The Bombay Burmah Trading Corporation Limited — Q1 FY23 earnings call

Call held 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

  • 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

  • Input Cost Inflation

Key financials

2 periods

Headline

  • Revenue from Operations
    ₹60.18 Cr
    YoY +19.2%
  • Operating Loss
    ₹-15.29 Cr
    YoY +353.7%

FY22

  • Revenue from Operations
    ₹339 Cr
    YoY +63.7%
  • PAT
    ₹9.89 Cr
    YoY +253.2%

What they filed

Q1 FY27: revenue up 8.0%, net profit up 17.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,761 4,685 4,519 4,712 4,943 +4%5,066 +8%4,818 +7%5,089 +8%
EBITDA724 873 802 724 936 +29%943 +8%827 +3%814 +12%
Net profit516 627 585 498 566 +10%655 +4%781 +34%583 +17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentTurnoverGrowth
Auto Components₹133 Cr29.5%
Healthcare₹18.62 Cr82.5%
Tea——

Guidance & targets

Other

  • Healthcare Division Growth Other · FY23 · Medium confidence 8% to 9%
    The demand for dental products improved considerably during quarter three and quarter four and is expected to grow at about 8% to 9% for the financial year 23.

    — Nusli Wadia, Chairman

Debt

  • Redeemable Non-Convertible Debentures Issue Debt · FY23 · High confidence ₹300 crore
    Approval for issue of redeemable non-convertible debentures of an amount up to Rs.300 crore.

    — Sanjay Kumar Chowdhary, Company Secretary

Risks & concerns

  • Input Cost Inflation

    high

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

    Both acknowledged

  • Adverse Weather Conditions

    medium

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

    Management acknowledged

  • Geopolitical and Regional Instability

    medium

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

    Analyst not addressed

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

0 direct, 3 evasive
Strategic Outlook: CAPEX, Demergers, and Plantation Exit Evasive
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

Go Air Investment and Subsidiary Profitability Evasive
We will send the replies as we have already said in the next two days or three days.

Investors are concerned about the performance of associate companies like Go Air and whether all subsidiaries are currently profitable, but management provided no verbal clarity.

Asked by Anil Parekh

Shareholder Value: Share Split and Britannia Holding Evasive
We will send the replies as we have already said in the next two days or three days.

The analyst questioned why the significant value of the Britannia holding is not reflected in the balance sheet and asked about plans for a share split to increase liquidity.

Asked by Manoj Kumar Gupta

2 min read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

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