Will Britannia results spark a revival for its shares?

The 16% rise in Britannia shares on May 27 after a strong Q4 performance seems to be an instance of the stock playing catch-up after a lacklustre run on the bourses so far this year. The stock has underperformed the BSE FMCG index, gaining by 28% compared with the index’s 67% gallop. Britannia’s 13.5% growth was largely driven by higher prices than volumes.


A little improvement in product mix, launch of some premium products and pricing power seem to have been the catalysts for the performance. Some FMCG companies have increased prices to cover higher raw material costs. With Britannia, the surprising part is that it has managed to lower employee costs at a time of talent shortage. Margins expanded 270 basis points to 8.9%.

However, investors betting on a revival in its fortunes may just have to wait a little longer. The FMCG industry has seen some bitter rivalry in the past and there is no indication that it is going to end soon. Local and foreign players are targeting the bakery and dairy segment and competition may keep the margins low.

At nearly Rs 8,000 crore, Britannia’s m-cap is just 1.5 times its last four quarter sales, much lower than Nestle’s (6 times sales) and ITC’s (nine times revenues). Britannia shares ended Monday at Rs 665.85.