Britannia partners with Bel SA; sells 49% stake in dairy subsidiary

Britannia Industries on Tuesday said it will sell 49% equity stake in its wholly-owned subsidiary Britannia Dairy Pvt. Ltd. as part of its joint venture agreement with French cheesemaker Bel SA.

The two companies plan to undertake the development, manufacturing, marketing, distribution, trading and selling of cheese products in India and some other countries.

"As a part of the JVA, Britannia shall sell and transfer 49% of its equity stake in its wholly owned subsidiary, BDPL, to Bel in accordance with the terms of the share purchase agreement entered between Britannia and Bel, on 29th November 2022," the fast moving consumer goods company says in a stock exchange filing.

As part of the deal, Britannia will get ₹262 crore by December 2, 2022. Bel will own of 49% of the entire issued, subscribed and paid‐up equity share capital of BDPL and the balance 51% will continue to be held by Britannia.

Post the transaction, the board of BDPL will consist of five directors out of which three directors will be nominated by Britannia and two directors will be nominated by Bel.

According to Britannia's stock exchange filing, the turnover of BDPL for the financial year 2021-22 stood at around ₹340 crore, amounting to 2.4% of the consolidated sales of Britannia. This includes cheese turnover of around ₹207 crore. Net worth of BDPL as on March 31, 2022 stood at around ₹130 crore, amounting to 5.1% of consolidated net worth of Britannia, as per the filing.

While the joint venture does not have a defined term, there is, however, a lock‐in period of 20 years from its effective date for both parties.

Earlier this month, the Wadia Group company clocked a 28.5% growth in consolidated net profit at ₹490.58 crore for the quarter ended September (Q2 FY23), as against ₹381.84 crore in the corresponding period last fiscal. The consolidated revenue from operations rose 21% to ₹4,379.61 crore in Q2.

During the quarter, Britannia’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at ₹711.7 crore, higher by 27.5% YoY. EBITDA margins expanded to 16.3% from 15.5% in the same quarter last fiscal.

As the company recorded its highest quarterly revenue during the second quarter, its market capitalisation crossed ₹1 lakh crore.

Domestic brokerage ICICI Securities said that Britannia’s volumes, price mix, and revenues growth have surprised consensus positively. The faster-than-expected revenue growth in core biscuits may boost the stock, while sustained weakness in consumption demand remained a key risk for the company, the brokerage said in its report.