Varun Beverages Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Varun Beverages Ltd (VBL) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:08:04] Abneesh Roy from Nuvama asked about the size of the Morocco investment and its opportunity. Ravi Jaipuria Chairman replied that it’s an existing business of INR150 crores, and it will take it from there from Jan 1, 2023. VBL will also start manufacturing all the brands in future in Morocco.

• [00:10:14] Abneesh Roy with Nuvama enquired about the current outlet reach in India. Ravi Jaipuria Chairman replied that the sting is reaching practically everywhere, which is more than 2 million outlets already.

• [00:10:24] Gaurav Jogani of Axis Capital asked about the realization difference between Sting and for other VBL products together. Ravi Jaipuria Chairman answered that the realization is more by 65% in Sting than other products.

• [00:13:02] Gaurav Jogani from Axis Capital enquired that with realization being very high in Sting, if it translates to the GM and EBITDA margin levels also. Ravi Jaipuria Chairman replied that it definitely adds to the margin and that’s why margins are better than volume growth.

• [00:14:18] Gaurav Jogani with Axis Capital also asked if the realization per case could sustain around the current levels of about 169. Ravi Jaipuria Chairman said that the company should be able to maintain the realization per case, give or take 1-2 points up or down.

• [00:16:23] Yash Dantewadia from Dante Equity enquired about the capacity utilization for the year. Ravi Jaipuria Chairman answered that the company was reasonably fully utilized in the year. VBL is also adding new capacity and should have good capacity for next year.

• [00:18:45]  Yash Dantewadia of Dante Equity asked if the company is seeing raw material prices coming down and VBL’s current net debt. Ravi Jaipuria Chairman said that sugar has not cooled down but resin prices have started cooling down. And net debt is around INR2300 crores.

• [00:19:23]  Devanshu Bansal with Emkay Global asked about the timeframe for capex in Rajasthan and Madhya Pradesh to get commissioned. Ravi Jaipuria Chairman replied that the company is trying to get it commissioned before start of next season.

• [00:23:57] Jaykumar Doshi from Kotak asked that leaving aside Sting, if VBL gained market share in the rest of the portfolio. Ravi Jaipuria Chairman answered that the company won’t want to say it has gained market share but it has grown substantially.

• [00:26:56] Sumant Kumar of Motilal Oswal enquired about the India growth of 22%, which geography has the higher growth in 3Q23. Ravi Jaipuria Chairman said it’s difficult to tell. But in areas where VBL was very weak of new territories taken from PepsiCo and some of the bottlers that’s where the company has had higher growth.

• [00:32:12] Jenish Karia from Antique Stock Broking asked about the distribution and performance of dairy product segment in 3Q23 and going forward. Ravi Jaipuria Chairman replied that fundamentally in the season VBL could not supply as it ran out of capacity. Also next year, VBL is going to be constrained as the capacity is only coming after the season.

• [00:44:42] Smitesh Sheth with Raedan Securities asked about the logical distribution outlet VBL can cater to over next 2-3 years. Ravi Jaipuria Chairman answered that there are 11 million outlets in India and VBL is reaching close to 3 million now. VBL is looking to add between 10-12% ever year.

• [00:45:38] Yash Dantewadia from Dante Equity asked if the company has taken any price hikes and if there’s any plans to take price hike in coming quarters. Ravi Jaipuria Chairman replied that VBL has taken some price increases during FY23. VBL has not decided on any price increase currently and hopes it doesn’t have to take any increases.

• [00:47:54] Yash Dantewadia from Dante Equity enquired about any change in demand trends after COVID. Ravi Jaipuria Chairman answered that the biggest change is the go-to-market has opened up, so single service started selling. Also a big jump in the energy drink was seen.

• [00:52:28] Arpit Shah from Stallion Asset asked that given the current territories VBL has, if the company believes that 15-17% volume growth is sufficient for the next 3-5 years. Ravi Jaipuria Chairman answered that VBL believes double digit growth is possible.