About the Industry:

India has the second largest arable land of 161 million hectares and has the highest acreageunder irrigation. Next to China, India ranks second largest food producer in the world and has the potential to immerge the biggest with its food and agricultural sector. India accounts for less than 1.5% of international food trade despite being one of the worlds major food producers, which indicates huge potential for both investors and exporters. The total milk production in the country is 127 million tons with per capita availability of 229 gms per day. The industry had been recording an annual growth of 4% during the period 1993-2012, which is almost 3 times the average growth rate of the dairy industry in the world. India produces over 85 mn tons of milk annually. The total milk economy is estimated at Rs 1300 billion in terms of value.

India Worlds second largest Food & Dairy Industry segments: Dairy, Fruits & Vegetable Processing Grain Processing Meat & Poultry Processing Fisheries Packaged foods/drinking water/beverages Industry valued at $135 Million Estimated to reach $200 Million by 2015 GDP Contribution: 7% Highest share of Food Industry is from Dairy Sector

Industry Demand (Past, Present & Future):

Chart Title
500 450 400 350 300 250 200 150 100 50 0

Demand (Million tons)

Year

About the Company:

Britannia is Indias Second largest company in Food & Dairy Industry. Started in 1892 in Calcutta with an investment of Rs.295. It went public in the year 1978 and Indian shareholders percentage crossed 60%. In 1983 it crossed Rs.100 crores revenues. Dairy products constitute 10% of the revenue of Britannia whereas the biscuits constitute the rest of the share. It has succeeded in garnering the trust of almost one-third of India's 1.21 billion population. Currently it has revenues of $825 million and profit of $24 million.

Shareholding Pattern:

1.74 13.95

Foreign Promoters Public

15.88

50.92 17.5

Foreign Institutions Financial Institutions/Banks Other Companies

Some Key Data: Face value 52 week high 52 week low Market capitalization Book value(Net worth /No. of shares) Price to book value PE multiple (trailing twelve months - TTM) Market capita8lization to sales Dividend % Average daily volume Beta() Earnings Per Share Yesterday's market price Dividend yield ROE 8Payout ratio General analysts forecast Rs.2 Rs. 599.9 Rs. 380 Rs.5761.14 Cr Rs.47.26 Rs.11.08 32.02 1.1582 425% 35,797 0.372 15.76 Rs.470.9 1.77 32.02 63.18 13.57%

1 yr govt. of India bond rate(risk free rate) Risk premium of Indian equity market

8.46% 6.52%

Stock Performance of the company:

Britannia-Balance Sheet: Industry :Food And Dairy Products Multinational (Rs in Crs) Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Other Liabilities Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Mar 12 23.89 496.15 0 0 520.04 0.58 27.57 28.15 136.73 684.92 677.36 298.27 0 379.09 0 79.73 Mar 11 23.89 427.41 0 0 451.3 406.89 23.68 430.57 138.67 1,020.54 593.56 289.86 0 303.7 0 11.7 Mar 10 23.89 372.36 0 0 396.25 408.1 21.51 429.61 0 825.86 547.83 266.33 0 281.5 0 9.97 Mar 09 23.89 800.65 0 0 824.54 2.2 22.97 25.17 0 849.71 511.5 233.66 0 277.84 0 6.02 Mar 08 23.89 731.92 0 0 755.81 1.94 104.16 106.1 0 861.91 453.18 212.19 0 240.99 0 9.69 Mar 07 23.89 590.93 0 0 614.82 1.53 3.25 4.78 0 619.6 392.11 193.75 0 198.36 0 16.03

Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Other Assets Total Assets Contingent Liabilities

428.94 545 382.28 52.14 30.94 182.08 647.44 854.46 124.8 979.26 331.82 0 23.68 31.84 -8.16 137.14 684.92 34.4 311.2 57.26 28.75 70.63 467.84 359.06 96.65 455.71 12.13 0 22.87 29.11 -6.24 154.25 1,020.54 110.08

490.64 423.1 268.34 39.49 23.36 207.7 538.89 253.63 49.61 40.8 195.3 539.34

380.83 320.05 301.53 46.32 43.77 160.84 552.46 214.94 28.61 48.65 89.17 381.37

310.89 265.8 247.02 236.72 190.83 147.48 100.65 86.31 501.72 413.28 347.67 323.03 37.17 0 31.18 24.6 6.58 0 825.86 268.75 126.06 26.64 14.31 24.26 -9.95 0 849.71 160.39 204.79 23.23 25.02 22.64 2.38 0 861.91 173.49 58.34 25.58 19.37 18.13 1.24 0 619.6 81.13

Britannia Profit & Loss: (Rs in Crs) Year INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Dec 11(12) 737.83 71.38 666.45 81.78 13.11 761.34 459.84 6.47 47 18.07 62.66 10.43 0 604.47 156.87 2.02 Dec 10(12) 484.38 45.91 438.47 59.5 1.69 499.66 292.67 5.48 37.85 13.42 41.97 8.3 0 399.69 99.97 2.57 Dec 09(12) 407.99 32.9 375.09 33.26 2.55 410.9 238.54 5.03 31.1 12.05 54.72 12.31 0 353.75 57.15 0.42 Dec 08(9) 771.78 81.18 690.6 68.44 -15.58 743.46 504.57 5.48 47.68 15.47 89.7 26.93 0.12 689.71 53.75 3.59 Mar 08(12) 2,512.41 314.36 2,198.05 40.14 42.11 2,280.30 1,656.05 15.88 126.74 37.4 258.06 40.08 0.36 2,133.85 146.45 17.77

Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr Britannia Cash Flow Statement: Dec11 Cash Flow Summary Cash and Cash Equivalents at Beginning of the year 11.1 84.3 Net Cash from Operating Activities 4 56.7 Net Cash Used in Investing Activities 9 29.9 Net Cash Used in Financing Activities 1 Dec10 Dec09 471.8 8 21.96 268.1 4 154.85 13.02 141.83 15.59 0 1.69 124.55 23.94 100.61 0 313.11 0 56.04 381.62 43.19 0 160 46 200.09 97.4 10.79 86.61 10.5 0 0.67 75.44 15 60.44 0 275.24 0 37.57 313.11 29.63 0 110 27.85 169.51 56.73 10.1 46.63 9.72 0.04 -0.66 37.53 -9.2 46.73 -95.23 356.5 0 23.56 275.24 18.69 0 70 28.96 306.85 50.16 15.2 34.96 32.99 0.43 -37.46 39 1.84 37.16 0 337.84 0 20.34 356.5 14.05 0 50 17.38 171.2 128.68 43.07 85.61 20.3 1.85 0.41 63.05 -0.18 63.23 0 297.54 0 22.75 337.84 14.05 0 50 21.59 163.16

Dec-08 17.8500003 8 33.7999992 4

Mar-08 47.7299995 4 83.4100036 6 67.4700012 2 14.6899995 8

114 43.75 138.3 8

Net Inc/(Dec) in Cash and Cash Equivalent Cash and Cash Equivalents at End of the year

-2.36 8.74

470.119995 1 49.8899993 -8.27 -111.7 9 357.8 454.029998 -102.9 8 8 471.880004 11.1 114 9

1.25 48.9799995 4

Valuation of Stock: CAPM Model:

ri = rf + (rm-rf) rf = 8.46 rm-rf = 6.5 = 0.37 ri =10.865 %

Zero Growth Model:

Value of the Stock: Vs = D/r where D = Dividend per share & r = Hurdle rate or Reqd rate Vs = 8.5/10.865 Vs = 0.7823

Gordon Model:
Value of the Stock: Vs = (D1/(r g)) = (D0(1+g))/(r-g) Calculation of Growth Rate, g: 1. Growth rate by Analyst, gA = 13.57% 2. Gdy = ri - (Dividend Yield) Gdy = 10.865 1.77 Gdy = 9.095% 3. g = ROE * b where b = Retention ratio b = (1-Payout ratio) g = 13.57*0.368 g = 4.99376%

D0 = 8.5 D1 = 8.5(1.1187) = 100.895 r-g = 10.865 11.87 = -1.005 Vs = 100.895/(-1.005) = - 100.393 Implied Growth Rate: r = (D1/P) + g where P -> Market price g = Analyst growth rate or can be historical growth rate g = 13.57% D1/P dividend yield Ri = 10.865, D1/P = 1.77 g = 10.865 1.77 g = 9.095% P = D0 (1+g)/(r-g) where Numerator g = historical growth 480.7= 8.5(1.3077)/0.10865-g g = 8.56%

CASH FLOW MODEL:

1. Historical CF growth rate 2. Sales growth rate as proxy 3. Analyst forecast of future sales P0 = FCF0 (1+g) / (r-g) Where FCF0 Free Cash flow for the current year Free Cash Flow = Net Income + Depreciation and Amortization Capital Expenditure + Net Debt Financing

Depreciation & Amortization = 47.32 Cr

Capital Expenditure = 191.20 Cr Net Income = 252.37 Cr Net Debt Financing = 437.07 FCF = 545.56 Crores P0 = 545.56 (1.1187)/1.005 P0 = Rs. 607.2815 Crores

Market Multiples Method:

E = P/(P/E) (company) P = E * (P/E) (Industry) P = E * (P/E) (Industry) (analyst forecast) P = E * (P/E) (Company) (analyst forecast) 15.01249219 549.4575 559.2819 544.2609

Sensitivity Analysis:
Market Price = EPS * (P/E)
EPS/(P/E) 32.02 15.03 481.2606 11.1 355.422 10.9 349.018 9.8 313.796 25.6 384.768 284.16 279.04 250.88 27.3 410.319 303.03 297.57 267.54 17.8 267.534 197.58 194.02 174.44

Analysis of the Company: Opportunities:

The Food and Dairy sector is booming owing to the increasing demand for the milk and milk products. The nutritional benefits offered in the products plays a significant role for the demand and the industry is buoyant. There is significant scope for growth of the company and the company can cash in on the opportunities lying ahead. The company offers a variety of products and the products width and depth can create a significant growth for the company in the future. The company is known for introducing innovative products like Nutrichoice, Snackits in order to gratify the need across the generations. Threats: The company has the first mover advantage in providing nutritional products addressing to diabetes etc but the competitors have started to imitate that and they are launching new products addressing similar needs.

Logistics is increasingly becoming a problem due to the volume of goods supplied. Bad road conditions, increase in fuel costs are making a significant impact in the costs that are incurred. Valuation: The company is expected to grow at a substantial pace and is expected to net