Shares of Britannia Industries Ltd have surged as much as 13% inthe past five trading sessions. This comes at a time when the Nifty FMCG index has risen by about 1.5%. FMCG stands for fast-moving consumer goods. What gives?
To begin with, the stock had corrected sharply after the company’s disappointing June quarter performance and rather tepid management commentary. On 21 August, the stock had closed at a 52-week low.
Analysts said this is only a recovery in the stock from its lows and that the short-term outlook continues to remain muted, given the demand slowdown. Domestic volume growth had dropped to an eight-quarter low of 3% in the June quarter.
Having said that, Britannia’s investors may well have other worries. “The pessimism in Britannia’s stock really began around the time when it disclosed that an additional part of its treasury surplus had been lent to promoter-group companies as inter-corporate deposits (ICDs carry 10% p.a. interest)," said analysts from JM Financial Institutional Securities Ltd in a report on 26 August.
According to Britannia, its ICDs have dropped to under ₹500 crore from about ₹690 crore at the end of March.
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