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BL Research Bureau

The settlement of the long-pending dispute between Britannia Industries and its French stakeholder, Groupe Danone, has received a warm reception from the stock market, with the Britannia stock rising 2.9 per cent for the day at Rs 1,468.

In fact, the stock bounced off an intra-day high of Rs 1,689. But the stock is unlikely to receive any sustained boost from this development.

For one, the buyout of a 25.48 per cent stake from the Danone group by Leila Lands, a Wadia group company, is expected to qualify as an “inter se transfer” between promoters. It may, thus, not require an open offer by the latter to Britannia’s public shareholders.

The price at which the stake is being bought out has not been disclosed. Britannia’s announcement to the stock exchanges that the price “will not exceed by 25 per cent” the price determined under the takeover regulations suggests that the transfer may be at a premium to market prices. But this will not have any material implications for Britannia shareholders, as it is Danone that will receive the proceeds of the sale.

Two, though the settlement of the dispute does resolve a niggling uncertainty for Britannia Industries, it may not have any material impact on the biscuit major’s business or operations as they stand today.

As the dispute between the two promoter groups has been on for close to two years, the Danone group has not made substantial contributions either to Britannia’s product portfolio or its new product pipeline in recent times. Its withdrawal, therefore, may not materially alter the biscuit major’s Indian business. Settlement of the dispute may, however, resolve any pending concerns on the patent row over Britannia’s Tiger brand.

The settlement may enable Danone to chart an independent India foray, which it has intended for quite some time. However, even if Groupe Danone does expand its Indian operations, its focus is likely to be on dairy and probiotic foods and water business.

After the sale of its biscuits business to Kraft Foods more than a year ago, Danone’s India foray is unlikely to be in areas that pose a direct competitive threat to Britannia Industries.

More Stories on : Stocks | Corporate Disputes | Food & Dairy Products

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