Britannia stocks slump on inter-corporate loan exposures

The stock price of FMCG company Britannia plunged on Friday to close over 3 per cent lower after the company declared that it had inter-corporate deposits (ICD) in associate companies accounting for 25 per cent of its total investment.

Inter-corporate deposit is an unsecured borrowing by corporates and financial institutions from other corporate entities. The corporate having surplus funds would generally lend to another corporate in need of funds.

Britannia's share price settled at Rs 2,695.10 on the BSE, lower by Rs 90.40 or 3.25 per cent from its previous close.

The company's total investments in the financial year 2018-19 stood at Rs 2,700 crore, and 25 per cent of this works out to Rs 675 crore. The amount is nearly double the amount of ICDs in associate companies in the previous two years, when Britannia lent Rs 350 crore to Bombay Dyeing.

 

Britannia's Chief Financial Officer N. Venkataraman said that the investments were made after evaluating all risks.

"There is certainly some concern here because this money could have been given as dividend to shareholders rather than lending the same to associate companies," said an analyst.

"But the Rs 350 crore investment (in Bombay Dyeing) has also been constant in FY17 and FY18 even as ICDs to Bajaj Finance and PNB Housing Finance by Britannia have grown in the same period," the analyst added.

Deepak Jasani of HDFC Securities told IANS: "Britannia has given lots of loans to Bombay Dyeing. Now people are questioning all inter-group transaction...but the management did not give satisfactory answer, except that they get high interests. Secondly, although they have come out with good earnings, Bombay Dyeing is not doing well and is facing lots of liquidity issues."

However, Britannia Industries on Wednesday reported an 11.82 per cent increase in consolidated net profit at Rs 294.27 crore for the fourth quarter ended March 31, 2019. The company had posted a net profit of Rs 263.16 crore in the corresponding quarter of the previous fiscal.

--IANS

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