Wadias to sell Britannia properties, raise Rs 700 cr

The Wadias are planning to sell the prime property of Britannia Garden estate in Bangalore and a 8.5 acre property in Chennai to raise close to Rs 700 crore. But due to the economic slowdown, the company is unable to find a suitable buyer.

This is part of Wadia's plan to raise funds on Britannia’s books and use the proceeds in launching new products and expand globally. Britannia plans to move its headquarters to a 90,000 sq ft commercial property in Whitefield from its six acres headquarters in the garden city. The valuation of the properties have increased since the company first said that it will sell the Bangalore property last year.

When contacted, a Britannia official said: "Britannia is moving to a larger office in Bangalore. The company has indeed advertised to sell its Chennai property "

The company’s margins have seen a sharp decline from 12.3% in FY 2005 to just 5.3% in FY 2012 before improving to 5.8% in FY13, say analysts.  A real estate sale will help it to generate funds to launch new products and enter new markets especially in the international markets. The company is facing steep competition from new entrants like ITC and older players like Parle which are eating into its market share.

Analysts say volatile commodity prices have also impacted its margins in the past and with commodity prices now shooting up, a repeat cannot be ruled out. Apart from selling real estate, Britannia is also taking steps to cut costs in the back-end and overheads would cushion the volatility.

On the operational side, a new management under Varun Beri has been given the task to restructure the company's operations while the company's MD Vinita Bali will look after its international business.  The Wadias are directly monitoring the sale of real estate but no buyer has come forward till now.

The company’s stock, meanwhile, is enjoying a dream run this year till date with the stock closing on Tuesday at Rs 738 a share, up by 48% this year since January. For the June quarter, Britannia made a profit of Rs 86 crore on revenues of Rs 1416 crore.

In a recent interaction with analysts, the management pointed out that biscuits category growth has slowed down substantially. Indexed category growth has come off by nearly two-thirds since first quarter of this fiscal.  Besides, the weak macroeconomic scenario coupled with high inflation has impacted consumption demand across staples categories.