ADFM | FINANCIAL REPORT

END SEM PROJECT

BRITANNIA
INDUSTRIES
LIMITED

PREPARED BY
GROUP 7
Table of Contents

01 About Us

02 Acknowledgment

03 why Britannia?

04 Britannia Company Profile

05 Dividend Policy of Britannia

06 WCM Strategies used by Britannia

07 Valuations

08 Regards
FINANCIAL REPORT

MEET

US

BHAVYA RAJPURIA
DIVIDEND POLICY & REPORT

LIPIKA KASHYAP
WORKING CAPITAL MANAGMENT
& REPORT

PRAPTI KAVTHANKAR
DIVIDEND POLICY & REPORT

SHAUN CARDOZA
COMPANY PROFILE

VIVEK BANSAL
WORKING CAPITAL MANAGEMENT
& REPORT
ACKNOWLEDGEMENTS

We would like to extend our gratitude toward Ms Aarti Patki who

has been an amazing teacher and mentor and gave us this
opportunity to use our theoretical knowledge practically on the
financials of Britannia Industries Limited.

Further, I would like to thank all my teammates for being a great

support and performing their roles sincerely and enthusiastically.

We thank you for your continued

support in our efforts.

GROUP 7 | FINANCIAL REPORT

WHY
BRITANNIA?
Britannia Industries Limited (BIL) is one of India's leading FMCG companies. Britannia's
product portfolio includes Biscuits Bread Cakes Rusk and Dairy products including Cheese
Beverages Milk and Yoghurt.
BIL has a presence in more than 60 countries across the globe. BIL's international footprint
includes a presence in the Middle East through local manufacturing in UAE and Oman. The
company is also the market leader in Nepal.
It was born on 21st March of the year 1918 as a public limited company. The Company's
plants are situated in Kolkata Delhi Chennai Mumbai and Uttarakhand. In 1921 it became
the first company east of the Suez Canal to use imported gas ovens.
The company’s Dairy business contributes close to 5 per cent of revenue and Britannia
dairy products directly reach 100,000 outlets.
Britannia Bread is the largest brand in the organized bread market with an annual
turnover of over 1 lac tons in volume and Rs.450 crores in value. The business operates
with 13 factories and 4 franchisees selling close to 1 mn loaves daily across more than 100
cities and towns of India.
Britannia takes pride in having stayed true to its credo, ‘Eat Healthy, Think Better’. Having
removed over 8500 tonnes of Trans Fats from products, Britannia became India’s first
Zero Trans Fat Company. Over 50% of the Company’s portfolio is enriched with essential
micro-nutrients which nourish the body.

GROUP 7 | ADFM PROJECT 1 REPORT 2022

Strengths
Strong Distribution network of suppliers
Innovative localised products
Established Identity
Strong Brand Image and recall
Sustainable practices
Market leader in the bakery sector

Weaknesses
Dependency in dairy procurement and manufacturing
through co-packers
Dependency on bakery and biscuit segment
Insufficient Turnover with the dairy segment
Opportunities
Continued investment in a developing country with
an ever-growing competitive market
Opportunity to capture market share in organized
dairy industry
Use of new technological resources
Setting up facilities to achieve self-dependency in
production
Exploring the growing segment of health conscious
consumers

Threats
New Giant Entrant in the market
Continued rising prices of input due to international
issues
Expectation of growth rate cut due to external
factors on emerging markets
FINANCIAL REPORT

PESTLE ANALYSIS
POLITICAL FACTORS

FOR BRITANNIA, RAW MATERIALS, PRODUCTION, AND SALE OF ITS GOODS

NEED APPROPRIATE GOVERNMENT LAWS, SUCH AS GST REGULATIONS AND
ACCOMPANYING GOVERNMENT INCENTIVES.
POLITICAL STABILITY AND GOOD TRADE RELATIONS WITH OTHER
COUNTRIES HAVE HELPED BRITANNIA TO EXPAND REGIONALLY AS WELL AS
INTERNATIONALLY.
FAVOURABLE TAX POLICIES AND GOVERNMENT SUBSIDIARIES HAVE ALSO
HELPED BRITANNIA TO CONTROL ITS COSTS

ECONOMIC FACTORS

INCREASING LIBERALIZATION OF THE TRADE POLICY OF INDIA CAN HELP

BRITANNIA INDUSTRIES TO INVEST FURTHER INTO THE REGIONS WHICH
ARE SO FAR OFF-LIMITS TO THE FIRM.
OVER THE YEARS THE INDIAN GOVERNMENT HAS HIGHLY INVESTED IN
DEVELOPING CORE INFRASTRUCTURE TO FACILITATE AND IMPROVE THE
BUSINESS ENVIRONMENT WHICH CAN POSITIVELY AFFECT BRITANNIA'S
GROWTH.
AFTER THE PANDEMIC PEOPLE GO AFTER TRUSTED BRAND NAMES KEEPING
IN MIND THE HYGIENE AND CONFIDENCE ASPECTS. WHICH HAS LED TO
INCREASING IN SALES FOR BRITANNIA PRODUCTS FOR ITS PACKAGED
CONSUMER GOODS.

SOCIAL FACTORS

PEOPLE TODAY CHOOSE MORE PACKED FOOD ITEMS AS WE GO TOWARDS

URBANISATION DUE TO THEIR EASE OF AVAILABILITY AND CONVENIENCE. IN
ADDITION, CUSTOMER PREFERENCES HAVE SHIFTED, LEADING PEOPLE TO
SEEK OUT HEALTHIER OPTIONS ON STORE SHELVES. THEY CLAIM THAT
THESE GOODS ARE MORE HYGIENIC AND SAVE TIME. AS A RESULT, IT IS
MORE APPEALING TO A WIDE RANGE OF CUSTOMERS.
HIGHER EDUCATION MEANS MORE TALENTED, COMPETENT, AND INFORMED
INDIVIDUALS IN THE BRITANNIA INDUSTRIES LTD TALENT POOL, AS WELL
AS INCREASED CUSTOMER AWARENESS OF THE PRODUCTS AND THEIR
DISTINCTIVE COMPETITIVE POSITIONING, WHICH WILL LEAD TO REPEAT
PURCHASES FROM BUYERS.
FINANCIAL REPORT

PESTLE ANALYSIS
TECHNICAL FACTORS:
FMCG FIRMS LIKE BRITANNIA ARE WELL-POSITIONED THANKS TO THE
DEVELOPMENT OF DIGITAL TECHNOLOGIES SUCH AS ARTIFICIAL
INTELLIGENCE (AI), COGNITIVE INTELLIGENCE,
AND THE PRACTICAL SMARTPHONE TREND. ONLINE PURCHASING AND
SELLING OF CONSUMER ITEMS IS CATCHING UP AS E-COMMERCE WEBSITES
AND APPLICATIONS DRAW A LARGE NUMBER OF POTENTIAL AND CURRENT
CUSTOMERS.
IT HAS A COMPETITIVE EDGE OVER OTHER COMPANIES BY OFFERING
PRODUCT BUNDLING ON E-COMMERCE PLATFORMS BECAUSE OF ITS DIVERSE
AND EXPANDING RANGE OF GOODS, WHICH INCLUDES BISCUITS, BREAD,
CAKES, RUSKS, DAIRY, AND MORE. TECHNOLOGY IS REALLY HELPING THE
FIRM EXPAND AND REACH A LARGER TARGET MARKET WHILE MAKING
SIGNIFICANT REVENUES.

LEGAL FACTORS:
IT MAY BE INFLUENCED BY A VARIETY OF LEGAL ISSUES IN ANY COUNTRY
WHERE IT CONDUCTS BUSINESS. THE BUSINESS MAY BE IMPACTED BY
SEVERAL VARIABLES, SUCH AS THE LENGTH OF LEGAL PROCESSES AND THE
DELAY IN TIMELY ENFORCING RULES.
EVEN THE COUNTRY'S LAWS GOVERNING MONOPOLIES AND RESTRICTIVE
TRADE PRACTICES ARE IMPORTANT AND CAN PRESENT BOTH
OPPORTUNITIES AND THREATS IN DIVERSE WAYS.
BRITANNIA MAY BE IMPACTED BY CONSUMER PROTECTION LAWS AND EVEN
INTELLECTUAL PROPERTY RIGHTS PROTECTION. FMCG FIRMS MAY BE
INFLUENCED BY CONSUMER PETITIONS AND SEVERAL OTHER LEGAL
CHALLENGES FROM THE GOVERNMENT. LEGAL RESTRICTIONS ON THE
OPERATIONAL LEVEL PLANS ARE NECESSARY FOR BRITANNIA TO CONTINUE
OPERATING.

ENVIRONMENTAL FACTORS
ENVIRONMENTAL ORGANISATIONS LIKE NGT AND OTHERS FREQUENTLY
SCRUTINISE BUSINESSES FOR ANTI-ENVIRONMENTAL PRACTICES THAT
CAUSE ENVIRONMENTAL DISRUPTION. CUSTOMER ACTIVISM IS ALSO HAVING
A NEGATIVE IMPACT ON CORPORATE OPERATIONS AND OUTPUT.
MANY NATIONS DO NOT PERMIT THE USE OF PLASTIC FOR PRODUCT
PACKAGING. THIS OCCASIONALLY RESULTS IN EXCESSIVE COSTS AND
EVENTUALLY HAS AN IMPACT ON THE SALES AND REVENUES OF THE
COMPANY.
FINANCIAL REPORT

COMPANY PROFILE

BRITANNIA INDUSTRIES
LIMITED
BRITANNIA INDUSTRIES LIMITED (BIL) IS ONE OF INDIA'S LEADING FMCG COMPANIES.
FOUNDED IN 1892 AND HEADQUARTERED IN KOLKATA, IT IS ONE OF INDIA'S OLDEST
EXISTING COMPANIES AND BEST KNOWN FOR ITS BISCUIT AND BAKERY PRODUCTS. A
BRAND THAT MANY GENERATIONS OF INDIANS HAVE GROWN UP WITH, CHERISHED
AND LOVED IN INDIA AND THE WORLD OVER.

THE COMPANY WAS ESTABLISHED IN 1892 BY A GROUP OF BRITISH BUSINESSMEN

WITH AN INVESTMENT OF ₹295. INITIALLY, BISCUITS WERE MANUFACTURED IN A
SMALL HOUSE IN CENTRAL KOLKATA. TODAY, IT SPECIALIZES IN THE FOOD INDUSTRY,
PART OF THE WADIA GROUP HEADED BY NUSLI WADIA. BY ITS PRODUCT TYPE,
BAKERY PRODUCTS ACCOUNT FOR AROUND 80% OF SALES REVENUE, WHILE THE
REST IS DIVIDED BETWEEN DAIRY AND OTHER PRODUCTS.

THE COMPANY PHILOSOPHY AND CORPORATE VALUES INCLUDE, ‘INVITING’, ‘IGNITING’,

‘CREATING’ AND ‘RESPECTING’ AND BRINGING ALIVE THE NEW CORPORATE BRAND
“EXCITING GOODNESS” INTO THE LIVES OF BRITANNIANS.

BRITANNIA PRODUCTS ARE AVAILABLE ACROSS THE COUNTRY IN CLOSE TO 5 MILLION

RETAIL OUTLETS AND REACH OVER 50% OF INDIAN HOMES. TODAY, BRITANNIA’S
PRODUCT PORTFOLIO INCLUDES BISCUITS, BREAD, CAKES, RUSK, AND DAIRY
PRODUCTS INCLUDING CHEESE, BEVERAGES, MILK, AND YOGHURT. BIL HAS A
PRESENCE IN MORE THAN 60 COUNTRIES ACROSS THE MIDDLE EAST, AFRICA AND
AMERICA.
FINANCIAL REPORT

INDUSTRY OVERVIEW
FMCG STANDS FOR ‘FAST-MOVING-CONSUMER-GOODS’. THESE ITEMS HAVE A
RELATIVELY SHORTER SHELF LIFE WITH A HIGH TURNOVER, AND CONSUMERS
PURCHASE THEM AT REGULAR INTERVALS. THE FMCG SECTOR IS INDIA’S FOURTH-
LARGEST SECTOR WITH HOUSEHOLD AND PERSONAL CARE ACCOUNTING FOR 50% OF
FMCG SALES IN INDIA. GROWING AWARENESS, EASIER ACCESS, AND CHANGING
LIFESTYLES HAVE BEEN THE KEY GROWTH DRIVERS FOR THE SECTOR. THE FMCG
MARKET REACHED US$ 110 BILLION IN 2020. THE MARKET IS EXPECTED TO REACH US$
220 BILLION BY 2025.

FOOD AND BEVERAGE, HEALTHCARE AND HOUSEHOLD AND PERSONAL CARE ARE THE
MAIN CATERING SEGMENTS OF FMCG IN INDIA. THE URBAN SEGMENT (WHICH
ACCOUNTS FOR A REVENUE SHARE OF AROUND 55%) IS THE LARGEST CONTRIBUTOR
TO THE OVERALL REVENUE GENERATED BY THE FMCG SECTOR IN INDIA. SEMI-URBAN
AND RURAL SEGMENTS ARE GROWING AT A RAPID PACE AND FMCG PRODUCTS
ACCOUNT FOR 50% OF THE TOTAL RURAL SPENDING. RURAL CONSUMPTION OF
BRANDED PRODUCTS HAS INCREASED, LED BY A COMBINATION OF THE INCREASE IN
INCOME AND HIGHER ASPIRATION LEVELS HOWEVER, IN THE LAST FEW YEARS, THE
FMCG MARKET HAS GROWN AT A FASTER PACE IN RURAL INDIA COMPARED TO URBAN
INDIA.
INDIA’S INCREASING INTERNET PENETRATION AND RISING DIGITAL MATURITY ALONG
WITH DEVELOPING INFRASTRUCTURE HAVE HELPED BOOST ONLINE TRANSACTIONS.
MANY FMCG BRANDS PARTNER WITH E-COMMERCE PLATFORMS SUCH AS DUNZO,
FLIPKART, GROFERS, AND BIGBASKET TO DELIVER PRODUCTS TO THE DOORSTEP OF
CONSUMERS DURING THE COVID-19 PANDEMIC. THE E-COMMERCE SHARE OF TOTAL
FMCG SALES IS EXPECTED TO INCREASE BY 11% BY 2030. GROWTH IN MODERN RETAIL
HAS AUGMENTED THE GROWTH OF THE ORGANIZED FMCG SECTOR. INFRASTRUCTURE
LIKE MEGA FOOD PARK PROJECTS AND FOOD LABS HAS ATTRACTED INVESTMENT IN
THIS SECTOR. GOVERNMENT-APPROVED SCHEMES HAVE AIDED THE FOOD
PROCESSING INDUSTRY, ESTABLISHING HIGH GROWTH POTENTIAL, IMPROVED EXPORT
CAPABILITIES, AND SIZEABLE EMPLOYMENT OPPORTUNITIES IN THE COUNTRY.

OVER THE PAST 2 DECADES, THE FMCG INDUSTRY HAS UNDERGONE A REMARKABLE
TRANSFORMATION AND IS ESTIMATED TO BE THE FOURTH LARGEST SECTOR IN INDIA.
AS PER REPORTS BY CRISIL, THE SECTOR IS SET FOR DOUBLE-DIGIT GROWTH IN 2022
AT 10-12 PER CENT. AT PRESENT. HERE ARE SOME OF THE DRIVING FACTORS THAT
WILL PLAY AN IMPORTANT ROLE IN THE GROWTH AND DEVELOPMENT OF THE SECTOR
IN FY23:

DIGITISATION THROUGH E-COMMERCE

A DIRECT SALE TO CONSUMERS

GOVERNMENT INITIATIVES
FINANCIAL REPORT

COMPETITORS
ANALYSIS
7,50,000

5,00,000

2,50,000

0
HUL Nestle Dabur Godrej Britannia

HUL IS AN FMCG GIANT, THE CLEAR MARKET LEADER IN INDIAN CONSUMER

PRODUCTS WITH A PRESENCE IN OVER 20 CONSUMER CATEGORIES WITH OVER
700 MILLION INDIAN CONSUMERS USING ITS PRODUCTS. HINDUSTAN UNILEVER
LIMITED HAD A TOTAL INCOME OF ABOUT 524 BILLION INDIAN RUPEES IN 2022
AND HAS A RS 600 CRORE MARKET CAP. LIKE BRITANNIA, NESTLE HAS A LONG
HISTORY IN THE COUNTRY. NESTLE IS KNOWN FOR ITS UNIQUE MARKETING
CAMPAIGNS THAT MAKE CONSUMERS FEEL AFFECTIONATE AND LOYAL
TOWARDS THE BRAND. DABUR AGAIN IS ONE OF THE LARGE FMCG IN OUR
COUNTRY. THEY MANUFACTURE PRODUCTS BASED ON AYURVEDA AND FEATURE
NATURE-BASED INGREDIENTS. GODREJ CONSUMER PRODUCTS IS PART OF THE
OVER 125-YEAR YOUNG GODREJ GROUP. THEIR NET SALES AMOUNTED TO
NEARLY 70 BILLION INDIAN RUPEES AT THE END OF THE FINANCIAL YEAR 2022.
FINANCIAL REPORT

POLICY &
REGULATORY
FRAMEWORK
AS PER MOFPI

The Ministry of Food Processing

Industries (MOFPI) is a ministry of the
Government of India responsible for
the formulation and administration of
the rules and regulations and laws
relating to food processing in India. An
industrial license is not required for
almost all food and agro-processing
industries, barring certain items such
as beer, potable alcohol, wines, cane
sugar, etc. The Government approved
51% FDI in multi-brand retail in 2006,
which will boost the nascent organised
retail market in the country. It also
allowed 100% FDI in the cash and carry
segment and in single-brand retail.
POLICY AND REGULATORY
FRAMEWORK
Here is A compact list of Government initiatives that promote the sector:

1. Union Budget 2022-23:

Rs. 1,725 crores (US$ 222.19 million) has been allocated to the Department
of Consumer Affairs
Rs. 215,960 crores (US$ 27.82 billion) has been allocated to the
Department of Food and Public Distribution
In FY 2021-22, the government approved the Production Linked Incentive
Scheme for Food Processing Industry (PLISFPI) with an outlay of Rs. 10,900
crores (US$ 1.4 billion) to help boost exports

2. Deendayal Antyodaya Yojana – National Rural Livelihood Mission (DAY-

NRLM) programme to empower local businesses and self-help groups (SHGs)
by bringing them into the e-commerce fold.

3. The Goods and Services Tax (GST) is beneficial for the FMCG industry as
many of the FMCG products such as soap, toothpaste and hair oil now come
under the 18% tax bracket against the previous rate of 23-24%. Also, GST on
food products and hygiene products has been reduced to 0-5% and 12-18%
respectively.

4. Government has initiated Self Employment and Talent Utilisation (SETU)

scheme to boost young entrepreneurs. The government has invested US$
163.73 million in this scheme.

5. The announcement of direct payment of Minimum Support Prices (MSP)

into the farmers' accounts will lead to an increase in disposable income at the
hands of the farmers, which will be beneficial since rural markets account for
40% of the total fast-moving consumer goods (FMCG) market in India.

FINANCIAL REPORT
 POLICY AND REGULATORY
FRAMEWORK

6. The sector always faced a challenge due to high logistics costs and inefficient supply
chains, which resulted in higher operating costs for the sector. The Prime Minister's Gati
Shakti vision of transforming the logistics space will be quite beneficial for the consumer,
retail and the e-commerce sector. GST is expected to transform logistics in the FMCG
sector into a modern and efficient model as all major corporations are remodelling their
operations into larger logistics and warehousing.

7. India is one of the largest importers of vegetable oil. The launch of a comprehensive
scheme for Oilseeds will increase the domestic production of oilseeds and will result in
reduced dependence on imports, thus, making the F&B sector more resilient.
The implementation of these initiatives will help the consumer and retail sector in
achieving its growth initiatives.

FINANCIAL REPORT
FINANCIAL REPORT

CORPORATE GOVERNANCE

STRUCTURE
BRITANNIA CONSIDERS GOOD CORPORATE GOVERNANCE A PRE-REQUISITE
FOR MEETING THE NEEDS AND ASPIRATIONS OF ITS STAKEHOLDERS AND
FIRMLY BELIEVES THAT THE SAME CAN BE ACHIEVED BY MAINTAINING
TRANSPARENCY IN ITS DEALINGS, CREATING ROBUST POLICIES AND
PRACTICES, EFFECTIVE PROCESSES AND SYSTEMS WITH CLEAR
ACCOUNTABILITY, INTEGRITY, TRANSPARENCY GOVERNANCE PRACTICES AND
THE HIGHEST STANDARDS OF GOVERNANCE.

THE BOARD OF BRITANNIA INDUSTRIES LIMITED CONSISTS OF 11 MEMBERS

HAVING ROLES IN VARIOUS COMMITTEES GIVEN BELOW:

1.AUDIT COMMITTEE – 5 MEMBERS

2. NOMINATION & REMUNERATION COMMITTEE – 3 MEMBERS
3. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE – 4 MEMBERS
4. STAKEHOLDER RELATIONSHIP COMMITTEE – 3 MEMBERS
5. FINANCE COMMITTEE - 3 MEMBERS
6. STRATEGY AND INNOVATION STEERING COMMITTEE - 8 MEMBERS
7. RISK MANAGEMENT COMMITTEE - 5 MEMBERS
8. IT COMMITTEE

THE BOARD HAS AN OPTIMUM MIX OF EXECUTIVE, NON-EXECUTIVE AND

INDEPENDENT DIRECTORS AND IS HEADED BY A NON-EXECUTIVE CHAIRMAN
CUM PROMOTER, MR. NUSLI N WADIA. THERE ARE 7 INDEPENDENT DIRECTORS
ALONG WITH 2 NON-INDEPENDENT DIRECTORS AND 2 EXECUTIVE DIRECTORS
THAT COMPRISE OF THE TOP MANAGEMENT OF THE COMPANY. THE COMPANY
IS GUIDED BY WELL-ESTABLISHED CODES OF CONDUCT THAT EXTEND TO
MANAGEMENT AND EMPLOYEES ALIKE.

A LIST OF GOVERNING POLICIES THAT REGULATE BUSINESS PRACTICES:

CODE OF BUSINESS CONDUCT POLICY

WHISTLE BLOWER POLICY
CSR POLICY
MARKETING COMMUNICATION POLICY
LABOUR AND EMPLOYEE WELFARE POLICY
FINANCIAL REPORT

DIVIDEND POLICY
BRITANNIA INDUSTRIES BOARD HAS APPROVED ISSUING BONUS
DEBENTURES AND PAYMENT OF DIVIDENDS TO REWARD ITS
SHAREHOLDERS IN COVID TIMES. ELABORATING ON THE RATIONALE
BEHIND THE STEPS, BRITANNIA INDUSTRIES SAID UPON TAKING INTO
CONSIDERATION ITS CAPABILITY TO GENERATE STRONG CASH FLOW AND
THE ACCUMULATED PROFITS BEING MORE THAN WHAT IS NEEDED TO
FUND ITS FUTURE GROWTH.
FINANCIAL REPORT

DIVIDEND POLICY

BRITANNIA LTD FOLLOWS A STABLE DIVIDEND POLICY.

THE COMPANY HAS A GOOD DIVIDEND TRACK REPORT AND HAS
CONSISTENTLY DECLARED DIVIDENDS FOR THE LAST 10 YEARS.
IT GAVE INTERIM DIVIDENDS AS WELL AS SPECIAL DIVIDENDS IN THE FY 21-22
RESULTING IN A HIGH DIVIDEND PAYOUT. RATIO OF 236.63% WHILE GIVING A
DIVIDEND YIELD OF 4.91%. THE INTERIM DIVIDEND WAS GIVEN TWICE IN FY 21-
22 ALONG WITH A SPECIAL DIVIDEND TO THE SHAREHOLDERS IN THE MIDST
OF THE PANDEMIC.

BRITANNIA INDUSTRIES HAD LAST SPLIT THE FACE VALUE OF ITS SHARES
FROM RS 2 TO RS 1 IN 2018.
THE SHARE HAS BEEN QUOTED ON AN EX-SPLIT BASIS FROM NOVEMBER 29,
2018. BRITANNIA INDUSTRIES GAVE THE APPROVAL TO SHARE SPLIT IN A 1:2
RATIO TO INCREASE STOCK LIQUIDITY AND AFFORDABILITY FOR SMALL RETAIL
INVESTORS. THE SHARES WITH RS 2 OF FACE VALUE WILL BE SPLIT INTO TWO
EQUITY SHARES OF RS 1 EACH.
 FINANCIAL REPORT

DIVIDEND POLICY

THE GRAPH SHOWS THE DPS OF BRITANNIA FROM THE DATA COLLECTED FROM THE YEAR FY
2012-13 TILL FY 2021-22. IT CAN BE OBSERVED FROM THE GRAPH THAT BRITANNIA HAS SEEN A
STEADY INCREASE IN ITS DIVIDEND THROUGH THE YEARS AND A SHARP RISE IN DIVIDENDS IN
YEARS 2021-22 DUE TO THE SPECIAL AND INTERIM DIVIDEND ANNOUNCED IN THE YEAR. THE
COMPANY IS OF THE VIEW THAT THESE EXCESS FUNDS CAN BE OPTIMALLY UTILISED TO
REWARD ITS MEMBERS IN SUCH DIFFICULT AND UNPRECEDENTED TIMES BY WAY OF
DISTRIBUTION.

CONCLUSION
BRITANNIA SHOULD FOLLOW ITS CURRENT DIVIDEND POLICY AS IT FOCUSES ON
INCREASING DIVIDEND PAYMENTS EVERY FINANCIAL YEAR IN ORDER TO INCREASE THE
SATISFACTION OF SHAREHOLDERS OR CREATE GOODWILL AMONG ITS SHAREHOLDERS.
THE REGULAR PAYMENT OF DIVIDENDS HAS ALSO IMPACTED THE SHARE PRICE OF
BRITANNIA SHARES WHICH CAN BE SEEN RISING OVER THE LAST 10 YEARS AND IT HAS
MADE BRITANNIA A TRUSTWORTHY COMPANY FOR INVESTORS.
 FINANCIAL REPORT

WORKING CAPITAL
MANAGMENT
WORKING CAPITAL POLICY

INTERPRETATION:
TO CALCULATE WHAT TYPE OF WORKING CAPITAL POLICY BRITANNIA FOLLOWS WE
HAVE ANALYSED 5 YEARS OF DATA FROM THIS WE HAVE INTERPRETED THAT
BRITANNIA SHIFTS FROM A CONSERVATIVE WORKING CAPITAL MANAGEMENT POLICY
TO AN AGGRESSIVE WORKING CAPITAL MANAGEMENT POLICY.

DURING THE YEAR 2018, IT IS FOLLOWING A CONSERVATIVE WCM STRATEGY WITH

TOTAL WORKING CAPITAL OF 1401.49 AND THEN IT SHIFTS TO THE AGGRESSIVE WCM
STRATEGY FROM THE YEAR 2018-19 WHERE THE WORKING CAPITAL DECREASED TO
1356.82. AGAIN, IN THE YEAR 2019-20 WORKING CAPITAL DECREASED TO 990.09 AND
FURTHER IN THE YEAR 2020 – 21, IT REDUCED TO 687.16. IN THE YEAR 2021- 22, THE
WORKING CAPITAL IS IN NEGATIVE, -256.41.
FINANCIAL REPORT

WORKING CAPITAL
MANAGMENT
WORKING CAPITAL POLICY

EXPLANATION:
THE AGGRESSIVE STRATEGY IS ONE OF THE APPROACHES OF WORKING
CAPITAL MANAGEMENT WHEREIN THE COMPANY’S INVESTMENTS IN WORKING
CAPITAL ARE KEPT AT A MINIMUM LEVEL, I.E., LIMITED INVESTMENT IN
CURRENT ASSETS. THIS MEANS THAT THE ENTITY HOLDS LOWER INVENTORY
LEVELS, FOLLOWS STRICT CREDIT POLICIES, KEEPS LESS CASH BALANCE, ETC.

THE WORKING CAPITAL IS KEPT VERY LOW. LOW WORKING CAPITAL RAISES
RISK BUT SAVES THE COST OF INTEREST. GIVEN THAT THIS APPROACH
MINIMIZES THE INTEREST COST, HIGHER PROFITABILITY IS ACHIEVED. BECAUSE
OF THE EXTREMELY TIGHT LIQUIDITY POSITION BEING MAINTAINED, THERE IS
A HIGH RISK OF BANKRUPTCY.

LOW WORKING CAPITAL INDICATES OPTIMUM UTILISATION OF FUNDS AS THE

COMPANY USES THE EXCESS FUNDS TO INVEST IT FURTHER ULTIMATELY
INCREASING THE COMPANY’S VALUE

THE TABLE DISCLOSES THAT THE COMPANY WAS DEALING WITH POSITIVE
WORKING CAPITAL EXCEPT DURING MARCH 2021-22 AS CURRENT LIABILITIES
INCREASED DRASTICALLY BY ALMOST 74 PER CENT AS COMPARED TO
CURRENT ASSETS WHICH ROSE BY ONLY 12 PER CENT FROM 2020 TO 2022

TRADITIONAL PRUDENCE ALWAYS SUGGESTS THAT A FIRM SHOULD HAVE

SUFFICIENT CASH TO COVER ITS IMMEDIATE LIABILITIES. HOWEVER, THERE IS
A GROWING BREED OF FMCG COMPANIES THAT CLAIM OTHERWISE. UNLIKE
MOST OTHER INDUSTRIES, THE TURNOVER OF AN FMCG COMPANY IS NOT
LIMITED BY ITS ABILITY TO PRODUCE, BUT BY ITS ABILITY TO SELL. THEY CAN
GENERATE CASH SO QUICKLY THAT THEY HAVE NEGATIVE WORKING CAPITAL.
THIS HAPPENS BECAUSE CUSTOMERS PAY UPFRONT AND SO RAPIDLY, THE
BUSINESS HAS NO PROBLEM RAISING CASH.
FINANCIAL REPORT

OPERATING CYCLE

THE OPERATING CYCLE OFFERS INSIGHT INTO A COMPANY’S

OPERATING EFFICIENCY. A SHORTER CYCLE IS PREFERRED AND
INDICATES A MORE EFFICIENT AND SUCCESSFUL BUSINESS. IT
INDICATES THAT A COMPANY IS ABLE TO RECOVER ITS INVENTORY
INVESTMENT QUICKLY AND POSSESSES ENOUGH CASH TO MEET
OBLIGATIONS. IF A COMPANY’S OC IS LONG, IT CAN CREATE CASH
FLOW PROBLEMS.

.
FINANCIAL REPORT

CASH CONVERSION
CYCLE

BRITANNIA HAS A NEGATIVE CASH CONVERSION CYCLE WHICH

MEANS THAT IT DOES NOT TAKE MUCH TIME TO CONVERT THE
STOCK INTO SALES AND IT DOESN'T TAKE TIME TO RECEIVE CASH
FROM THE CUSTOMERS. WHICH MEANS IT RECOVERS MONEY
FASTER THAN IT PAYS MONEY TO THE SUPPLIER. THIS IS AN IDEAL
SITUATION FOR A COMPANY AS IT KEEPS THE COMPANY LIQUID
WITHOUT THE NEED TO KEEP FUNDS LOCKED IN WORKING CAPITAL
FOR LONG PERIOD.
FINANCIAL REPORT

DEBTOR COLLECTION
PERIOD

DEBTORS' COLLECTION PERIOD HAS DECREASED OVER THE YEARS,

ONLY TO SEE A SLIGHT INCREASE IN THE PREVIOUS YEAR. THIS
MEANS THAT THE COMPANY IS MOVING TO A STRICT CREDIT
POLICY. WHICH INDICATES THE COMPANY IS MOVING TOWARDS AN
AGGRESSIVE WCM POLICY.
 FINANCIAL REPORT

DIVIDEND DISCOUNT
MODEL

THE DIVIDEND DISCOUNT MODEL ALLOWS THE INVESTOR TO DETERMINE A

REASONABLE PRICE FOR A STOCK BASED ON AN ESTIMATE OF THE AMOUNT OF
CASH IT WILL RETURN IN CURRENT AND FUTURE DIVIDENDS. DDM IS ONE WAY OF
ESTIMATING THE INTRINSIC VALUE OF A STOCK. IT IS MOST USEFUL TO INVESTORS
IN DECIDING WHICH DIVIDEND-PAYING STOCKS TO BUY AND HOLD LONG-TERM.
THE THEORY SUGGESTS THAT IF THE VALUE OBTAINED FROM THE DIVIDEND
DISCOUNT MODEL IS HIGHER THAN THE CURRENT TRADING PRICE OF SHARES,
THEN THE STOCK IS UNDERVALUED AND HENCE, WOULD BE IDEAL TO BUY,
SIMILARLY IF THE PRICE OF SHARES IS LOWER, IT IS OVERVALUED AND HENCE, IT
WOULDN'T BE A GOOD IDEA TO BUY. THE PRIMARY DISADVANTAGE OF DIVIDENDS
AS A CASH FLOW MEASURE IS THAT IT IS DIFFICULT TO IMPLEMENT FOR FIRMS
THAT DON’T CURRENTLY PAY DIVIDENDS.

INTERPRETATION:

BRITANNIA HAS BEEN CONSISTENTLY GIVING DIVIDENDS FOR THE LAST FIVE
YEARS AND FINDING THE VALUE USING THE DDM MODEL WOULD GIVE AN
ACCURATE VALUE FOR THE VALUE OF THE FIRM. HERE WE HAVE CALCULATED THE
HIGH GROWTH RATE BY TAKING THE AVERAGE VALUE OF ROE AND DIVIDEND
PAYOUT RATIO OF THE LAST 5 YEARS AND THEN APPLYING THE FORMULA ROE*(1-
DPO). THE STABLE GROWTH RATE IS ASSUMED TO BE 3%. D0 IS CALCULATED BY
TAKING AN AVERAGE OF DPS FOR THE LAST 5 YEARS. THE VALUE OF THE FIRM IS
CALCULATED BY ADDING THE PRESENT VALUE OF THE FORECASTED DIVIDENDS
AND THE PRESENT VALUE FOR THE TERMINAL VALUE I.E RS.1,234.28. AS THE
CURRENT TRADING PRICE IS 4100 IT IS SEEN THAT FIRM’S VALUE THROUGH DDM IS
LOWER THAN THE CURRENT TRADING PRICE, HENCE THE STOCK IS OVERVALUED.
 FINANCIAL REPORT

RELATIVE VALUATION
A RELATIVE VALUATION MODEL IS A BUSINESS VALUATION METHOD THAT
COMPARES A COMPANY'S VALUE TO THAT OF ITS COMPETITORS OR INDUSTRY
PEERS TO ASSESS THE FIRM'S FINANCIAL WORTH. RELATIVE VALUATION
MODELS ARE AN ALTERNATIVE TO ABSOLUTE VALUE MODELS, WHICH TRY TO
DETERMINE A COMPANY'S INTRINSIC WORTH BASED ON ITS ESTIMATED
FUTURE FREE CASH FLOWS DISCOUNTED TO THEIR PRESENT VALUE, WITHOUT
ANY REFERENCE TO ANOTHER COMPANY OR INDUSTRY AVERAGE. LIKE
ABSOLUTE VALUE MODELS, INVESTORS MAY USE RELATIVE VALUATION
MODELS WHEN DETERMINING WHETHER A COMPANY'S STOCK IS A GOOD BUY.

A COMPANY WITH A HIGH P/E RATIO IS TRADING AT A HIGHER PRICE PER

DOLLAR OF EARNINGS THAN ITS PEERS AND IS CONSIDERED OVERVALUED.
HENCE, OUR CALCULATED DATA SHOWS THAT BRITANNIA’S SHARES ARE
OVERVALUED. WE COMPLETED THE RELATIVE VALUATION BY USING VARIOUS
MULTIPLES FOR COMPARABLE COMPANIES SUCH AS P/E, P/S, P/BV, EV/SALES,
AND EV/EBIT. EV/CFO AND EV/TOTAL ASSETS FOR BRITANNIA AND THE OTHER
COMPANIES WEREN’T AVAILABLE.

NET ASSET VALUE

THE DIFFERENCE BETWEEN ASSETS AND LIABILITIES FOR FIRMS AND BUSINESS
ENTITIES IS KNOWN AS THE NET ASSETS, NET WORTH, OR CAPITAL OF THE
COMPANY. THE WORD NAV REFERS TO THE VALUE AND PRICING OF MUTUAL
FUNDS, WHICH IS CALCULATED BY DIVIDING THE DIFFERENCE BETWEEN ASSETS
AND LIABILITIES BY THE NUMBER OF SHARES HELD BY INVESTORS. THIS METHOD
NEEDS COSTLY OVERESTIMATION OF CORPORATE ASSETS AND COMPLETELY
DISREGARDS THE COMPANY'S EXISTING AND FUTURE EARNING POSSIBILITIES.
THIS STRATEGY IS MOST UTILISED IN THE CONTEXT OF CAPITAL-INTENSIVE
FIRMS, NON-OPERATIONAL ENTITIES SUCH AS INVESTMENT HOLDING COMPANIES
AND REAL ESTATE, AND BUSINESSES WITH NO PRESENT OR EXPECTED
OPERATING INCOME.

FROM THE BALANCE SHEET WE HAVE TAKEN THE ASSETS AT REALISABLE VALUE
AND SUBTRACTED THE TOTAL EXTERNAL LIABILITIES TO CALCULATE THE NET
WORTH OF BRITANNIA. ON DIVIDING THIS BY THE NUMBER OF OUTSTANDING
SHARES WE HAVE DERIVED THE NAV OF THE COMPANY. TO UNDERSTAND IF THE
SHARE PRICE OF A COMPANY IS OVERVALUED OR UNDERVALUED. THEREFORE,
AFTER COMPARING THE NAV OF THIS YEAR WITH THE MARKET PRICE FOR THE
SAME IT CAN BE OBSERVED THAT THE SHARE OF BRITANNIA IS OVERVALUED.
 RESIDUAL INCOME

RESIDUAL INCOME VALUATION (ALSO KNOWN AS RESIDUAL INCOME MODEL OR

RESIDUAL INCOME METHOD) IS AN EQUITY VALUATION METHOD THAT IS BASED
ON THE IDEA THAT THE VALUE OF A COMPANY’S STOCK EQUALS THE PRESENT
VALUE OF FUTURE RESIDUAL INCOMES DISCOUNTED AT THE APPROPRIATE COST
OF EQUITY. THE RESIDUAL INCOME MODEL IS SIMILAR TO THE DCF AND DDM
APPROACHES. HOWEVER, IN CONTRAST WITH THE DDM, IT SUBSTITUTES FUTURE
RESIDUAL INCOME FOR DIVIDENDS. MEANWHILE, INSTEAD OF USING THE
WEIGHTED AVERAGE COST OF CAPITAL FOR THE DISCOUNT RATE LIKE THE DCF
MODEL, THE RESIDUAL INCOME MODEL USES THE COST OF EQUITY.

ANALYSIS
ANALYSIS THE VALUE PER SHARE AS PER THE RESIDUAL INCOME MODEL IS RS.
1964.70. THE CURRENT MARKET PRICE AS OF 13TH NOVEMBER 2022 IS RS. 3149.30.
THIS MEANS THAT THE SHARE IS SIGNIFICANTLY OVERVALUED. RESIDUAL INCOME
MODEL IS WIDELY USED WITH COMPANIES THAT DO NOT REGULARLY DISTRIBUTE
REGULAR INCOMES OR DO NOT HAVE A POSITIVE CASH FLOW. AS THAT IS NOT
THE SITUATION WITH BRITANNIA, RESIDUAL INCOME MODEL IS NOT THE BEST
MODEL FOR VALUING THIS STOCK.
 FINANCIAL REPORT

FCFF & FCFE

FREE CASH FLOW IS A MORE ACCURATE METRIC THAN EBITDA, EBIT, AND NET
INCOME AS THEY LEAVE OUT LARGE CAPITAL EXPENDITURES AND CHANGE IN
CASH DUE TO CHANGES IN OPERATING ASSETS AND LIABILITIES. ALSO, METRICS
SUCH AS EBIT AND NET INCOME INCLUDE NON-CASH EXPENSES, FURTHER
MISREPRESENTING THE TRUE CASH FLOW OF A BUSINESS.

VALUATION MULTIPLES DIFFER DEPENDING ON THE TYPE OF CASH FLOW BEING

USED, THE DISCOUNT RATE IN A DISCOUNTED CASH FLOW ALSO DIFFERS
DEPENDING ON WHETHER FCFF OR FCFE ARE BEING DISCOUNTED.

IF FCFF ARE BEING USED, THE FIRM’S WEIGHTED AVERAGE COST OF CAPITAL
(9.08%) IS USED AS THE DISCOUNT RATE BECAUSE ONE MUST TAKE INTO
ACCOUNT THE ENTIRE CAPITAL STRUCTURE OF THE COMPANY. WHEN
PRESENTING THEIR ACTIVITIES, MANAGEMENT OF HIGHLY LEVERAGED
ORGANIZATIONS EMPLOY FCFF. IT IS NECESSARY TO VERIFY THAT THE COMPANY
DOES NOT HAVE A NEGATIVE LEVERED FREE CASH FLOW AS A RESULT OF LARGE
FINANCIAL OBLIGATIONS, AS THIS COULD MAKE THE ORGANIZATION
UNSUSTAINABLE IN THE LONG RUN.

WHEN FCFE IS USED, THE FIRM’S COST OF EQUITY (9.19%) SHOULD BE USED AS
THE DISCOUNT RATE BECAUSE IT INVOLVES ONLY THE AMOUNT LEFT FOR EQUITY
INVESTORS. IT ENSURES CALCULATING EQUITY VALUE INSTEAD OF ENTERPRISE
VALUE. FCFE IS OFTEN USED BY EXPERTS TO ASSESS THE VALUE OF A FIRM OR
COMPANY, AND IT CAN BE USED IN PLACE OF DIVIDENDS FOR THIS OBJECTIVE.

FROM RETURN EXPECTATION, DEBT HOLDERS OF THE FIRM EXPECT AN INTEREST

PAYMENT AGAINST THE PRINCIPAL AMOUNT, PLUS AT THE END OF THE TENURE,
THEY EXPECT THE PRINCIPAL ITSELF TO BE REPAID. THE FIRM ALSO HAS EQUITY
HOLDERS WHO HAVE DIFFERENT RETURN EXPECTATION. THE EQUITY HOLDERS
WILL EXPECT A HIGHER RETURN THAN THE DEBT HOLDERS BECAUSE THE EQUITY
HOLDERS TAKE MORE RISK. EQUITY HOLDERS EXPECT AT LEAST THE RISK-FREE
RATE THAT PREVAILS IN THE ECONOMY PLUS A RISK PREMIUM FOR THE
ADDITIONAL RISK (OVER THE DEBT HOLDERS) THAT THEY TAKE.

THE RETURN EXPECTATION OF THE FIRM SHOULD BE SUCH THAT IT SATISFIES

BOTH DEBT AND EQUITY HOLDERS. WHEN WE BUILD A VALUATION MODEL BASED
ON FCFE, THE CASH FLOW IS DISCOUNTED WITH A BLENDED RATE, SATISFYING
BOTH THE DEBT AND EQUITY HOLDERS. HENCE, COST OF CAPITAL IS ALWAYS
HIGHER THAN THE WACC.
15/11/2022
REGARDS

PRESENTED AS

PREPARED BY
ADFM FINAL END
SEM PROJECT GROUP 7