Britannia Industries Ltd. (India) Ratio Analysis

8/11/2019 Britannia Industries Ltd. (India) Ratio Analysis

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BritanniaIndustries Limite


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Britannia Industries Limited Eat Healthy, Think Better

Established in 1892

Headquarter in Kolkata

Key Personnel : Vinita Bali, Managing Director

Neeraj Chandra, Vice President Business Development


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Britannia Industries Limited

Crossed 100 crore Revenue in 1983

76% of Total Revenues come from Biscuits

The Dairy segment comprises of 6.3% of total Turnover

Exports form 5% of the company's overall Sales


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Britannia33%

Parle

38%

Sunfeast13%

Priya Gold &Others

16%

Market Share


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Industry Analysis

VAT

Biscuits - 13.5

Other food products0% to 5%

Price

Economy (Price < Rs100 per kg)

Mid (Rs 100-150 per kg price band)

Premium (Price > Rs 150 per kg)

Region

Urban : 75%-85%

Rural : 50%-65%

Country

India - Per capita consumption is 1.8 kg

South East Asian & European countries - Per capita consumption is 2.5-5.5

US - Per capita consumption is 7.5 kg


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Competitors In Dairy Produ

NESTLE AMUL

NDDB


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Competitors In Biscuits

PARLE ITC

CADBURYOREO

SUNFEAST


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Products

BISCUITSBREAD, CAKE

&

RUSK

GIFT DAIRY


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Segmentation

Age Group: Different products for different age groups

Niche Snacking segment: For those individuals who are on the go, th

introduced small packs

Occasions: Britannias Shubh Kaamnayein is for special occasions li

festivals.

Targeting

Full Market Coverage: Britannia follows full market coverage pattern

market selection


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Trend Analysis of Sales and Profit

Comparative Statement of the Balance

Sheet for the years 2011-12 and 2012-1
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Liquidity Ratios

Ratio Formula 2012-

Current ratioCurrent assets

times 0.8Current liabilities

Quick RatioCurrent Assets - Inventories

times 0.44Current Liabilities


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Current Ratio

Higher Current Ratio implies healthier short term liquidity comfor

A current ratio below 1 indicates that the company may not be ab

obligations in the shorter run.

However, it is not always a matter of worry if this ratio temporaril

1 as many companies squeeze out short term cash sources to achi

intensive plan with a longer term outlook.


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Quick Ratio

Quick ratio measures the liquidity of a business by matching

near cash current assets with its total liabilities

It helps us to determine whether a business would be able to

debts by using its most liquid assets (i.e. cash, marketable se

accounts receivable)

A quick ratio of 1 means that the most liquid assets of a business

its total debts and the business will just manage to repay all using its cash, marketable securities and accounts receivable.

A quick ratio of more than 1 indicates that the most liquid

business exceed its total debts.

On the opposite side, a quick ratio of less than 1 indicates tha

would not be able to repay all its debts by using its most liquid as


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Solvency Ratios

1. Debt to Equity = Debt

Equity

Long Term Debt to Equity = Long Term Borrowings

Shareholders Funds

2. Capital Gearing Ratio = Owed Funds

Owned Funds


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Year

Debt to Equity

ratio

Long term De

Equity Rati

March, 2013 0.30

March, 2012 0.05

March, 2011 0.96 March, 2010 1.08

March, 2009 0.03


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Debt to Equity Ratio

It is a measure of a company's financial leverage whic

what proportion of equity and debt the company is using to

assets

A debt/equity ratio greater than 1 generally means that

has been aggressive in financing its growth with debt. Thiin volatile earnings as a result of the additional interest exp

BILsaverage debt to equity ratio over past 5 years is 0.48


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Long Term Debt to Equity Ratio

Long term debt to equity ratio higher than 0

would affect business of a company and its

operations.

BILsaverage long term debt to equity ratio ove5 financial years has been 0.55 which indicate

company operating with a considerate level of d


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Year Capital Gearing Ratio

March, 2013

March, 2012

March, 2011

March, 2010

March, 2009


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Capital Gearing Ratio

Gearing is a measure of financial leverage, demonstrating th

which a firm's activities are funded by owner's funds versus cred

The higher a company's degree of leverage, the more the

considered risky.

The firm is said to be low geared if the preference shares capi

fixed interest bearing loans and less than equity capital and rese

A company with high gearing (high leverage) is more v

downturns in the business cycle because the company must

service its debt regardless of how bad sales are. A greater p

equity provides a cushion and is seen as a measure of financial


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Stock Turnover Ratio and Debtors Turnover Ra

Ratio Formula 2012-1

Debtors turnoverSale of products times 73.3

Trade receivables

Stock turnover

Sale of productstimes 40.7 Inventories (Finished goods

+ Stock-in-trade)


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Stock Turnover Ratio

Inventory turnover is the ratio of cost of goods sold by a business to its average i

a given accounting period.

Inventory turnover ratio is used to measure the inventory management efficiency o

In general, a higher value of inventory turnover indicates better performance a

means inefficiency in controlling inventory levels.

A lower inventory turnover ratio may be an indication of over-stocking which m

obsolescence and increased inventory holding costs.

However, a very high value of this ratio may be accompanied by loss of sales d

shortage.

Inventory turnover is different for different industries. Businesses which trade p

have very higher turnover compared to those dealing in durables. Hence a compar

be fair if made between businesses of same industry.


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Debtors Turnover Ratio

It is an accounting measure used to quantify a firm's effe

extending credit as well as collecting debts.

A high ratio implies either that a company operates on a cash ba

extension of credit and collection of accounts receivable is efficie

A low ratio implies the company should re-assess its credit pol

to ensure the timely collection of imparted credit that is not ear

for the firm.


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Dividend Yield Ratio

RatioFormula 2012-13 2011

Dividend Yield Dividend Per share % 1.62 1.4

Current Share Price


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Dividend Yield Ratio

Dividend yield is the ratio of dividend per share to current share price. It is a m

percentage an investor is earning in the form of dividends.

Depending solely on dividend yield figure for making investment in a compan

wise decision.

A high dividend yield percentage may be due to a recent decrease in the mar

stock of the company due to sever financial troubles. It may have to reduce

dividends in future that may further reduce the market value of its stock

company with attractive dividend yield figure may not always be the best optio


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Capital Ratio

Ratio Formula 2012-13 2011

Capital Ratio

Shareholder's Equity +

Long-term Debt1.15 1.2

Total Fixed Assets


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Capital Ratio The Capital Ratio measures the amount of equity and debt funding that has resulted

acquiring a certain level of Net Property Plant Equipment. Most long-term, fixed assets are

an infusion of equity from stockholders or from debt financed from banks.

A decreasing Capital Ratio is usually a positive sign, as this shows the company ma

proportion of fixed assets when compared to its total equity and debt. The company may

some debt, or possibly bought back some of its stock while maintaining its amount of fixed

An increasing ratio may indicate the company has taken on more debt or completed

securing equity, but less of a proportion was spent on fixed assets. The company may have

its fixed assets, causing the ratio to skew upwards.


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Return on Equity

PAT

% 36.75 35

Shareholders funds

Return on Equity


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Return on Equity

It is a measure of profitability of stockholders' investments. It shows

percentage of shareholder equity.

Higher values are generally favorable meaning that the company

generating income on new investment.

With BIL, we see an increasing trend from 32-35-36% over 3 ye

should compare the ROE of different companies and also check the

over time.

However, relying solely on ROE for investment decisions is not safe.


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Return on Capital Employed


Return on Capital

Employed

PAT% 18.68 1

Capital Employed


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Return on Capital Employed

Return on capital employed (ROCE) is the ratio of net operatin

company to its capital employed.

It measures the profitability of a company by expressing its op

as a percentage of its capital employed.

A higher value of return on capital employed is favorable indica

company generates more earnings per rupee of capital employe A lower value of ROCE indicates lower profitability.

A company having less assets but same profit as its competit

higher value of return on capital employed and thus higher profit


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Price to Earning Ratio

RatioFormula 2012-13 20

PE Ratio as per

Book Value

Book value per sharetimes 2.74 2

EPS

PE Ratio as per Avg

Market Price

Market Value per sharetimes 26.55 3

EPS


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Price to Earning Ratio

It shows how much investors are willing to pay per rupee of earnings.

If a company were currently trading at a multiple (P/E) of 20, the interpretinvestor is willing to pay Rs. 20 for Re. 1 of current earnings.

Generally a high P/E ratio means that investors are anticipating higher growth

The average market P/E ratio is 20-25 times earnings.

Book P/E is based on cost while Market P/E is based on market expectation

these two P/E helps in deciding whether to invest or not.

In case of BIL, Market P/E is greater than book P/E, it means that shares are

a Premium.


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Conclusion

Britannia continues to suffer from low profitability. Although

has been upgrading its product portfolio by launching more

healthy offerings, these efforts are still to make a big diffe

company's margins.

In FY13, net margin has improved, albeit slightly to around

by higher realizations. However volume off take remained t

towards intense competition and the lack of pricing power.

Going forward, margins are not expected to expand sig

account of reduced flexibility to hike prices in the face of


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Thank You

Akshay GurumoorthyBulbul Saha

Fabushara Wasim

Mansi Shah

Monika Nehe

Onkar Charegaonkar

Pooja Junnarkar

Rachna Gaikwad

Yash Baldev

Britannia Industries Ltd. (India) Ratio Analysis

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