Britannia to add 50 products by March 2020; seeking dairy venture partner for VADPs

Company is in the process of setting up a Rs1,000cr integrated food park at Ranjangaon, Pune expected to commercialize by December 2019

Feb 14, 2018 08:02 IST India Infoline News Service

Britannia plans to launch ~50 new products under its existing as well as new categories by March 2020, as per media sources. This strategy is in tandem with company’s efforts to be a total foods company. The expansion of portfolio may include launch of new sub-brands in some categories along with focus on the macro snacking category outside bakery.

Further, company is seeking a joint venture (JV) with a global player to expand its dairy presence, as per media reports. Currently, dairy contributes ~Rs400cr to the company’s revenue, which the management expects to touch Rs1,500 in next five years. With the JV, company intends to take complete control of the dairy business process, from collecting fresh milk to processing and then manufacturing. Britannia is not focusing on the crowded and commoditised fresh milk segment, rather it is interested in coming up with premium and innovative value added dairy products (VADPs) where the competition is not intense.

Company is in the process of setting up a Rs1,000cr integrated food park at Ranjangaon, Pune, which is expected to commercialise by December 2019. This plant would be spread across 150 acres and would have integrated dairy processing units in addition to units catering to the Chipita JV and other manufacturing units for biscuits, rusks, etc. Britannia has already started milk procurement in Maharashtra on a pilot basis and expects to go full scale once the Ranjangaon plant is fully operational. It aims at sourcing milk form ~25,000 farmers.

Company reported a healthy set of numbers for the December quarter with revenue growth of 12.5% yoy to Rs2,567.5cr, led by double-digit domestic volume growth. EBITDA jumped by 26.8% yoy to Rs398.4cr and EBITDA margin expanded by 175bps yoy to 15.5%. Due to higher tax outgo, PAT grew by 19.6% yoy to 263.7cr. Domestic volume growth was supported by brand investments and distribution expansion (focus on increasing direct reach).

Britannia is engaged in the manufacturing and sale of biscuits, bread, rusk, cakes and dairy products. Biscuits contribute ~80% of the company’s turnover. As on Q3FY18, the company’s products were available in 48 lakh outlets across India. Company is focusing on increasing direct reach, scaling up its rural share (currently ~17% revenue comes from rural India), improving manufacturing and supply chain to increase efficiencies and drive cost optimization. We estimate Britannia to report revenue CAGR of 12% over FY17-20E. Led by various initiatives – premiumisation, cost control, innovation, we expect the EBITDA margin to expand by ~235bps over FY17-20E to 16.5% in FY20E. We expect EBITDA CAGR of 16% over FY17-20E. PAT is estimated to grow at 17% CAGR over the same period.

Britannia Industries Ltd ended at Rs4782, up by Rs147.15 or 3.17% from its previous closing of Rs4634.85 on the

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