Corporate Governance in Britannia Industries-Dissertation Topic

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Company Profile-

Britannia Industries Limited manufactures, sells, and exports bakery and dairy products in India and internationally.  Forbes Global rated Britannia amongst the Top 200 small companies of the world, and the Economic Times pegged Britannia India`s 2nd most trusted brand in India.   Company plans to focus on
strengthening its international business and expand its brand presence.  Britannia Industries is seeking shareholders permission for a proposal to up its borrowing limit to Rs.20 billion to chase inorganic growth
opportunities.  Net sales and PAT of the company is expected to grow at a CAGR of 12% and 7% over 2008 to 2011E respectively.

Industry Overview

Food Processing
The Indian food market is estimated at over US$ 182 billion, and accounts for about two thirds of the
total Indian retail market. Further, according to consultancy firm McKinsey & Co, the retail food sector
in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025, accounting for
a large chunk of the world food industry, which would grow to US$ 400 billion from US$ 175 billion by
2025.

Spices
Despite a global slowdown, Indian spice exports are growing. India exported 470,520 tonnes of spices
valued at US$ 11.68 billion—an all-time high—in 2008-09.

During the previous financial year, 444,250 tonnes valued at US$ 11.01 billion were exported.
The spice exports were at an all-time high both in terms of volume and value. Compared with last
year, the export had shown an increase of 19 per cent in rupee value and six per cent in dollar terms.

Food Processing

The food processing industry is presently growing at 14 per cent against 6-7 per cent growth in 2003-
04. The industry received foreign direct investments (FDI) totalling US$ 143.80 million in 2007-08
against US$ 5.70 million in the previous fiscal. However, India’s share in exports of processed food in global trade is only 1.5 per cent; whereas the size of the global processed-food market is estimated at US$ 3.2 trillion and nearly 80 per cent of agricultural products in the developed countries get processed and  packaged.

In order to further grow the food processing industry, the government has formulated a Vision-2015 action plan under which specific targets have been set. This includes tripling the size of the food processing industry from around US$ 70 billion to about US$ 210 billion, raising the level of processing of perishables from 6 per cent to 20 per cent, increasing value addition from 20 per cent to 35per cent, and enhancing India’s share in global food trade from 1.5 per cent to 3 per cent. This would require an investment of US$ 20.6 billion. The ministry of food processing is also planning to set up 350 new food processing units by mid-
October.

Snacks and Confectionery
The Indian market holds enormous growth potential for snack food, which is estimated to be worth
US$ 3 billion, with the branded snack market estimated to be around US$ 1.34 billion, growing at 15-
20 per cent a year. While the growth rate of the US$ 1.56 billion unorganised sector is 7-8 per cent.
 
Dairy
According to Dairy India 2007 estimates, the current size of the Indian dairy sector is US$ 62.67 billion and has been growing at a rate of 5 per cent a year. The dairy exports in 2007–08 rose to US$ 210.5 million against US$ 113.57 last fiscal, whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011.

Retail Landscape: Food Chains and Restaurants
The food and grocery market in India is the sixth largest in the world. Food and grocery retail contributes to 70 per cent of the total retail sales. According to industry estimates, the segment is growing at a rate of 104 per cent and is expected to grow to US$ 482 billion by 2020.

According to a BMI forecast, India is likely to see a huge 443 per cent increase in mass grocery retail
(MGR) sales during the 2007-2012 period.

Ninety nine per cent of this segment is unorganised, and therefore, there is immense scope for growth
for the organised sector. The organised food retail sector is largely dominated by restaurants, fast
food outlets, coffee joints and the like.

McDonald’s is planning to open 40 new outlets across the country in FY10—mostly in Mumbai, Chennai
and Hyderabad—with an investment of US$ 25.64 million. At present, it has 160 outlets.

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