Shares of Britannia Industries Ltd plunged as much as 6.7% on Tuesday after the board accepted Varun Berry’s resignation and relieved him from his position as vice-chairman, managing director and chief executive officer with immediate effect on 10 November. The board appointed Rakshit Hargave as managing director and chief executive officer from 15 December.
Shares of Britannia Industries Ltd plunged as much as 6.7% on Tuesday after the board accepted Varun Berry's resignation and relieved him from his position as vice-chairman, managing director and chief executive officer with immediate effect on 10 November. The board appointed Rakshit Hargave as managing director and chief executive officer from 15 December.
Berry's impressive track record at the biscuit and dairy product company means Hargave has big shoes to fill. As Motilal Oswal Financial Services pointed out, Britannia at times (before Berry's tenure) was considered a commodity business with a weak operating margin profile, which has changed significantly since.
During Berry's tenure from FY13 to FY25, Britannia's consolidated Ebitda margin improved by a striking 1,100 basis points to 18% and profit-after-tax margin rose 800 bps to 12%. The company's revenue, Ebitda, PAT and market capitalization grew at a compounded annual rate of 10%, 18%, 20% and 25%, respectively, during FY13-FY25, as per Motilal's calculations.
"With this (leadership) change, the focus on the new CEO and his strategic layout will be crucial, but growth recovery will be a key monitorable in the near term," the broking firm said in a report dated 10 November.
Hargave served as the chief executive officer of Birla Opus in his previous assignment. He comes with rich experience at various consumer companies including Beiersdorf (makers of Nivea) and Hindustan Unilever Ltd.
Improving prospects
These events come when Britannia's near-term prospects are upbeat. The September quarter (Q2FY26) results released last week beat expectations on profitability. Ebitda grew 22% year-on-year even as total operating revenue increased only 3.7% to ₹4,840 crore amid transitional challenges due to changes related to the GST rate cuts.
Gross margin improved slightly. Aided by lower staff costs and other expenses, the Ebitda margin rose 293 bps to 19.7%, the first year-on-year expansion after four consecutive quarters of a declining trend.
"While Q2 pricing growth was about 7%, it should moderate in coming quarters as Britannia has reduced prices on large packs and taken grammage increases in small packs (to hit the market from mid-Nov) to pass on benefits of GST," Nomura Research's analysts said. "We think this will be supportive for better volume growth, as about 65% of Britannia's portfolio consists of low unit packs ( ₹5/10)."
All eyes will now be on volume and growth recovery after a dull show on this front in Q2.