Good Q4 Results but Britannia Stock Is Falling. Why?

Reasons for Britannia Industries Stock Decline- May, 2019

Introduction

In this article, we will analyse the Britannia Stock. In recent week, the stock has corrected by 10.69%. From Rs.2974 on 30^th April, 2019, the Britannia Industries stock has seen a consistent decline and currently it is trading at Rs. 2650 on 7^th May, 2019. What are the reasons behind this drop in the share price? Let us understand those reasons in this article.

Company Profile

• Britannia Industries Limited is an Indian food-products corporation. Founded in 1892 and headquartered in Kolkata, it is one of India’s oldest existing companies. It is now part of the Wadia Group headed by Nusli Wadia. Britannia Industries is one of India’s leading food companies with a 100 year legacy.
• Britannia is among the most trusted food brands, and manufactures India’s favourite brands like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold which are household names in India. Britannia’s product portfolio includes Biscuits, Bread, Cakes, Rusk, and Dairy products including Cheese, Beverages, Milk and Yoghurt. 

In spite of Steady Q4 Results, Why Britannia Stock Is Falling?

Ness Wadia’s Arrest in Japan

• Ness Wadia is a son of Nusli Wadia. He is the director in major firms of the Wadia group, including Bombay Dyeing and Bombay Burmah Trading Corporation Ltd.
• Ness Wadia, who was on a skiing holiday was arrested in early March at New Chitose Airport in the northern Japanese island of Hokkaido. Customs officials found 25g of cannabis resin (Drugs) with him. So, the Sapporo district court in Japan handed Wadia a two-year prison sentence, which was suspended for five years for drug possession. Thus, A Japanese court gave Wadia two years in jail last month for possessing 25 gm of cannabis resin but suspended the sentence for five years, allowing him to return to India.

ESG Parameters

• For any stock, institutional investors analyse the ESG parameters of the stock. ESG stands for Environment, Social and Governance. parameters.
• In Britannia case, Social And Governance both the parameters are hampered very badly because of Ness Wadia’s arrest due to drugs possession.

Corporate Governance Issue :

• In the interest of larger corporate governance and character, the board should have asked themselves whether such a director is good for the company. Chairman Nusli Wadia come with an opinion from top jurist Fali S Nariman which had endorsed his son, Ness Wadia staying on as director.
• According to SEBI’s listing obligations and disclosure requirements (LODR), 
  A company has to report any fraud, default by promoter or arrest of key managerial persons or promoters as it is a material event. The arrest of promoter was a material event and that was to be disclosed to the stock exchanges. That was not done by Britannia.

Impact on Britannia Industries Stock Price

From Rs.2974 on 30^th April, 2019, the stock has seen a consistent decline and currently it is trading at Rs. 2650 on 7^th May, 2019. Stock has dropped by 10.69% in recent week.

steady performance by the company

• Standalone domestic business grew by 11.7% y-o-y led by 7% y-o-y volume growth in Q4FY19. Growth trajectory is steady, which is helped by market share gains, distribution expansion and strong innovation.
• Britannia Industries Ltd. (BIL) reported consolidated revenue growth of 10% for the Quarter and 12% (comparable) for the Year at Rs. 2,764 crores and Rs. 10,973 crores respectively.
• Net Profit increased 13% for the Quarter and 15% for the Year at Rs. 297 crores and Rs. 1,159 crores respectively.
• The Board of Directors recommended a dividend of 1500% i.e. Rs. 15 per share of face value Re. 1/- each.