2. Britannia industries ltd.
Introduction -
Britannia Industries is one of India’s leading food companies.
The Annual revenue of Britannia is Rs. 9000 Cr. Its Market share is 28%.
Market capitalization stands at Rs 85597.37 Cr.
Market analysis
1). Increase in Revenue 11.7% in financial year 20-21
2).Net profit increased to 24%
3) RoE min increased to 20%
3. 4). There was an increase or decrease in price in company but
shareholders still invest in Britannia (Including FII, DII, Public)
5). Rural revenue will reach 50 per cent in the next three years for
Britannia as the company continues to focus on the rural market.
Liquidity ratios-
Current ratio is used to perform short term financial analysis. It
is an indicator of a firm’s ability to meet its short term liabilities.
Current ratio = Current assets / Current liabilities
Over a period of 3 years, the current ratio has decreased from
1.94 to 1.21 which indicates the firm is liquid and has the ability
to meet its current liabilities. It shows that funds yielded by
currents assets are more than sufficient to pay the amounts
due to various creditors.
Quick ratio gives a better picture to meet its short term
liabilities out of its short term assets. It measures a company's
2021 2020 2019
Current ratio
1.21 1.45 1.94
Quick ratio
0.91 1.16 1.49
4. capacity to pay its current liabilities without needing to sell its
inventory or obtain additional financing.
Quick Ratio = Quick Assets/Quick Liabilities
Over a period of 3 years, the quick ratio has decreased from
1.49 to 0.91 which is slightly less than 1:1 that means a
company may find itself in financial difficulties.
2. Turnover ratios-
Inventory turnover ratio- The ratio measures of how well a
company generates sales from its inventory. The higher the
inventory turnover better is the management of the inventory
by the company to generate sales. It typically means a company
is selling goods quickly and replaces its duration in a set of
duration.
2021 2020 2019
Inventory
Turnover Ratio
(X)
12.49 17.34 14.58
Debtors
Receivable
turnover ratio
56.19 37.04 36.07
5. Inventory turnover ratio = COGS (Cost of Revenue from
operations)/Average inventory (Stock)
Over a period of 3 years, the inventory turnover ratio has
decreased from 14.58 to 12.49 which shows more sales are
being produced by each rupee of investment in stock. The rate
at which a stock is converted into sales and then into cash is
high.
Average holding period-
Average holding period =1÷12.49×365=29 days in 2021.
Average holding period=1÷17.34×365=21 days in 2020
Average holding period=1÷14.58×365=25 days in 2019
Debtors’ receivable ratios- Debtor's Turnover Ratio is an
accounting measure used to measure how effective a company
is in extending credit as well as collecting debts.
Higher the Debtors Turnover Ratio better is the credit
management of the firm.
Trade Receivable Turnover Ratio = Credit Sales / Average Trade
Receivables (Debtors)
Over a period of 3 years, the debtors’ turnover ratio has
increased from 36.07 to 56.19 which shows debts are being
6. collected more quickly. Changes in this ratio show the changes
in the company’s credit policy or changes in its ability to collect
from its debtors.
Profit margin ratios & Return ratios
2021 2020 2019
Net Profit
margin(%)
14.21 13.50 10.70
Return on asset 23.73 20.46 19.85
Return on equity 53.02 34.72 27.78
Net profit margin- The net profit margin ratio is calculated by
dividing net income by net sales. It shows us that how much
profit is generated as a percentage of revenue. It is also said as
the best indicator of company’s financial health.
Net Profit Margin ratio = Net Income / Net Sales
Over a period of 3 years, the net profit margin has increased
from 10.70 to 14.21 which show it has shown positive growth
over the years. It has shown a good growth which is
appreciated by most of the investors.
Return on asset- measures how efficiently a company is using
its assets to generate profit.
Return on assets ratio = Net income / Total assets
7. Over a period of 3 years, the return on asset has increased from
19.85 to 23.73 which shows gives investors an idea of how
effective the company is in converting the money it invests
into net income. The higher the ROA number, the better,
because the company is able to earn more money with a
smaller investment.
Return on equity-Return on equity ratio is a profitability ratio
that tells us about the firm’s ability to generate profits from its
shareholders’ investment. In layman terms, it tells us how much
profit each rupee of common shareholders’ equity generates.
It is also considered as a measure of how effectively
management is using company’s assets or investments to
generate profits
ROE = Net Income / Shareholders’ Equity
Over a period of 3 years, the return on equity has increased
from 27.78 to 53.02 that show high return on capital
shareholders.
Other ratios-
2021 2020 2019
EPS 73.12 61.75 46.71
PE ratio 46.62 48.81 65.81
8. Dividend yield
ratio
3.25 1.34 1.34
Dividend
payout ratio
161.34 28.44 26.74
Earnings per share measure the profitability of a firm on a per
share basis. It is used by invest
Earnings per share ratio = Net earnings / Total shares outstanding
Over a period of 3 years, EPS has increased from 46.71 to 73.12 which
shows greater value because investors will pay more for a company's
shares if they think the company has higher profits relative to its share
price.
Profit to earnings guides investors to decide whether to buy
shares of a company or not. A company with a high P/E ratio
usually indicated positive future performance and investors are
willing to pay more for this company’s shares.
P/E Ratio = Market Value per Share/ Earning per Share
Over a period of 3 years, the price to earnings ratio has
decreased from 65.81 to 46.62 which shows increase in
earnings per share.
9. Dividend yield ratio is important for those investors who
make investments decision for the purpose of earning a
reasonable yield on the amount of investment.
Dividend Yield Ratio = Dividend Per Share/Market Value Per
Share
Over a period of 3 years, the dividend yield ratio has increased
from 1.34 to 3.25. The company has a good yield of 3.25 shows
that company is paying a good amount to its investors.
Dividend payout ratio or DPR is the total amount of dividends
the company is paying out to the shareholders relative to its
net income. It is the percentage of total earnings paid to the
shareholders in the form of dividend.
Dividend payout Ratio = Dividend per Share / Earning per
Share
Over a period of 3 years, the dividend payout ratio has
increased from 26.74 to 161.34 which shows maybe company
has earn some big profits and thus distributing to its
shareholders. Constant high dividend payout ratio might have
attracted more shareholders.
Other ratios
Particular 2021 2019 2020
10. DEBT EQUITY
RATIO
0.54 0.28 0.00
INTEREST
COVERAGE
RATIO
23.66 25.20 195.60
FIXED ASSET
TURNOVER
RATIO
5.87 5.47 6.06
Debt equity ratio measures the relationship between long term
debts and shareholders’ funds. The debt equity ratio of 1:1 is
acceptable. From the point of view of the company, the lower
this ratio, the less the company has to worry in meeting its
fixed obligations.
Debt/Equity=
Personal Assets−Liabilities/Total Personal Liabilities
Over a period of 3 years, debt equity ratio has increased from 0
to 0.54 which shows that greater claims of owners on the
assets of the company than the creditors.
Interest coverage ratio is a debt and profitability ratio used
to determine how easily a company can pay interest on its
outstanding debt.
Interest Coverage Ratio= EBIT/Interest Expense
11. Over a period of 3 years, interest coverage ratio has
decreased from 195.6 to 23.66 which shows company’s
ability to pay interest is decreasing.
Fixed asset turnover ratio indicates the efficiency with
which a firm is utilizing its investment in fixed assets.
Fixed Asset Turnover = Net Sales / Average Fixed Assets
Over a period of 3 years, fixed asset turnover ratio is
decreased from 6.06 to 5.87 that shows company is
investing more on investing on fixed assets.
Comparison of Britannia and hatsun agro
PEER COMPANY-HATSUN AGRO
Hatsun Agro Product Ltd (HAP), often referred as Hatsun, is a
private sector dairy company. Its market capitalization is 27874
crore rupees.
CURRENT RATIO
12. 2021 2020 2019
1. BRITANNIA 1.21 1.45 1.94
2. HATSUN AGRO 1.08 1.04 1.08
Higher the current ratio, the more capable a company is of paying its
obligations. Britannia has higher current ratio.
QUICK RATIO
2021 2020 2019
1. BRITANNIA 0.91 1.16 1.49
2. HATSUN AGRO 0.11 0.13 0.11
The quick ratio of Britannia is closer to 1:1 which is better than hatsun
agro. Britannia is more stable than hatsun agro.
Price to earnings ratio
S
NO
COMPANY 2021 2020 2019
1. Britannia 46.62 48.81 65.81
2. Hatsun agro 63.42 55.44 74.6
In general a higher ratio means that investors anticipate higher
performance and growth in the future. So P/E ratio of hatsun agro is
higher.
Dividend yield ratio
2021 2020 2019
13. 1. BRITANNIA 3.25 1.34 1.34
2. HATSUN AGRO 2 1.12 0.96
A company with a high dividend yield pays its investors a large
dividend compared to the fair market value of the stock.
Britannia has the higher dividend yield ratio.
Dividend payout ratio
2021 2020 2019
1. BRITANNIA 161.34 28.44 26.74
2. HATSUN AGRO 52.50 103.35 55.65
A payout ratio over 100% indicates that the company is paying
out more in dividends than its earning can support, which some
view as an unsustainable practice. A low payout ratio can signal
that a company is reinvesting the bulk of its earnings into
expanding operations. Britannia has the higher ratio.
NET PROFIT MARGIN
2021 2020 2019
1. BRITANNIA 14.21 13.50 10.70
2. HATSUN AGRO 4.42 2.11 2.41
So it can be interpreted form the above data, the Net profit
ratio of the Britannia is quite good and it has shown positive
14. growth over the years. Hatsun agro is also showing positive
growth.
RETURN ON EQUITY
Particular 2021 2020 2019
1. BRITANNIA 53.02 34.72 27.78
2. HATSUN AGRO 24.11 12.41 14.27
A company which has a high ROE ratio is more successful to
generate cash internally. Generally, companies with high ROE
attract investors and it is a better benchmark when comparing
different companies of same industry.
Britannia will generate cash successfully.
Conclusion
Fundamental analysis can be important to investor when they
are looking to invest in company. If they find the financials of
the company strong enough then they will invest in that
company.
15. I have done analysis of Britannia and hatsun agro and came up
with the result that Britannia is good in terms of liquidity ratio,
dividend yield and payout ratio, net profit margin and return on
equity. But hatsun agro is better in price to earnings ratios. So
according to me Britannia is a good stock to pick as it pays good
returns on equity and highest dividend payout ratio in the
industry and also this company comes under the good brand
name.
