Britannia to recast subsidiaries

It’s restructuring time for Britannia Industries. Not the operations, but the over 20 subsidiaries that the biscuit and dairy major has in its fold.

“We have too many subsidiaries. We want to reduce them,” chairman Nusli Wadia said, while addressing shareholders at the 92nd annual general meeting of the company.

Later, the company’s managing director Vinita Bali clarified that the company has many “historical entities,” which could be merged or “collapsed”.

“We have three front-end subsidiaries which manage our dairy, the daily bread and the Middle East operations. Then there are contract packers also. There are also investment companies like Boribunder Finance, Flora Investments and Gilt Edge Finance. We have to see whether they will be phased out or they can be consolidated. These are possibilities,” Raju Thomas, chief financial officer, said.

While a few like Britannia Dairy Pvt Ltd, Daily Bread Gourmet Foods (India) Pvt Ltd, Strategic Food International Company LLC, Dubai, and Al Sallan Food Industries Company are its active operating subsidiaries within and outside the country, Britannia has several contract manufacturing subsidiaries, whose formation was necessitated by restrictive laws of a bygone era, and also several investment companies where not much trading happens now.

Britannia is contemplating bringing these numbers to a more manageable level.

“What chairman said is that it is worth actively looking at them to try and see if there is sense in being able to rationalise some of them when they are not serving any purpose. For example, we have investment companies, none of which is actually doing any active trading so why have three of them. The benefit (of restructuring) would be simplification,” Thomas said.

“Why do we have so many contract manufacturers? In the 80’s if you wanted to sell biscuits you couldn’t produce as it was reserved for the small-scale sector. So there are historical reasons that determined where the industry is today. (These are) some of legacy issues we have to deal with because today’s context has changed. Today biscuits are not reserved for the small scale so we have the option to create our own manufacturing units, which was not possible earlier,” Bali said.
Bali said the company would soon get three greenfield projects in bakery running in Bihar, Orissa and Karnataka. “The Bihar project will be up and running very soon, within few weeks. The other two projects are in pipeline,” she said. Each greenfield project would entail an investment of Rs50-60 crore.

Britannia is also looking for a suitable location in the western part of the country for a greenfield project, she said.

For the June quarter, Britannia’s net profit  was up 27% at Rs42 crore, while sales rose 21% to Rs1,106 crore.