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    Bombay Burmah

    BBTCWeak
    Fast Moving Consumer Goods·25 Aug 2022
    Management Summary

    Bombay Burmah (BBTC) experienced a challenging Q1 FY23, characterized by revenue growth that was overshadowed by a sharp widening of operating losses. While the non-plantation segments like Auto Components and Healthcare showed strong momentum in the preceding fiscal year, the core plantation business struggled with adverse weather and inflationary costs. A significant red flag emerged during the call as management deferred all shareholder questions to written responses, providing no immediate clarity on strategic concerns regarding Go Air or potential demergers.

    Highlights

    7

    • Q1 FY23 Revenue from operations stood at ₹60.18 crores, a 19.2% increase from ₹50.5 crores in Q1 FY22.

    • Operating loss widened significantly to ₹15.29 crores in Q1 FY23, compared to a loss of ₹3.37 crores in the previous year's quarter.

    • FY22 full-year revenue from operations was ₹339 crores, which included a one-time gain of ₹80.77 crores from the sale of equity land.

    • The Auto Components business grew by 29.5% in FY22, reaching a turnover of ₹133 crores.

    • Healthcare division turnover nearly doubled to ₹18.62 crores in FY22 from ₹10.2 crores in FY21.

    • Tea production in FY22 declined slightly to 41.72 lakh kilos due to COVID-19 restrictions and a continuous six-month wet spell.

    • Management proposed a dividend of ₹1.20 per share and the issuance of NCDs up to ₹300 crore.

    Concerns

    1

    • Input Cost Inflation

    What Changed1

    vs Q4 FY23

    Tone shiftNeutral → Weak
    Key financials

    Metrics

    4

    Periods

    2

    Headline

    2
    • Revenue from Operations
      ₹60.18 Cr
      YoY+19.2%
    • Operating Loss
      ₹-15.29 Cr
      YoY+3.5%

    FY22

    2
    • Revenue from Operations
      ₹339 Cr
      YoY+63.7%
    • PAT
      ₹9.89 Cr
      YoY+2.5%

    Segment breakdown

    TurnoverGrowth
    Auto Components₹133 Cr29.5%
    Healthcare₹18.62 Cr82.5%
    Tea——
    Heatmap· 2 shared metrics

    Guidance & targets

    2
    CategoryTargetPriority
    Other
    Healthcare Division Growth
    8% to 9%
    		Medium
    Debt
    Redeemable Non-Convertible Debentures Issue
    ₹300 crore
    		High

    Risks & concerns

    9
    RiskSeverity

    Input Cost Inflation

    Raw material prices have reportedly increased by 20% to 30%, impacting margins across segments. — Both acknowledged

    high

    Adverse Weather Conditions

    A continuous six-month wet spell impacted tea production volumes in the previous fiscal year. — Management acknowledged

    medium

    Geopolitical and Regional Instability

    Disturbances in Sri Lanka were flagged as a potential risk/opportunity for the tea business that management did not address. — Analyst not addressed

    medium

    Areas of Evasion(6)

    • CAPEX plans
    • Go Air associate company performance
    • Demerger of Bombay Realty
    • Exit from plantation business
    • Share split plans
    • Land bank valuation

    Q&A highlights

    3

    “We will send the replies as we have already said in the next two days or three days.”

    Management refused to address critical questions regarding the 5-year CAPEX plan, the potential demerger of Bombay Realty, and rumors of exiting the plantation business.

    asked by Niranjan Manjunath Bhat

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 FY23 Financial Strain

    Bombay Burmah reported a significant widening of its operating loss to ₹15.29 crores in Q1 FY23, up from a loss of ₹3.37 crores in the same period last year. This occurred despite a 19.2% increase in revenue from operations to ₹60.18 crores. The disconnect between revenue growth and profitability suggests severe margin pressure, likely driven by the 20-30% increase in raw material costs mentioned during the call.

    02

    Segmental Divergence: Components and Healthcare

    The non-plantation segments emerged as the primary growth drivers in FY22. The Auto Components business saw turnover rise to ₹133 crores, a 29.5% increase, while the Healthcare division turnover jumped to ₹18.62 crores from ₹10.2 crores. Management expects the Healthcare division to maintain a growth trajectory of 8% to 9% in FY23 as dental clinics fully resume operations post-COVID.

    03

    Plantation Headwinds and Climate Impact

    The tea and coffee segments faced operational challenges, with tea production falling slightly to 41.72 lakh kilos in FY22. This was attributed to a combination of COVID-19 restrictions in Q1 and an unusually long six-month continuous wet spell. Revenue from tea decreased by ₹45.8 lakhs, further impacted by a lower average sale price, although sales quantity saw a marginal increase of 1.76 lakh kilos.

    04

    Strategic Asset Monetization

    The company's FY22 results were significantly aided by the monetization of assets, specifically the sale of equity land which contributed ₹80.77 crores to the total revenue of ₹339 crores. This one-time📎 gain masked underlying operational weaknesses in the core plantation business. Shareholders expressed concerns regarding the valuation of the remaining land bank and the lack of reflection of Britannia's market value in the BBTC balance sheet.

    05

    Shareholder Engagement Breakdown

    The AGM was notable for a complete lack of verbal interaction during the Q&A session. Despite multiple analysts raising critical questions about the Go Air investment, potential demergers of Bombay Realty, and the 5-year CAPEX roadmap, Chairman Nusli Wadia deferred all responses to private email communications. This move significantly hampered transparency and left investors without immediate clarity on the company's long-term strategic direction.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.