What is the best thing to have happened since sliced bread? Whatever it is, Britannia Industries Ltd appears to be partaking some of it, going by the dramatic increase in its market capitalization over the past few years. The company’s market cap has increased 6.9 times in the last four years to 72,740 crore and, with this, it has catapulted itself into the bellwether Nifty 50 index. Effective April 2019, Britannia will become only the third fast-moving consumer goods firm in the index, after industry heavyweights Hindustan Unilever Ltd and ITC Ltd.

In the past, investors saw Britannia as a bread-and-butter business, which was growing steadily. Now, product introductions and rising premiumization are driving higher-than-industry growth. With consumers shifting to higher value-added products, Britannia has positioned itself well with new launches. The company has been introducing newer variants of its biscuits and entering fresh categories, such as croissants. It has also been expanding its cakes menu.

All this has seen its revenue expand. Its December quarter revenue stood at 2,827.40 crore, compared to 2,558.3 crore in the year-ago period. The increase in sales of value-added products has also boosted margins. The Ebitda (earnings before interest, tax, depreciation and amortization) margin rose from 14.79% in December 2017 quarter to 15.79% in the latest quarter.

Lately, though, the Britannia stock has been experiencing a bumpy ride from its peak of 3,467 in August 2018. It is already down 12.7% to 3,027. Analysts attribute investors’ concerns to slowing revenue growth. Its year-on-year revenue growth rate has slowed in the December quarter to 10.5%. In contrast, revenue growth in the year-ago period stood at 12.9%.

Part of the reason for the stock’s stagnation is concerns over its ability to drive further margin expansion. Raw material prices have been stable largely due to the drop in food prices. “One of the big concerns is food inflation. Rising raw material prices will tend to impact margins," says Naveen Kulkarni, head of research at Reliance Securities.

A larger concern is the rich stock valuations, due to higher demand for consumer goods stocks. In March 2015, Britannia’s one-year forward price-to-earnings ratio used to be about 35 times. Currently, it is 51.8 times, which is 48% higher. Unless it can bake healthy growth rates in the future, investors might soon find the stock unappetizing.