23 August 2016
Update | Sector: Consumer
TP: INR3,870 (+15%)
Widening the moat
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap.(INR b)/(USD b)
Avg Val (INR m)
Financial Snapshot (INR b)
2016 2017E 2018E
83.3 94.2 110.7
147.2 192.0 250.4
Shareholding pattern (%)
Jun-16 Mar-16 Jun-15
We organized a visit to the new Britannia (BRIT) plant and the new R&D
center located in Bidadi near Bangalore. Following are the key takeaways
from the visit:
Visit to both the facilities helped us understand better what Mr. Varun
Berry is trying to do in terms of in-house manufacturing, innovation and
cost efficiency. It also enabled us to appreciate the sheer scale of
opportunity available in the Indian food space for efficient and innovative
The comprehensive R&D center at Bidadi enables the company to improve
in areas ranging from new product innovation to faster commercialization
in all existing and new categories, improving manufacturing efficiencies in
line with best global practices, reducing lead time for change in processes,
improving on packing/packaging and thus ensuring both shelf life and
safety, ensuring greater compliance with FSSAI and other regulatory
requirements, and enabling reverse engineering of any product worldwide.
The Bidadi manufacturing facility is currently operational with one biscuit
line; when operational with four biscuit lines in November 2016, it will be
the only such facility of Britannia in India. The emphasis – not just at the
Bidadi plant but also across many of the other new plants – is on scale
benefits, ensuring better quality, safeguarding on hygiene standards and
raising the ability to scale up on innovative products. While in-house
manufacturing will be ~66% of sales by end-FY18 v/s ~54% currently, the
contract manufacturing component will be retained at 2/3rd over the long
term as it enables flexibility and reduces route to market, which is critical
for mass market products that these facilities will be focusing on.
We retain our
rating on the stock.
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
Important highlights from R&D facility, as guided by Mr. Sudhir Nema
(Vice President, R&D)
Mr. Nema is a veteran of foods business R&D. He has been with Britannia
for around two years. Prior to that, he worked for 18 years with Pepsico for
its foods business in India and other countries. He also worked with
Unilever in the foods business.
The R&D facility is just four months old and employs 40 people as of now,
which by the end of the year will be around 62. The facility can house up to
120 R&D employees.
Machine modification for grammage changes can now be done in 2-3 days
through R&D, compared to 35-40 days earlier through external agencies.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
Vishal Punmiya (Vishal.Punmiya@MotilalOswal.com);
+91 22 3980 4261