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Business Research Methods

Individual Project- Britannia Industries Limited


Yashaswi Bhatnagar
Roll no. 257

Basic Information

Established: 1892
Ownership: Associated Biscuits International Limited (ABIL) holds 53,904,500 shares out
of a total of 119,925,815, which is 44.95%. Further in ABIL, Wadia Group of India and
Group Danone of France are equal shareholders. Apart from this, Mr Neville Wadia
individually owns 2,250 shares.
There is also a public shareholding of 49.25%. Life Insurance Corporation of India (2.03%),
General Insurance Corporation of India (1.08%) and Arisaig India Fund Limited (8.9%) are
major public shareholders.

Managing Director: Mr. Varun Berry


Head Office: Kolkatta, West Bengal
Factories: Kolkatta (West Bengal), Delhi, Chennai (Tamil Nadu), Mumbai (Maharashtra),
Udham Singh Nagar Di (Uttaranchal), Jhagadia (Gujarat), Khurda (Orissa)

Other Offices: Executive Office- Bangalore, Karnataka


Bankers: Bank of America, Citibank NA., Hongkong & Shanghai Banking Corporation
Ltd., Indian Bank, Royal Bank of Scotland, Standard Chartered Bank, State Bank of India,
HDFC Bank Ltd., Bank of Tokyo Mitsubishi Ltd.

Auditors: BSR & Co.

Business Divisions: Dairy sector, Biscuits sector, Bread Cake and Rusk sector
Product Line: Glucose biscuits, Cream biscuits, Nutri Choice biscuits, Marie biscuits, Milk
biscuits, Good day biscuits, 50-50 biscuits, Little Hearts, Britannia bread, Britannia Cheese,
butter and ghee products, Britannia Milk products

Table 1: Financial Information of Britannia Industries Ltd


Financial Information (in crores unless specified)

Revenue

2013-

2012-

2011-

2010-

2009

2008-

2007-

2006-

2005

2004

14

13

12

11

-10

09

08

07

-06

-05

6,307.3
9

Domestic

6,195.4

Revenue

Export

111.92

5,615. 4,974.1 4,250.1 3,427. 3,142.8 2,617.6 2,317.1 1,817. 1,615.


49

97

92

45

5,528. 4,909.5 4,202.7 3,391. 3,104.2 2,606.4 2,302.5 1,806. 1,608.


26

87.23

64.69

47.42

233.87

186.74

145.29

46
36.51

38.61

11.20

14.52

180.40

191.00

107.65

75

29

11.17

7.16

146.4

148.7

331.5

254.8

226.8

194.8

9.36

6.14

318.2

320.3

1800

1800

Revenue
Profits

369.83

Fixed
Assets
Current

116.5
1
499.9

371.75

360.08

82.83

487.02

486.33

473.09

465.36

395.72

4.62

194.47

28.15

431.44

660.98

576.90

882.53

406.63

2400

2200

2000

2000

Assets

2
325.9
4

505.91

470.51

327.52

343.80

391.40

292.08

25.17

106.10

4.78

437.54

370.31

323.03

2000

2000

2000

Long
Term

429.6
1

Debt
Short
Term

345.0
8

Debt
Manpower no.

2000

Sensex
Closing

1348.3
5

Value

920.4

499.25

448.15

53.24

43.54

37.78

410

1680.6

1324.9

1475.3

345.14

316.37

257.35

1091.

1352.

75

229.8

185.6

(/ share)
Book
Value of

71.17

165.8
6

Share ()
Market

16170.

Cap

11001. 596359 535319

401495 316518 352449 26083 32317

22

17

.1

.7

97949

.3

.6

.2

10

10

10

10

10

10

Face
Value ()

Business Growth: Between 1998 and 2001, the company's sales grew at a compound
annual rate of 16% against the market, and operating profits reached 18%. More recently, the
company has been growing at 27% a year, compared to the industry's growth rate of 20%. At
present, 90% of Britannias annual revenue of 22 billion comes from biscuits.
Table 2: Exports and Forex Earnings of Britannia Industries Ltd
Exports and Foreign Exchange Earnings(in crores)
2013-

2012-

2011-

2010-

2009-

2008-

2007-

2006-

2005-

2004-

14

13

12

11

10

09

08

07

06

05

Exports

111.92

87.23

64.69

47.42

36.51

38.61

11.20

14.52

11.17

7.16

Forex

125.09

96.44

70.89

51.54

40.85

69.16

11.55

14.61

11.27

7.36

Mergers and Acquisitions: Britannia exited a loss making dairy JV with New Zealands
Fonterra. Apart from this, it acquired a majority stake in Balaji Wafers, along with Pepsico
and Mondelez. Also, Danone agreed to sell its 25.48% stake in Britannia to Leila Lands,
which is a Wadia group entity based in Mauritius. The deal was valued at $175200 m. With
this buy-out, Wadia holds a majority stake of 50.96%.

Achievements

On the 17th January 2013, Britannia Industries Ltd, Kolkata was selected the winner of
the GOLDEN PEACOCK NATIONAL QUALITY AWARD for the year 2012.

The Modern Trade team of Britannia was honoured with Winner-BEST BAKERY
SUPPLIER award for the year 2011-12, at the 1st SPENCER'S Best Supplier
Awards2012 on 22nd June.

Britannia received the Most Respected Company Award 2011 from Business world.

Research and Development-Britannia looks to:

Creation of a range of differentiated products.

Continuous interaction and partnership with institutions and subject-matter experts to


derive improvements in ingredients, nutrition, packaging and process technology.

Britannia spends 0.16% of its sales turnover on Research and Development.

Market Share: Britanniaa market share fell from 48% in 2004 to 36% in 2013. Analysts
feel that it is because of its poor rural penetration and even Varun Berry, company MD, has
now announced plans to increase the same.

CSR Initiatives: The Britannia Nutrition Foundation is an autonomous, non-profit entity


that works towards the control and prevention of malnutrition leveraging the strengths of
Britannias wide stakeholder network. The Navjyoti project was launched to fight iron
malnutrition through the supplementation of biscuits with iron. These biscuits are distributed
to many mid-day meal schemes in Andhra Pradesh that reach underprivileged children. This
program has been recognized by GAIN.

Analysis and Forecasting of Stock Prices of Britannia Industries Ltd

Figure 1: Pictorial Representation of forecasted stock prices of Britannia (using unadjusted data)

As can be seen in the figure, Britannia Industries Limited wen for a stock split on September
8, 2010. Owing the same, the companys stock prices dipped from Rs 2049.5 in September
2010 to 4359 in October 2010. This change was also reflecting in the forecasted prices and
was leading to an erroneous result because stock split is not a frequent phenomenon and
cannot be predicted.
To correct the same, stock prices before October 2010 have been divided by five. This has
given a more uniform and reliable data for analysis. The stock prices on and after October
2014 are unedited.
Presented hereafter is analysis on the new edited data.

Table 5: Multiplicative Model of Seasonal Decomposition


Model Description
Model Name

MOD_2

Model Type

Multiplicative

Series Name

Close Price

Length of Seasonal Period

12

Computing Method of Moving

Span equal to the

Averages

periodicity and all points


weighted equally

Applying the model specifications from MOD_2

In this Table 5, we have used Multiplicative Model of Seasonal Decomposition. Under this
model, four variables get added. These are Error term, Seasonally Adjusted Series (SAS),
Seasonal Adjustment Factor (SAF) and Seasonal Trend Cycle (STC). Here actual prices
multiplied with SAF gives SAS. Also, error term will be calculated by dividing SAS with
actual prices.

Table 6: Seasonal Factors


Seasonal Factors
Series Name: Close
Price
Seasonal
Period

Factor (%)

100.9

93.8

95.9

92.3

92.4

102.3

104.0

107.5

104.4

10

102.2

11

103.1

12

101.1

This table shows that for the 5 years under the study, seasonal factors for the 12
months remain the same. For example: seasonal factor for January 2012 is the same as
that for January 2013, i.e. 100.9%.

Seasonal factor for January 2013 is 100.9%. The stock price for January 2013 is Rs
501.1. Hence the Seasonal Adjusted Factor for January 2013 will be 501.1*1.009, i.e.
505.61. In a similar manner, SAS can be calculated for all the twelve months in the
five year period.

Figure 2: Box Plot showing stock prices of Britannia Industries Ltd from the year 2009 to
year 2014

In Figure 2, we observe that:

The prices for Britannia have been in the range of Rs 263 to Rs 1397.

The prices have been consistently growing during this period. The lowest, median and
the largest value of each year have been higher than the previous year, respectively.

The price in 2014 specially have seen a sharp rise, with the median being around Rs
901, the lowest Rs 842 and the highest value reaching Rs 1396.8.

A high difference between the median and lowest value also indicates that most
values below median lie near it, while values above median are more scattered, hence
would pull the mean up, making it less reliable.

A median of Rs 901 also means that 50% of the stock prices have been above this
value and 50% of the prices below this level. The box also shows the first and third
quartiles, which are the 25th and 75th percentiles of the data respectively.

Table 3: Model Fit obtained from Expert Modeler in estimating the trend in Stock Prices of
Britannia

Model Fit
Percentile

Minim Maxi
Fit Statistic
Stationary Rsquared
R-squared

Mean

SE

um

mum

10

25

50

75

90

95

.000

.000

.000

.000

.000

.000

.000

.000

.000

.000

.970

.970

.970

.970

.970

.970

.970

.970

.970

.970

RMSE

43.154

MAPE

6.042

. 43.154 43.154 43.154 43.154 43.154 43.154 43.154 43.154 43.154


.

6.042

6.042

6.042

6.042

6.042

6.042

6.042

6.042

6.042

MaxAPE

19.753

. 19.753 19.753 19.753 19.753 19.753 19.753 19.753 19.753 19.753

MAE

32.624

. 32.624 32.624 32.624 32.624 32.624 32.624 32.624 32.624 32.624

MaxAE

112.37
6

Normalized
BIC

7.591

112.37 112.37 112.37 112.37 112.37 112.37 112.37 112.37 112.37


6

7.591

7.591

7.591

7.591

7.591

7.591

7.591

7.591

7.591

In Table 3, we observe that:

R-squared value is .970. R-square explains the fraction of variance explained by the
model. The higher the value, better the fit of the model. The value here shows that the
model for future forecasting explains 97% of the variations in the observed share
prices.

MAPE (Mean Absolute Percentage Error) is calculated using:

MAPE= (Observed Value- Predicted Value)/ Predicted Value. When MAPE is low, the
model will be more accurate. The value for our model is 6.04%.

MaxAPE is Maximum Absolute Percentage Error which shows the maximum value
that may have occurred in the forecast model. MaxAPE for this model is 19.75%.

Table 4: Forecasted Closing Stock Prices of Britannia Industries Ltd.


Forecast

In, Table 4, forecast is done from month of November 2014 to December 2017. We observe
that the prices of Britannia Industries Ltd are forecasted to grow at a faster pace than they are
doing presently. UCL depicts the upper limit of the confidence level and LCL depicts its
lower limit. The confidence level udes here is 95%. For example, for April 2015, predicted
price is Rs 1684.8, and it will fluctuate in the range of Rs 1129.0 to Rs 2307.7

Figure 3: Pictorial Representation of forecasted stock prices of Britannia

In Figure 3, we observe that prices rise at an increasing rate starting from November 2014 till
December 2017. The darker line represents the forecasted stock price while the light line
represents the actual stock prices measured from January 2009 to October 2014.

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