Britannia Dairy Business Valued At Rs 155 Crore

Biscuits major Britannia Industries' dairy business, which has been transferred to Britannia New Zealand Foods, the newly formed joint venture with Fonterra Co-operative Group of New Zealand, has been valued at Rs 155 crore, according to Britannia's annual report.

While Britannia and Fonterra Co-operative hold 49 per cent each in the joint venture, the remaining 2 per cent is held by a strategic investor.

The joint venture sources, manufactures and distributes milk and milk products in India. It will continue to position its products (cheese, dairy whitener, butter, ghee and milk) under the Milkman brand.

Currently, Britannia holds 28.32 lakh equity shares of Rs 10 each in the joint venture. The book value of the investment is Rs 57.52 crore, implying that the shares were issued at a premium of Rs 193 each. Further, it holds 29.40 lakh cumulative preference shares issued by the JV company. The rest of the consideration was a cash inflow of Rs 65.26 crore.

Fonterra Cooperative Group, which has a turnover of $4 billion, is one of the ten largest dairy companies in the world.

According to the company, Fonterra will provide research and development support and international experience in the dairy field. This, coupled with Britannia's marketing infrastructure and brand equity, will provide the ideal engine for profitable growth.

However, the company feels, with the removal of quantitative restrictions, there is a possibility of an increase in competition from foreign players which can impact volumes/profitability of the business.

Britannia is the market leader in the biscuit and bakery segment. Biscuits contribute over 80 per cent to the company's turnover. Britannia had formulated the strategy to focus on its core seven brands-- Marie Gold, Cream Treat, Good Day, Fifty Fifty, Milk Bikis, Time Pass and Tiger -- and their variants.