15-Mar-2022

BRITANNIA INDUSTRIES LIMITED

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DHD Industries Limited, established in 1892, is one of India’s oldest food products company and is part of the Wadia Group. It is
Britannia
one of the largest players in the biscuit industry in India.
The company operates in the food segment and derives majority of its revenues from the biscuits segment. The company, however,
over the years have diversified into other segments like bread, dairy products, cakes, snacks, milk shakes, croissants, wafers and rusk.
Few of its prominent brands include Good Day, Marie Gold, Tiger, NutriChoice, Milk Bikis etc.
The business operates with 13 factories and 4 franchisees catering to more than 100 cities and towns of India. In addition to
manufacturing from its own plant, the company has established relationship with several contract manufacturers across the country.
The company has incorporated wholly-owned subsidiaries in Bangladesh and Nepal. It has also acquired Strategic Foods International
LLC in the United Arab Emirates (UAE) and Al Sallan Food Industries Co SAOG in Oman.
Its products are also exported to over 79 countries including Middle East, North America, Europe, Africa and South East Asia.

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DHD
REVENUE MIX (FY21)

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 GROWTH
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DHD SALES GROWTH

In FY21, net sales was ₹13,136 cr, a growth of
13.25% YoY.
In 9M FY22, net sales stood at ₹10,586 cr, a growth
of 6% YoY.
The management is focusing to achieve double-digit
growth in terms of both revenues as well as volumes.
It is also focusing on distribution ramp up especially
in Hindi heartland.
Going forward, market share gain, distribution
expansion and improving performance of its
adjacent business segment is also likely to aid in the
topline growth.

5 Year CAGR: 8.8%

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DHD EBITDA GROWTH

In FY21, EBITDA was ₹2,509 cr, a growth of 36% YoY.
In 9M FY22, EBITDA was ₹1,652 cr, a decline of 18%
YoY. This was mainly due to unprecedented increase
in input costs.
The company initiated price hike of ~13% to
offset the impact of the inflationary trend.
It is also focusing on volume growth coupled with
pricing action which will be a combination of 1/3rd
through MRP changes & 2/3rd through grammage
reduction (it is targeting price increase of 10% in Q4
FY22).

5 Year CAGR: 15.6%

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DHD PAT GROWTH

In FY21, the company reported a profit of ₹1,850 cr,
a growth of 33% YoY.
In 9M FY22, PAT was ₹1,139 cr, a decline of 24% YoY.
Decline in operating profit and other income had a

as
bearing on the bottom line growth.

5 Year CAGR: 17.6%

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 GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY21, the EBITDA margin saw an improvement.
In 9M FY22, EBITDA margin saw a contraction on a
YoY basis mainly due to inflation in commodity prices.
Margins are likely to be under pressure in the near
term owing to the inflationary trend witnessed in the
input costs.

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DHD PAT MARGIN

In FY21, the PAT margin was 13%.
In 9M FY22, PAT margin saw a contraction on a YoY
basis.

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DHD ROCE
For FY21, ROCE was 45%. The metric improved on
the back of higher EBIT growth.

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DHD ROE
In FY21, the ROE was 47%.
In FY21, the metric saw an improvement due to
improved net profits as well as a decline in the
average net worth of the company for the year.
The company made hefty dividend payment of
₹2,840 cr. Thus, leading to a decline in the net
worth.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

The company is maintaining its upward growth
trajectory of cash from operations on the back of
improved operating profit.
In FY21, cash from investing activities saw an inflow
of ₹461 cr on the back of partial redemption of inter-
corporate deposits and the sale of investments.
Dividend payments of ₹2,824 cr led to a higher
outflow of cash from financing activities.

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WORKING
DHD CAPITAL CYCLE
The positive impact of working capital can be
attributed to lower debtors’ days.
Strong brand loyalty and customer franchise along
with better terms with the suppliers, continues to
help the company to maintain a favourable working
capital cycle.

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DHD FREE CASH FLOW

In FY21, the free cash flow per share was ₹73.
Capex on dairy factory, which will be ready by 2022,
is the only commitment for the current year.
The company is also looking at setting up a factory
in Uttar Pradesh and is also considering establishing
factories in Bihar and Odisha.
These capex are likely to be funded through internal
accruals.

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ASSET
DHD TURNOVER RATIO
In FY21, the asset turnover ratio was 1.74x.
The metric continues to remain range bound.

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 EFFICIENCY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

In FY21, the total debt stood at ₹2,107 cr. The ratio
increased due to rise in total debt coupled with a
decline in average net worth.
As on 31st March, 2021, the long term debt stood at
₹748 cr vs ₹766 cr as on 31st March, 2020.
In Q1 FY22, the company issued bonus debentures of
₹699 cr to its shareholders. Thus, leading to further
increase in the level of debt.
While the short term debt increased from ₹1,339 cr
as on 31st March, 2021 vs ₹748 cr as on 31st March,
2020. The uptick in the short term borrowing was
primarily due to higher working capital utilisation
and higher issuance of commercial paper (CP) to
support the increase in the scale of operations.

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INTEREST
DHD COVERAGE RATIO
The surge in total debt led to higher interest cost,
thus impacting the metric.
The company’s operating profit is sufficient to meet
its interest obligations.

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DHD CURRENT RATIO

In FY21, the current ratio is at 1.22x.
The decline in the metric was mainly on the back of a
surge in short term debt.
As on 30th September, 2021, it has cash balances and
liquid investments of ₹751 cr. Thus, having a steady
liquidity profile.

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 SOLVENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Britannia Industries is currently trading at a TTM PE
multiple of 51.42x.
Strong brand recall with market leadership in the
domestic market, recovery in rural demand, market
share gains from small players is likely to support the
current PE.

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DHD DIVIDEND YIELD

The company has been consistently declaring
dividends year after year.
In FY21 the company declared a dividend of ₹157.5
per share. That is, a payout ratio of 203.5%.

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DHD KEY LEVELS

After a steady up move from ~₹1800 in June 2016 to
₹3400 in August 2018, the stock consolidated for a
couple of years between ₹2400 -₹3400.
In June 2020, it breached this range on the upside
and moved higher to test ₹4000 in July 2020. Post
which the stock has been broadly consolidating in the
range of ₹3050-₹4100.
The zone of ₹2700-₹3000 can be used by the long
term investors for accumulation, while on the upside
the stock may see a move towards ₹4600.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
The management is focusing on the following
strategies to continue to strengthen its brand:
(I) Localized strategies to meet the needs of
different markets and gain market share of local
and unorganized players.
(II) Continuous product differentiation through
renovation, new launches and re-launches.

(I) Focus on increasing direct distribution and

improving its rural footprint.

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SHAREHOLDING
DHD PATTERN
The promoter shareholding has been more or less in
the same range for the last nine quarters.
FII have marginally decreased their stake from
17.65% in Q2 FY22 to 17.59% in Q3 FY22.
DII stake continues to remain the same for the last
two quarters at 11.53%.

Top Public Shareholding:-

Life Insurance Corporation of India 4.03%

SBI Arbitrage Opportunities Fund 1.65%
GIC of India 1.35%
ICICI Prudential Bharat Consumption Fund 1.21%
Touchstone Strategic Trust 1.00%

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DHD SECTOR POTENTIAL

• The growing demand for quick food and popularity of convenience foods and the increasing drive for hygiene is further aiding the
growth of the Indian ready to eat and convenience food market.
• Most players are constantly focusing on launching new and improved products into the market to avoid food fatigue. Additionally,
innovation in products offerings, sustainable packaging, aggressive marketing and promotional strategies would contribute to the
growth in the segment.
• Urban markets are expected to benefit from increase in mobility and a weak base relative to the rural markets. However, in the
long run, increase in disposable income and low penetration in rural markets levels provide headroom for growth.
• Going forward, channel mix will shift in favour of e-commerce.
• Recently, the GOI has approved the production-linked incentive (PLI) scheme for the food processing sector, entailing an outlay of
₹10,900 cr.
• In the ready to eat segment, the quality of the product is a bigger challenge, as while there are many brands, very few of them are
actually able to match up to the customer expectations.
• Commodity-prices linked inflation is leading to an increase in the raw material that may impact the margin profile of the
companies.
• Government directive to ban single-use plastic from 1st July, 2022, may lead to a rise in packaging costs.

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COMPETITIVE
DHD LANDSCAPE
Presently, Britannia Industries is one of the leading
players in the Indian biscuit industry.
It continued to gain market share from its largest and
second largest competitor. However, Parle is still way
stronger in rural areas of many parts of North India
as compared to Britannia.
To strengthen its position as the leading player in the
biscuit industry, Britannia has deepened its rural
distribution, and is particularly targeting North India.
It anticipates to maintain its market leadership
position on the back of strong demand from in-house
consumption, low ticket size of product, strong
growth in adjacencies (like dairy and bakery) along
with focusing on product innovation.

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DHD FUTURE OUTLOOK

• It intends to become a global foods company and has set up strategic business units for adjacent bakery, dairy and international
business, and will be focusing on driving its non-biscuit and innovation portfolio.
• The company is also planning to increase its presence in other weak markets, which include Gujarat, Madhya Pradesh and
Rajasthan. This will help it to garner market share.
• Management expects the rural segment to improve to 35% of total revenue in the next 18 months from the current level
(accounts for 30% of total revenue) on account of higher network expansion.
• Over the next three years, it aims to achieve an equal share of revenue from urban and rural markets.
• As per the management, contribution of e-commerce could potentially reach as high as ~5% for its products.
• The Ranjangaon plant, once fully operational, will contribute a turnover of ₹1,500-₹1,600 cr on the current investment.
• Expansion plans in Africa are progressing as anticipated. Currently, it is focusing on three countries and has already started contract
manufacturing operations in Egypt and Uganda.
• The company will be investing ₹621 cr over the next three years in the PLI (production linked incentive) scheme under the ready to
eat/ ready to cook category.
• As on 31st December 2021, Inter Corporate Deposits (ICDs) to its group companies Bombay Dyeing & Manufacturing Co. Ltd and
The Bombay Burmah Trading Corporation Ltd. stood at ₹580 cr compared to ₹505 cr as on 30th September 2021. The trajectory of
the same remains monitorable.

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 QUALITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
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DHD
Edge Meter Aspects Grade
Growth 3
Profitability 4
Efficiency 3
Solvency 4
Valuation 3
Quality 4
TOTAL 21

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one per cent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
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of public appearance.
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the subject company in the past twelve months.
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banking or brokerage services from the subject company in the past twelve months.
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