FSA Report of Britannia Industries Ltd.

for Financial
Year 2012-2013, 2013-14 and 2014-15
END TERM PROJECT REPORT
Submitted to - Dr.Pawan Jain

Name of the Student

1. Kunal Desai
2. Sagar Arora

Roll No. Section D

2015211
2015236
Britannia Industries Ltd

Britannia Industries Ltd is an India-based food company. The Company was born in 21st
March of the year 1918 as a public limited company in Kolkata which initially used to
manufacture biscuit in a small house. But now it has plants in Kolkata, Delhi, Chennai,
Mumbai and Uttarakhand and is recognized as one of the most trusted, valuable and popular
brands among Indian consumers in various reputed surveys. Over the last century and a
quarter, Britannia has been serving the Indian consumer with a range of fresh, nutritious and
flavour-rich products. Company offers a range of bakery products and dairy products, its
product range includes Britannia Cheese Slices, Britannia Tiger, Britannia NutriChoice Oat
Cookies, Britannia NutriChoice Ragi Cookies, Veg Cakes, Nutrichoice Health Starter Kit,
NutriChoice 5 Grain, NutriChoice SugarOut, NutriChoice Digestive Biscuit, Treat Fruit
Rollz, and many more.
Biscuits manufacturing is the main divisions of the company, the company's factories have an
annual capacity of 433,000 tonnes. The brand names of biscuits include VitaMarieGold,
Tiger, Nutrichoice Junior, Good day, 50 50, Treat, Pure Magic, Milk Bikis, Good Morning,
Bourbon, Thin Arrowroot, Nice, Little Hearts among others.
Tiger, the mass market brand, realised $150.75 million in sales including exports to countries
including the U.S. and Australia, or 20% of Britannia revenues in 2006.
Today, Britannia is a leading food company in India with over Rs. 6000 Crores in revenues,
delivering products in over 5 categories through 3.5 million retail outlets to more than half
the Indian population. Britannia is also listed in one of India's 100 Most Trusted brands
in The Brand Trust Report and currently having an estimated market share of 38%.

Section 2:
1

 Objective-To carry out the Financial Statement Analysis Britannia Industries

Ltd.
Period of study-2012-13, 2013-14, 2014-15.
Mode of Research-Secondary Data
Ratio analysis as a tool to analyze Financial statements
Ratio analysis is used to evaluate various aspects of a companys operating and
financial performance such as its efficiency, liquidity, profitability and solvency. Here
we are using different ratios to understand various financial results and trends of
Britannia Industries over time and analyze companys performance
List of Ratios used1) Net Profit ratio=Profit after tax*100/Total revenue
2) Percentage change in Profit after tax with that of Net operating Revenue
3) Percentage of Operating profit with that of Net Operating Revenue
4) Debt Equity=Total Non-current liability/shareholders Funds
5) Current ratio=Current assets/Current liability
6) Percentage of total assets with that of Non-current liabilities
7) Trade receivable turnover ratio=Net credit sales/Average accounts receivables
8) Inventory turnover ratio=(Cost of material consumed+ purchase of stock in trade+
change in inventory Manufacturing expenses)/closing stock
9) Cash realization=cash generated by operations/PAT
10) Earnings per share = Profit after tax / Number of Equity Shares/issued

Section 3:

 Revenue Generating Activities (Main Business) of the company

The primary business segment of your Companyis Foods comprising (i) Bakery products
- Biscuit,Bread, Cake and Rusk, and (ii) Dairy products Milk, Butter, Cheese, Ghee,
Dahi, Milk-based ready
to drink beverages and Dairy Whitener. Sale of Products in the domestic market for
bakeryproducts and exports from India representing the standalone performance of
Companys growth of 14.5% from 6,347.85 crores in 2013-14 to 7,269.26 crores in
2014-15 and at present, 90% of Britannias annual revenue of Rs22 billion comes from
biscuits alone.
Areas which are being covered by the Company in its Accounting Policies
There are various areas which are being covered by the company in its Accounting
Policies: (a) Basis of preparation of consolidated financial statements, (b) Subsidiaries and
associate companies considered in the consolidated financial statements, (c) Principles of
consolidation, (d) Basis of accounting and preparation of financial statements, (e) Use of
estimates, (f) Fixed assets, (g) Depreciation and amortisation , (h) Impairment of assets (i)
Leases Assets, (j) Inventories, (k) Trade receivables and loans and advances, (l) Investments,
(m) Revenue recognition, (n) Foreign currency transactions, (o) Derivative contracts, (p)
Taxes on income, (q) Employee benefits, (r) Borrowing costs, (s) Employee share based
payments, (t) Provisions and contingent liabilities, (u) Earnings per share, (v) Cash flow
statement, (w) Capital subsidy, (x) Government grants related to revenue.

Specify the Accounting Policy being followed for:

Depreciation

Depreciation in respect of all the assets is provided on straight line method over the useful
lives of assets estimated by the Company. Depreciation for assets purchased / sold during the
period is proportionately charged. Intangible assets are amortised over their respective
individual estimated useful lives on a straight line basis, commencing from the date the asset
is available to the Company for its use. The Company estimates the useful life of fixed assets
as follows:
Plant and equipment (7.5 - 15 years), Furniture and fixtures (10 years), Motor vehicles (8
years), Computer software (6 years), Office equipment (3-5 years), Building (60 years),
Leasehold land (Lease period), Moulders, cutters and spare parts (1 year).
Inventory valuation
Inventoriesare valued at the lower of cost (including prime cost, excise duty and other
overheads incurred in bringing the inventories to their present location and condition) and
estimated net realisable value, after providing for obsolescence, where appropriate. Raw
3

materials, packing materials and other supplies held for use in production of inventories are
not written-down below cost except in cases where material prices have declined, and it is
estimated that the cost of the finished products will exceed their net realisable value. Workin-progress is valued at input material cost plus conversion cost as applicable. Finished goods
are valued at lower of net realisable value and prime cost, excise duty and other overheads
incurred in bringing the inventories to their present location and condition.
Basis for Preparation of Accounts
The financial statements are prepared under the historical cost convention, on the accrual
basis of accounting to comply in all material aspects with the applicable accounting
principles in India, the mandatory Accounting Standards (AS) prescribed by the Companies
(Accounting Standard) Rules, 2006, the relevant provisions of the Companies Act, 1956 (the
Act) and the guidelines issued by the Securities and Exchange Board of India (SEBI).

Cash Flow Activities

Cash flows

2012-13 (in crores)

2013-14 (in crores)

2014-15 (in crores)

Cash flow generated

from operating activity
Cash flow generated
from investing activity
Cash flow generated
from financing activity
Cash and cash
equivalents at the
beginning of the year
Net cash increase/
(decrease)
Cash at the end of the
year

351.45

796.45

809.72

53.89

(227.34)

(384.29)

(359.11)

(325.46)

(168.11)

26.19

(7.02)

54.69

(33.21)

61.71

(37.07)

(7.02)

54.69

17.62

Cash flows of Britannia Industries pvt. ltd. (in crores)

1000
800
600
400
200
0
-200

operating activity

investing activity

financing activity

-400
-600
2012-13

2013-14

2014-15

Cash at the beginnin and the end of the year

60
50
40
30
20
10
0
-10
-20

2012-13

2013-14

cash at beginning

2014-15

cash at the end

Cash flows of Britannia Industries Pvt. Ltd. Can be easily analysed from the graphs.
Company has maintained highest cash balance in the year 2013-14 and negative cash balance
(credit/loan) in 2012-13. This is due to fact that cash inflow from operating activity in 201213 is the lowest and cash outflow from financing activity in the same year is the highest
(repayment of loan is highest i.e. 400.58 crores), although cash inflow from investing activity
is the highest. Though cash flow from operating activity in the year 2014-15 is the highest,
but cash at the end is highest in the year 2013-14 because comparatively there is less outflow
of cash in investing activity from 2014-15. Cash inflow from investing activity is only in
2013-14, this is a positive growth factor for the company i.e. it is generating all its revenue
from operating activity.
From comparing cash flow statements of three consecutive years it can be concluded that
company is growing with stable grounds, it is generating all of its revenue from the operating
activity. Stakeholders/Shareholders are getting benefit by greater dividends/profits.

 Section-4

Particulars

2012-2013

2013-2014

2014-2015

Profit After Tax

Net Operating
Revenue
Total Revenue
Operating Profit
Total Non-Current
Liabilities
Share-holders fund
Total Current
Assets
Total Current
Liabilities
Total Non-Current
fixed Tangible
Assets
Total Assets
Total Liabilities
Cost of goods sold
(COGS)
Inventories
Net credit sales
Average account
receivables
Number of Equity
shares

233.87
272.01

369.8
614.51

622.41
515.33

5,670.96
351.45
171.77

6,946.30
796.38
28.27

7,946.38
809.72
20.35

636.41
715.38

853.46
860.06

1,235.62
1,429.31

867.74

958.43

1,202.45

437.76

529.81

513.24

1,683.03
1,683.03
5100.46

1,844.44
1,844.44
5538.32

2,461.99
2,461.99
6227.7

331.49
5564.38
(77.12+52.14)/2=
64.63
250,000,000

366.86
6,232.09
(77.12+53.69)/2=65.4
0
250,000,000

345.74
7,100.46
(70.98+53.69)/2=62.3
3
250,000,000

a) Percentage of profit after Tax with that of Net Operating Revenue and Total
Revenue
Net profit ratio reveals the remaining profit after all costs of production, administration, and
financing have been deducted from sales, and income taxes recognized. It is one of the best
measures of the overall results of a firm, especially when combined with an evaluation of
how well it is using its working capital.

Years

Profit after tax/Net

operating revenue*100

Profit after tax/total

revenue*100
6

2012-13
2013-14
2014-15

95.40
60.17
120.77

4.75
5.32
7.83

Analysis:
Here the Net Profit ratio is continuously increasing which indicates that the organization
management is efficiently managing its business affairs.

Profit after tax/Net operating revenue*100 Profit after tax/total revenue*100

9

140

120

100

80

60

40

20

0
2012-13

1
2013-14

2014-15

Profit after tax/Net operating

revenue*100

0
2012-13

2013-14

2014-15

Profit after tax/total revenue*100

b) Percentage of Operating Profit with that of Net Operating Revenue

This is a profitability ratio that measures what percentage of total revenues is made up by
operating income; it indicates the profit available after deducting manufacturing and
operating expense. In short it indicates the cushion available for paying interests and
taxes.

Years
2012-13
2013-14

Operating profit ratio =

Operating profit/Net
operating revenue*100
129.20
129.59
7

2014-15

157.12

Analysis:
Hera in case of Britannia Industries the operating profit ratio is increasing which shows that
the company is making enough money from its ongoing operations to pay for its variable
costs as well as its fixed costs.

Operating profit/Net operating revenue*100

180
160
140
120
100
80
60
40
20
0
2012-13

2013-14

2014-15

Operating profit/Net operating revenue*100

c) Percentage of Total Non-Current Liabilities with that of Shareholders fund

The D/E ratio indicates how much debt a company is using to finance its assets relative to
the amount of value represented in shareholders equity. It also shows how much
percentage of company financing that comes from creditors and investors.

Years
2012-13
2013-14
2014-15

Debt Equity ratio = Total non-current

liabilities/shareholders fund*100
26.99
13.24
1.64

Analysis:

Here the D/E ratios are falling down each year which means in year 2014-15 Britannia
Industries have more financially stable business as compare to 2012-13 where the ratio was
high which indicates company was investing on large amounts on debts.

Total non-current liabilities/shareholders fund*100

30
25
20
15
10
5
0
2012-13

2013-14

2014-15

Total non-current liabilities/shareholders fund*100

d) Percentage of Total Current Assets with that of Total Current Liabilities.

It is the relative proportion of an entity's current assets to its current liabilities, and is
intended to show the ability of a business to pay for its current liabilities with its current
assets.

Years
2012-13
2013-14
2014-15

Working Capital Ratio or Current Ratio = Total

Current Assets/Total Current Liabilities*100
82.44
89.73
118.86

Total Current Assets/Total Current Liabilities*100

140
120
100
80
60
40
20
0
2012-13

2013-14

2014-15

Total Current Assets/Total Current Liabilities*100

Analysis:
This is a Current ratio that comes under Liquidity Ratio. Current Assets is directly
proportional to the Current Ratio as interpreted generally. Current Assets in 2012-13
gradually increases to 2013-14 then to 2014-15. Also, the value of Current Liabilities in
2012-13 decreases every year. So the ratio increase here show the good sign for company

e) Percentage of Total Non-Current Fixed Tangible Assets with that of Non-Current

Liabilities

Years
2012-13
2013-14
2014-15

Total Non-Current Fixed Tangible

Assets/Non-Current Liabilities*100
254.85
1874.10
2522.06

Total Non-Current Fixed Tangible Assets/Non-Current Liabilities*100

3000
2500
2000
1500
1000
500
0
2012-13

2013-14

2014-15

Total Non-Current Fixed Tangible Assets/Non-Current Liabilities*100

Analysis:
In this scenario, The non-current Fixed tangible assets increases from 2012-13 to 2013-14
and then from 2013-14 to 2014-15 which holds direct relation with the overall ratio. The
company must try new ways to increase tangible assets to perform continually.
f) percentage of Total Assets with that of Non-Current Liabilities

Years
2012-13

Total Assets/Non-Current Liabilities*100

979.81
10

2013-14
2014-15

6524.372
12098.23

Total Assets/Non-Current Liabilities*100

14000
12000
10000
8000
6000
4000
2000
0
2012-13

2013-14

2014-15

Total Assets/Non-Current Liabilities*100

Analysis:
The ratio is gradually decreasing from 2012-13 to 2013-14 and then from 2013-14 to 201415. The reason behind this can be interpreted like, the non-current liabilities is decreasing in a
much steeper way than increase the rate of increase in Total assets. Thus this numbers are not
a good sign for the investors, shareholders and ultimately for the company
g) Trade receivable turnover ratio=Net credit sales/Average accounts receivables

Its accounting measure used to quantify a firm's effectiveness in extending credit and in
collecting debts on that credit. The ratio is an activity ratio measuring how efficiently a
firm uses its assets.
Years

Net Credit sale

2012-2013

5564.38

2013-14

6,232.09

2014-15

7,100.46

Average accounts
receivables =
=(opening +closing of
trade receivables) / 2
(77.12+52.14)/2=
64.63
(77.12+53.69)/2=65.4
0
(70.98+53.69)/2=62.3
3

Trade Receivables
Turnover Ratio

86.09
95.25
113.90

Inventory Turnover Ratio

This ratio indicates the velocity with which Inventory moves or how quickly a company
is able to convert its inventory into cash or cash equivalents.
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Years
2012-13
2013-14
2014-15

Cost of goods sold/inventory

15.38
15.09
18.01

Cost of goods sold/inventory*100

25
20
15
10
5
0
2012-13

2013-14

2014-15

Cost of goods sold/inventory*100

Analysis:
In order to prevent the inventory pile-up, Britannia is lowering wholesale shipments & in turn
maintaining revenues. It explains the movement of inventories in relation to sales. This shows
the company does not overspend by buying too much inventory and that the company can
effectively sell the inventory it buys. The inventory turnover ratio has increased from 8.02 to
8.23 meaning that there have either been strong sales or ineffective buying. High inventory
levels may put the company in trouble if prices begin to fall.
h) Percentage of Cash Flow from Operating Activities with that of Profit after Tax
- This ratio indicates how much %age of PAT is being realized in cash.
Years
2012-13
2013-14
2014-15

Cash Realization = Cash Flow from

Operating Activities/Profit after Tax*100
150.27
215.35
130.09

Analysis:
The cash ratio increased in 2013-14 comparing to 2012-13 but drop drastically in 2014-15
which means that that Britannia is suffering from heavy losses in the FY 2014-15. As we
can observe that EPS is gradually decreasing for next year with respect to the
current year. In this case, total expenses for each year is dependant of the total
sales/net sales. We have to find the proportions of (total expenses/total sales).
For 2012-13, the proportion is 0.85, for 2013-14, the proportion is 0.87 and for
2014-15 it is 0.89. As we can now easily identify the reason for change in the
EPS. The proportionality goes inversely with the earnings per share. In this case,
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as the proportion iss gradually increasing in forward direction, so the EPS iss
gradually is decreasing in same proportion in the forward direction.

Cash Flow from Operating Activities/Profit after Tax*100

250
200
150
100
50
0
2012-13

2013-14

2014-15

Cash Flow from Operating Activities/Profit after Tax*100

i) Earnings Per Share

This ratio indicates the amount of profit available for the equity shareholders after paying off
all the expenses. In short it is the ratio that serves as an indicator of the company's
profitability.
Years
2012-13
2013-14
2014-15

Profit after tax/No. of equity shares

issued*100
19.57
30.84
51.90

Analysis:: As we can observe that EPS is gradually increasing for next year with respect to
the current year. In this case, total expenses for each year are dependant of the total sales/net
sales. We have to find the proportions of (total expenses/total sales). For 2012-13, the
proportion is 0.93, for 2013-14, the proportion is 0.90 and for 2014-15 it is 0.89. As we can
now easily identify the reason for change in the EPS. The proportionality goes inversely with
the earnings per share. In this case, as the proportion is gradually decreasing in forward
direction, so the EPS is gradually is decreasing in same proportion in the forward direction.

13

Profit after tax/No. of equity shares issued*100

2500
2000
1500
1000
500
0
2012-13

2013-14

2014-15

Profit after tax/No. of equity shares issued*100

j) Share price movement chart of the company during last three years starting
backward from August 01, 2015

Dividend
Period Dividend % Equity Rs 00
2012 April-March 425.00 1194508
2013 April-March 425.00 1195258
2014 April-March 600.001199258
2015 April-March 800.00 1199258

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Bibliography
1) http://in.reuters.com/finance/stocks/companyProfile?symbol=BRIT.BO
2) http://www.efinancemanagement.com/financial-analysis/analysis-of-financialstatements-using-financial-ratios
3) Britannia Annual Report of 2012-2013, 2013-2014, 2014-2015
4) http://www.nseindia.com/corporates/corporateHome.html?
id=shldinfo_annual_reports&radio_btn=company&param=BRITANNIA
5) http://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.j
sp?symbol=BRITANNIA&illiquid=0&smeFlag=0&itpFlag=0
6) http://www.moneycontrol.com/stock-charts/britanniaindustries/charts/BI#BI
7) http://www.myaccountingcourse.com/financial-ratios/
8) http://www.investopedia.com

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