return On Net Worth(%) 35.9 32.19 29.4

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 Liquidity ratio

1) Current ratioCurrent ratio = Current Asset /Current Liabilities

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 newprojects 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

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 firm’s 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 ratioDebtor turnover ratio = annual net credit sales/trade receivables

Mar 2012 Mar 2011 Mar 2010

Debtors Turnover Ratio  90.75  87.18  76.42 

Mar '12 Mar '11 Mar '10

Current Ratio 0.7 1.04 1.08

Mar '12 Mar '11 Mar '10Current Ratio 0.7 1.04 1.08

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  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 Mar 2010

Asset turnover ratio 6.94  7.2  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 2011-12 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.

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4) Fixed asset turnover ratio

Fixed asset turnover ratio = Net Sales / Total Fixed Assets

Mar 2012 Mar 2011 Mar 2010

Fixed Asset Turnover Ratio6.28 6.14 5.73

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 Mar '11 Mar '10Debt Equity

Ratio 0.05 0.96 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 Mar '11 Mar '10Interest Cover 7.44 5.63 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

company’s 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.

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3) Earnings Per Share

Earnings Per share = PAT/number of Equity Share

Mar '12 Mar '11 Mar '10Earnings Per

Share 15.63 12.16 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.