Varun Beverages Ltd
NSE:VBL
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
410.9265
673.5543
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Varun Beverages Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Varun Beverages Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I would now like to hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages' Q2 CY 2023 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Chairman of the company; Mr. Varun Jaipuria, Executive Vice Chairman and Whole-Time Director; and Mr. Raj Gandhi, Group CFO and Whole-Time Director of the company.
We will initiate the call with opening remarks from the management, following which we'll have the forum open for a question-and-answer session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier.
I would now like to invite Mr. Ravi Jaipuria to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope all of you had the opportunity to go through our results presentation that provides details to our -- of our operational and financial performance for the second quarter and half year ended June 30, 2023.
We have delivered a resilient performance in the quarter despite facing a soft demand environment in India due to abnormally high unseasonal rain throughout the quarter. Our consolidated revenue grew by 13.3% during the quarter with our international territories showing strong momentum. Furthermore, sales volume growth and improvement in realization per case contributed to a 20.8% and 25.4% improvement in our EBITDA and PAT performance during quarter 2, respectively.
Our newly established greenfield plants and brownfield manufacturing lines have become operational in line with our commitment to meet the increasing demand. Especially for our juice and value-added dairy products, we are currently in the process of establishing greenfield facilities in the states of Uttar Pradesh, Maharashtra and Odisha. These new facilities, along with the upcoming facility in DRC, Congo, are expected to be fully operational before the next season.
Further, we have incorporated a new subsidiary in South Africa to explore the business of manufacturing and distribution of beverages. We remain firmly committed to minimizing our environmental impact and promoting a greener, more sustainable future in line with our sustainability mission. We are pleased to share that we have recently introduced 100% recycled PET bottles for Pepsi Black in certain sub territories. As a partner of PepsiCo, we take immense pride in actively participating in the transformative initiatives and collaborating to build a greener future for generations to come.
Moreover, we are delighted to share that VBL has recently received the esteemed recognition of PepsiCo's International Bottler of the Year 2022. This outstanding accomplishments further validates VBL's commitment to operational excellence, strong governance principles and sustainability endeavors. We are pleased to share that in line with our dividend policy, the Board of Directors have approved an interim dividend at 25% of the face value, that is INR 1.25 per share.
While we witnessed slower-than-anticipated demand due to unseasonal rains, we remain optimistic about our full year performance, especially considering the low seasonality in our business following the integration of West and South territories. As we move forward, we will continue to capitalize on our position as a key player in the beverage industry and focus on strengthening our capabilities in line with customer performance. We are confident this approach will translate into sustainable value for all stakeholders.
I would now invite Mr. Gandhi to provide the highlights of the operational and financial performance. Thank you very much.
Thank you, Mr. Chairman. Good afternoon, and a warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the second quarter and half year ended June 30, 2023. Revenue from operations adjusted for excise GST grew up 13.3% year-on-year in quarter 2, 2023, to the level of INR 56,114 million. Sales volume grew by 4.6% to 314 million cases in Q2 CY 2023 from 300 million cases in Q2 CY '22, driven by growth in international markets. Sales volume growth in India got affected due to abnormally high unseasonal rains throughout the quarter.
CSD constituted 73.9%, juice 7.3% and package drinking water 18.8% of total sales volume in Q2 2023. In the second quarter of 2023, there was a notable improvement in net realization per case, which increased by 8.3% to reach at INR 179 per case. This improvement can be attributed to the continued increase in the proportion of smaller SKUs, such as 250 ml in our portfolio compared to the corresponding quarter last year.
Our gross margins during the quarter improved by 196 basis points to the level of 52.5% from 50.5% mainly due to softening of PET chip prices. As a result of higher gross margins and operational efficiencies, EBITDA also saw a notable increase of 20.8% to INR 15,110 million with EBITDA margin improving by 169 basis points from the level of 26.9% in Q2 2023.
Depreciation increased by 23% and finance costs increased by 49.5% in Q2 CY 2023 on account of capitalization of assets and setting up of more production facilities. PAT increased by 25.4% to the level of INR 10,054 million in Q2 2023 from INR 8,020 million in Q2 2022, driven by growth in revenue from operations and improvement in margins.
As of June 30, 2023, our net debt level was amounting to [ INR 31,760 million ], showing a decrease from INR 34,096 million reported in December '22. It's worth noting that the net debt figure includes approximately INR 9,000 million of CWIP and capital advances, allocating for the CapEx spend in Maharashtra, Uttar Pradesh and Odisha for 2024 season.
These investments are expected to drive our growth and expansion in key regions. Operational leverage remains solid and debt equity and debt-to-EBITDA ratios standing at 0.48 and 0.96, respectively, as on June 30, 2023.
In H1 2023, the net CapEx amounted to [ INR 19,000 million ] primarily for setting up of new greenfield production facilities at Bundi, Kota, Rajasthan and Jabalpur, MP, for approximately INR 8,500 million, brownfield expansion at our existing facilities in India for approximately INR 6,500 million and brownfield expansion in international markets of approximately INR 3,000 million and approximately INR 100 million towards land purchase for CapEx in future years.
The net CapEx includes capitalization of CWIP and capital advances amounting to INR 12,000 million, which was outstanding as on December '22. As on June 30 '23, the CWIP and capital advances of INR 9,000 million towards greenfield expansion as stated in Maharashtra, UP and Odisha. Working capital days increased to 21 as on 30th June '23 from the level of 17 days in June 30 '22 [indiscernible].
Overall, we are committed to maintaining a strong financial position and continuing to focus on our growth initiatives. At the same time, we are dedicated to optimizing our operational efficiencies, which we believe will ensure long-term sustainability and create value for our stakeholders.
On that note, I come to an end of the opening remarks and would like to now ask the moderator to open the forum for any questions or suggestions that you may have. Thank you.
[Operator Instructions] The first question is from the line of Vivek from Jefferies.
A few questions. First, on the international business, can you just highlight how different businesses have grown in this quarter?
Vivek, internationally, the growth is good. And all our directives, like in the past, had been [ blasting ] and luckily, they were not affected by the unseasonal rains. And any particular thing you want to know, we can tell you, but otherwise progress is as has been in the past.
So let's say, the 27% volume growth, are there, let's say, geographies that Morocco or others, which have grown like way faster than the others. Can you just highlight that, please?
Our biggest territories, which is Morocco and Zimbabwe have grown faster.
Okay. Got it. And on South Africa, can you just elaborate on the next steps?
Well, South Africa, we have just formed a company there. We are looking at what are the possibilities. I think it's a bit too early to say what is going to happen, but we are evaluating and seeing if this is a market we would like to move in.
Okay. Got it. The other bit is on the CapEx, Mr. Gandhi, what will be the -- let's say, second half of full year CapEx number that we should work with?
Basically, our endeavor will be set out of the 3 plants, which we are initiated for next season, if one out of these we can complete by December itself. Because in a normalized year when rains do not affect, we still don't want to get in a situation like last year there was struggling for capacity. And moreover, there are certain things like Tropicana or milk-based juices, which -- basically dairy products, which we have still to launch rest of the India. So we would like out of the 3, 1 plant at least is operational in December. Otherwise, out of -- this 1,900 out of the -- out of the -- next year, we have already spent, maybe INR 500 crores, INR 700 crores more at least at the time of capitalization will be coming in. In India, the total CapEx may go up to INR 2,400 crores, INR 2,500 crores.
So just to get it right, so let's say, first half, you have done just under INR 1,800 crores. You are seeing the second half cash flow -- cash outflow on CapEx will be about INR 500 crores, INR 600 crores from a cash flow perspective?
Maybe it's INR 800 crores, INR 900 crores, I say.
INR 800 crores to INR 900 crores. Okay, okay. Where do you think, Mr. Gandhi, where the peak debt settles at?
In fact, debt in the H1 has come down. And we may come back to the last year debt, and we will have 4 incremental plants with once these are operational, 3 mentioned in India and 1 India. All these -- if you see on an overall basis, all these 4 plants will be funded out of internal approvals.
Right. So what you're saying, essentially, let's say, INR 3,600 crores, INR 3,700 crores is where the debt will peak at?
It should be around that.
Yes. Got it. And next one is on the energy drinks. What was the -- how was the quarter for energy drinks in the second quarter?
Well, Vivek, as stated in the earlier calls, the exact numbers will not be given. But trend wise, the journey is continuing.
Okay. Okay. And lastly, on the standalone business, if I look at the -- there is no real operating leverage this time around, despite which, let's say, the margins are at about 28% or so. Where -- and we have seen in the past where you have done, let's say, 28.5%. So had it not been for this poor volume, the margins could have been far, far better, probably, let's say, 30% ballpark. Is that a fair assessment?
Let me put it slightly differently. See, the expectation, I think, 169 basis points in the [indiscernible], I have stated there was an improvement. This has come up because of softening of the commodity pricing, basically PAT. And the operating leverage actually in this quarter, there has been increase. There would have been further increase, you are right, maybe 0.5 percent point -- percentage point or percentage equivalent, there could have been improvement. We can't deny that.
Sorry, Mr. Gandhi, what I referring to was, let's say, the stand-alone numbers. So because your revenue growth is 7%, there is a gross margin expansion for sure. But the growth has been somewhat lower than what I'm sure you would have been saying. In that context, [indiscernible]?
You are absolutely right. If the growth would have been normal and seasonal -- season would have been normal, we would have had a much better margin. But this is not -- you cannot plan it and we don't save this for long term because depending on the pricing, we have always said the EBITDA margin would be around 21%, 22%, not more than that. That's what we'd like to commit. But obviously, if the season is good and you get better commodity prices, you get a blip on it.
Got it. Mr. Jaipuria, if I can just follow up on that. That's exactly my point. So if I extrapolate seasonality and full year number, your guidance is -- I mean, I get a sense if we look at what's your, let's say, growth targets are, et cetera, et cetera, the margins can be higher than what your guidance is. What am I missing in that?
No, you're not missing anything. It's just that we don't like to give a guidance better than that. And if we have a good season and the second quarter is our biggest quarter, so this margin will always be higher in this. I'm talking annualized basis, 21%, 22% is reasonably high, and that's what we'd like to say. Beyond that, we don't like to say. If we get a good commodity advantage or something better happens or a special season comes, I don't want to deny that we can't do better.
The next question is from the line of Percy Panthaki from IIFL.
Yes. Sir, on Zimbabwe, now since many years, we have seen very robust healthy growth in this market. So can you help us understand that market a little bit in terms of what is the industry growth, who are the main players there? And if you are growing faster than the industry, who is really sort of growing at a slower pace to balance the equation out, some flavor on that, please?
Well, I think, Percy, it's very difficult because no numbers are published in that country. And we ourselves also can't understand that country after 6 years. So it's very difficult to understand that country, but it's a great country. We have seen huge growth, very positive. And obviously, our main competition is there. And if we are growing faster, then somebody is getting hurt, so I can't answer you more than that.
Okay. But like anything that you're doing there, which you would attribute your success to -- I mean, I'm sure that you are gaining market share and you would have probably crossed 50% kind of mark by now. So is it that the other players are not very focused on that geography or something like that? Or are we doing something right, which we can replicate in the other geographies maybe because we are not getting the same kind of market share gain in the other geographies also?
I don't want to say they are not focused, I think we are more focused.
Sure, sure, sure. And I just wanted to understand on the CapEx part. I think in the last call, we had mentioned that on a full year basis, the CapEx would be about INR 1,500 crores, and now that number is sort of going up by more than INR 1,000 crores, it seems, to be like on a cash flow basis, the CapEx will be more than INR 2,500 crores. So what has really changed in this 1 quarter period for such a big difference?
I think the main reason is basically, we want to enhance our capacities of...
Percy, that INR 1,500 crores number, apple-to-apple is INR 1,900 crores. But the number we discussed INR 2,900 crores or so is for the season 2024. So for this year, it is INR 1,900 crores. So it's a difference of INR 400 crores because there...
Because that INR 400 crores is actually being put in a new territory, which was not part of India, and that is DRC, Congo.
Okay. So is this just a preponement of CapEx that you would have planned over CY '23 plus CY '24 ? Or is it that the total CapEx of CY '23 plus CY '24 also will go up and not just this year's CapEx?
No. But every year, there will be a CapEx. What we are saying is we had said about INR 1,500 crores for '23 and INR 400 crores additional, about $50 million are being put in DRC to start a new country. So that is what it is. Next year's CapEx will be at the end there.
Okay. And versus that INR 1,900 crores, it seems more like this year will be INR 2 500 crores, INR 2,600 crores. So that difference of about INR500 crores to INR 600 crores, what is the reason for that, sir?
It will not be -- firstly, that will not be CapEx for this year. For next year, it will be sitting in our balance sheet, CWIP. When we're reconciling the debt figure, that mention comes because out of '24 CapEx, a part of which will be spent ahead of time.
Right. But this INR 1,500 crores number that you had given last quarter was also on a cash flow basis only, right? Or was it on a balance sheet basis?
That was on a capitalization basis.
The next question is from the line of Nihal Jham from Nuvama.
Sir, just if you could give me the India volumes for us to start, if that is possible.
I didn't hear you.
I'm sorry. I was looking the volumes in India.
Yes. India, there is a growth, but it was...
It was very small. This quarter, the India growth has been very small.
Understood. The other thing is if I just look at versus the juices segment are seeing a contraction, any specific reasons for that happening?
Yes. The main reason is our juice plant, which is in the North, which produces -- we only service the North mainly with that for Tropicana, [ PP and Kd ], that -- because of the north rails, it was depressed. And we normally don't send products from here to south and west. The freight is too high. That's why we are putting up a plant in Maharashtra in the East in Gorakhpur. And it was absolutely abnormal range this year we had in the North.
Sure, Mr. Jaipuria. The next question was to the earlier questions on margins. We are currently having a flavor of how the raw material prices are playing out. And historically, we have increased our discounts to distributors highly to drive volumes when margins have gone up. So is that also a thought in the coming quarters that we want to, say, normalize the discounts that you may be taken down last year, and maybe that is one of the reasons we don't want to change our margin guidance too much?
The discounts keep on getting adjusted. These are to the marketing spend schemes. Their commission structure doesn't change, but over and above that, there are a lot of incentives. And those are performances. If the volume goes up, they are more incentives, therefore more commission for them. And if the volumes don't go up, definitely, they don't earn those extra incentives.
So this year, it's -- basically as it's directly linked to the volume, it's not that made higher. And last year, there was so much of volume growth that they made so much of money and rather -- apart from the company, they have also co-invested in [indiscernible] and other things. So we are much better equipped through the distributed infrastructure to face the next round of growth, maybe next quarters in this year or in the next year.
Just one last question, if I may. Given the way we've obviously turned around a lot of the territories and if I look at some of the awards that you received, definitely, we do rank among the top bottlers from Pepsi's perspective. Now where my question is coming from is the today when we found a subsidiary in South Africa and currently, it is still a discussion that is currently happening.
Are there other international geographies that we will simultaneously look at entering? Or it will mainly be that maybe right now, we'll see how this discussion goes, focus on maybe South Africa and Congo for the next few years and then look at whether we incrementally want to go ahead and move into other international territories? Or it is as and when the opportunity comes, we'll look at taking them out?
Clearly, we are constantly discussing with Pepsi. In India, we have already taken most of it, and there's very little to grow in this, except organically. So any market which looks good, which is good for us, and Pepsi is willing to work with us on that, we are looking forward to it and expand our territory.
The next question is from the line of Devanshu Bansal from Emkay Global.
Congrats on a good set of numbers in a challenging quarter. Sir, June quarter was obviously impacted. So we just wanted to check how is the situation now as there are still evidences of disruptions from this plant?
Even in the disruptive quarter, we have done well. So I'm sure we'll do well again. We'll keep you guys happy. Don't worry about it.
Great, sir. Second, sir, we have been successful in bringing Gatorade to a very accessible price point of INR 20. So firstly, I wanted to check how difficult it is for competition to bring this soft drink at this price point. And second, if you could share the trends for our new growth drivers, Gatorade, dairy and juices?
So our key growth drivers are energy drink, our juice product which is the Nimbooz product, Tropicana, our dairy products and gateways. So these are the new products. And also our sugar-free drinks, which are doing extremely well, which is Seven-Up and Pepsi Black. So I think there are a lot of new categories, which we are doing and doing extremely well. And that's why we've been able to sustain a bad quarter like this.
Go it, sir. And from a distribution footprint perspective, all these new growth drivers, are these -- to what extent of our network are they currently available? And what is the plan going ahead in terms of expansion?
Dairy is not available apart from North. Dairy and Tropicana is more focused in the north right now because of our capability of the plant being only in north, which is going to change for next year's season. We'll have complete capacities available for West and South as well as East. So there, we see a major expansion, which is our Nimbooz, which is our Tropicana juices, Gatorade and energy drink, of course.
Got it. Lastly, just to understand this CapEx a bit better. So in H1, we have done INR 1,900 crores, which includes the CWIP that was created of about INR [ 1,200 ] crores. So cash flow perspective, it was about INR 700 crores in H1. And then we have created another INR 900 crores of CWIP, which amounts to total INR 1,600 crores of CapEx. But the amount that you are indicating is about INR 1,900 crores. For what purpose is this additional INR 300 crores that is going to be used? Is it for...
I had just said that is for the international market, which is DRC, Congo. There's a greenfield plant coming up there.
So that is included in INR 1,900 crores. So PPT mentions that INR 1,900 crores includes that INR 300 crores.
The [ equal ] of this is already given, INR 1,900 crores -- one is that INR 850 crores for Rajasthan and Jabalpur plant, it's on sheet #15; and brownfield expansion INR 650 crores, and INR 300 crore international subsidiaries. And paid for land ahead of plant construction for future, because the acquisition of land takes time, a lot of time, INR 100 crores for that. And...
No, sir, I get that, I'm on that sheet itself. I wanted to understand the cash outlook for CY '23. So this mentions that in H1, we have done a CapEx of INR 1,900 crores, of which the cash outflow of INR 1,200 crores has already been done in CY [ '22. ] So actual cash outflow is INR 700 crores in H1. And then we have additionally created the CWIP of INR 900 crores. So total is INR 1,600 crores. But the number that we are giving is about INR 1,900 crores. So just wanted to know in second half, what is this additional INR 300 crores that we are...
So that is the CapEx. These are the cash flow, because there were some cash other than this in the international market was also sitting in the CWIP. So basically, the capitalization is INR 1,900 crores, and the money spent in H1 is 1,600 crores. INR 300 crores is coming from the -- definitely either is outstanding or is coming out of the CWIP or the capital account advances with the suppliers.
Got it. And last thing, sir, this working capital days has increased to about 21 days. So what is this? Is this largely raw material or finished goods?
This is partly both, finished as well as raw material, because the season was not as per planned. And normally, we get rid of our goods by end of June. This time, we had to take it through July.
The next question is from the line of Vatsal Dujari from CLSA.
Congratulations on a good set of numbers. My question is on the line of distribution reach. What is the progress on -- in terms of number of outlets and visi cooler infrastructure?
In fact, we update in our presentation at the year end, otherwise the latest figure, which was 925,000 [indiscernible]. And at the year-end, we -- once a year, we update this figure. And distributor network, the next question is about 3.3 million, which we have already in the past discussions with retailers, we have already stated.
Okay. And in terms of the South Africa expansion, could you give us some sense of the size of the opportunity there in terms of how does it stack up versus the other international geographies we are currently present in.
I think South Africa, at the moment, we would only like to say that we are looking at the market, and it's a bit too early. As soon as we have something concrete, we wiil get back to you.
Okay.
Otherwise, the industry size is at least equal to 50% or higher than India.
The next question is from the line of Omkar Ungate from Shree Investment.
My question was regarding once the entire CapEx is done and all the new facilities are commenced, what kind of total revenue potential it can generate?
With these new plants coming up, actually, the thumb rule is whatever CapEx we do, 2x of that once the plants have stabilized and they are working fully, the revenue, which can come up. So with only INR 900 crores, we can expect INR 5,500 crores or INR 5,800 crores to CapEx.
So around 2x at a time you are expecting on this?
That's right. It's very simple. The thumb rule is, for example, my ROCE today is 30-plus and depreciation 5%, 6%, [ 36%] or something. So 1.8, 1.9x you can take it.
Okay. And a rough figure of how many million cases that would be servicing?
We -- last year, we did 800 million. So this year in H1, I think 11% growth is [indiscernible] So 900-plus. So in that -- yes.
[indiscernible] is much more, but of course, it depends on the season and how it works. Because our quarter was very subdued, this one, so we -- that's why it's not showing the numbers. But otherwise, the capability of production is much higher than this.
So that's what I'm asking with the full capacity and once the new capacity is...
I won't be able to give you exact numbers, but we can produce reasonably high double-digit numbers.
Okay. With the expanded facilities, right?
Absolutely. Absolutely.
Okay. Another question is on the product categories. I mean, if we look at the international markets where Pepsi Wild Cherry, Pepsi Mango, Pepsi without caffeine, these products are available. I mean, how do you decide to bring a new product to Indian markets or other markets?
That it depends. We work with Pepsi and we bring one by one products what we think are going to work and the market is tested. And after that, we choose one product at a time, because it has to be marketed, it has to be distributed. So there are thousands of products available in the market -- in the international market. I mean it depends what suits the Indian talent.
Okay. But any deciding factor on that, like how do you choose it? Or what stops us from doing...
We marketed in the market, see the feedback from the people before we put it across all markets. So test markets are done. And then after getting feedback from the reasonable size quantum, then we decide what products will work in this market.
So let's say, out of 100, how many -- 100%, how many percent is currently available?
No, no, there's nothing available. I mean there are thousands of products. There's nothing that -- every market has different things. Apart from the key products, which is your Pepsi, Miranda, Seven-Up and Mountain Dew, those are your basic key products. Otherwise, there are thousands of products. Pepsi itself might have 20 to 30, 40 variants.
Okay. So as far as India is concerned, you won't say that you have just scratched the surface. You can say like that?
You can say that.
Okay. Just wanted to know what's the progress on the milk-based products, dairy products? And what kind of growth you will be looking at, as you said that it would be the next category that would lead the growth for the company?
It would be one of the categories that would see grow, because we are setting up -- we are tripling our capacity on that. So -- and it will be available in West and South as well as East. But we are doing the same for Tropicana juices and Nimbooz and some other categories. So production-wise, next year, we will have no shortfall like we had in 2022.
Okay. Any ballpark figure which you can give about the growth in the international markets, how much it was in volume terms?
So again, these markets have done well. We are further enhancing some capacity where it is needed and the markets are doing well. So all our international markets are growing and doing well. We expect the same to continue.
Just one final question. People -- the earlier participants have already asked about South African thing. But I just wanted to know what made you form the company in South Africa?
Because we are looking at it -- that looks like another big market after India. So we are looking at it very seriously. But until we have something finalized, we can't tell you.
Okay. And Mr. Gandhi said, it's 50% bigger than India, right, in terms of...
No, no, no. It is not bigger than India. But it's a large market, per caps are much higher than India.
So he was talking more about 50% higher than in terms of per capita...
There was a error there. Per caps are much higher. It's a large market. But it's error by a slip of tongue.
Okay. But what could be the size of the market if you compare with India?
It is more than a 1 billion case market. So it's a large market.
The next question is from the line of [ Chakrabarti from Chakrabarti ] Family Office.
Congratulations on a good quarter. I first want to start with the bookkeeping question. What I see in the balance sheet, both for the consolidated and the stand-alone results, is that the receivables have almost doubled. I was curious what color you could paint around this. And is this happening because of international operations? Is this just the seasonality effect? Or am I putting emphasis on something which is not really a thing for you?
At annual level, will come back. But it looks like in the international market, that currency play, it maybe one of the reasons, because international has played well in this quarter. But more details, we can come back to you.
All right. The second question is, I think, the continuation of the question the previous participant asked. So I'm more interested in the dairy-based leverages field. I mean you guys spoke on the manufacturing side. So that is good to hear. I was just curious on the physical distribution of this because I imagine that the life cycle for dairy waste products are much shorter than carbonated drinks. And I also know that the competitive intensity, specifically for dairy-based beverage is already high. So what can you add to us around how your physical distribution model is? And what do you see in the competition in the market going forward?
There 2 things. First of all, time is the same. Actually dairy-based products have longer shelf life than soft drinks. So that is one gap, which you have to understand. Our dairy-based products are all 6-month shelf life. And there is no gas, so there's no dilution of gas also. So actually, shelf life is longer than soft drinks.
Secondly, our distribution is same what we do, same trucks, same distributors, same people carry the product. And we have close to 1 million visi coolers, which it is very easily accessible and are dairy products go in that, which nobody in the dairy industry has. So -- and nobody has this kind of distribution, so that's our bigger strength, and that's what makes it easy for us to put up products in the market.
So you're saying the physical infrastructure for supply chain distribution is exactly the same. There is no additional modification.
There's no change at all.
Understood. And the last question on this one is anything you can add on in terms of volume growth and realization specifically for this dairy-based products?
Realization is higher. And what else would you want to know?
Volume growth.
So volume growth, I've told you. We didn't have capacity. Now we'll have capacity. Internationally, we are tripling our capacity. So we expect a good run next year.
Understood. And how high is the realization? Are we speaking like 20%, 25%, 50%?
About 15% to 20% higher.
The next question is from the line of Sanjaya Satapathy from Ampersand Capital.
A couple of questions. The first one is that the slower growth that we saw in quarter 1 is exclusively because of weather, but your comment suggested that weather is not particularly a factor for rest of the year. So should one assume that your double-digit growth will come back from quarter 2?
I can't tell you. We have done well in most of the territories. There, the weather was not affected. So hopefully, I would see no reason why not if the weather does not [indiscernible].
Okay. And my second question is that you have taken so many just to push record growth in Gatorade. Can you just give us some sense of how things are there? And what are the outlook?
No, we are looking very positively for Gatorade, but I think the real push will come for next year. This year, we are just getting our product right and getting -- we have reduced the price and now it's a product which is every common man can afford to have it, which was mainly for the niche before. So we expect huge growth in it. But it will -- you'll really see the traction next year.
And what will both do so that the traction will be there next year, can you just...
Because we have to plan, this is not produced in every unit of ours. The specific units, we don't introduce it. And our capacities and our [ molds ], everything has to be redone.
Understood. Understood. And sir, last thing I just wanted to check, is that you've already given a lot of color on your capacity expansion in fruit juice and milk side. And I understand that the milk one is your own brand and Tropicana is one of the [indiscernible] Pepsi. Considering that you will be getting into newer territories, just going to be supplier or you'll need to do a lot more in kind of building the brand in progressing before, launching those products and let's say, the ramp-up in those sales of those segments will not be that abrupt?
I'm not really getting your question properly.
My question is that, sir, you are getting into -- not only your expanding capacity in these 2 juices and daily products, but you are also getting into new territories. So what will be your strategy to kind of gain market share?
We're not getting any new territories. We are in the same -- Indian territory is the same. There's no expansion in territory.
It's you are not present in those states...
Except these products are being added because we didn't have manufacturing capability to go there. So now we are just going to add these products in these territories where we are already in the distribution, we have the whole setup, we just have to add these products.
And no need of any branding or anything there?
Of course, there is branding and that we will do. That's part of everything. Whatever we are doing, branding will be there. There is already branding going on for this. Advertisements have started. It will be much more focused because we'll have capacity.
Understood. And that is coming by March next year.
Next year.
It will be coming by March or a little earlier than that?
Maybe a little earlier.
The next question is from the line of Rakesh Roy from Omkara Capital.
Sir, my first question regarding, sir, a few years back you said you were not looking to expand your business in Africa. But currently, you are expanding your business in [indiscernible]. Is there any reason or any change...
We are not expanding our business in Africa. We have never said that.
Okay. And then you -- I think 2 years back you said you are not looking back or not looking to expand your business in Africa, only we are looking to -- like Zambia, Zimbabwe and Morocco only.
I have never said that. I'm sorry. Some misunderstanding. In India and these countries, how will be inorganically expand otherwise.
Okay. Sir, next question regarding, sir -- are we looking to expand our product portfolio in Africa also because that is -- like dairy?
That will always happen. Each country has a different market and we have to study the market and see what is practical for that category. So we'll be expanding wherever once we get in, our distribution is there, whatever we can sell there, we will definitely sell. We have the portfolio.
Okay. Sir, next question, sir, recently you said PepsiCo declared the result that they increased their guidance from 8% to 10%, sir? So can we assume our second half or H2 will be better than H1 or a higher growth?
In H1, our growth is 11%.
Yes. Still we are looking same growth, 11%, sir?
Well, I don't know. I said whether I can't decide, but there's no reason why we should not grow.
Yes, definitely, sir. Yes, sir. Yes, sir. Sir, last question sir, regarding sir...
[indiscernible]
Yes, sir. Sir, last question, sir, regarding sir, apart from Africa, any other territory or geography we are looking where PepsiCo is doing the work, like the same like Africa, where we do.
Right now, we are looking for expansion in Africa only, wherever we get good territory, and it makes financial strength for us.
The next question is from the line of Amit Purohit from Elara.
Sir, just on the international business, I wanted to check, has the -- have you changed any distribution initiatives which is helping up us to probably drive the growth even faster from here on? What is driving this very strong growth of almost like 30% in volumes? Last 2 quarters have been slightly lower than this. So just wanted to know that.
Definitely, whatever practices work for us in our key country, India, and we feel it can help us in other territories, Africa or other regions, we definitely try and duplicate that and try and do the same. So we are always finding new innovative initiatives even for countries in Africa and -- which is helping us.
And would you be able to share, sir, what do we say, 2 years back, what would be our reach in those markets compared to now? I understand that these markets are different, but still...
Very difficult, each country is different. I think each country is different. It is very difficult to bifurcate each country.
There is no seasonality much in these markets, right, so from...
There is seasonality. The only thing is it's reverse seasonality. Their summer is November, December, January.
And just on the India business juices part, I wanted to understand, would Tropicana and dairy would still be mid-single digit of our total volumes. Is that a fair right now?
Yes, approximately. But maybe a little less, but very close. Juices and dairy, it should be 7%, 8% at least.
And in the international market right now, you're just -- you're not looking to get into the juices part, right? Or...
We might, but not at the moment. Right now there's so much scope to do without that. But once we complete that, then maybe we'll look at it, because we have to also look at how much CapEx we want to protect for the time.
The next question is from the line of Robert Lee from Kitara Capital.
Just a question on South Africa, interested in what particularly attracted you about that market and exactly what the CBD kind of market instructs the I'm aware that betas positioning with Pepsi. I just wonder whether that's exclusive or whether you have other opportunities related to Pepsi there and how the broader competitive structure is in that market, please?
As I said, it's a bit too early. And I think we're still looking at the market, talking to Pepsi and looking -- and our people are looking at market. I think maybe as soon as we have something streamlined or something happens, then we will definitely come back and tell you what we are doing and when we would be doing it. At the moment, it's still in there.
So what exactly is -- or why South Africa, what's the particular attraction there?
[indiscernible] other large market, which we feel we are in the southern part of Africa, we are in Zambia, Zimbabwe, which are very close to South Africa, and that's the belt that we would like us to look at. So we are looking at it. But at the moment, it's a bit too early. Nothing has been agreed. Nothing has been finalized. So we're still looking at the market and the conditions as Pepsi is very weak here. So...
The next question is from the line of Sumant Kumar from Motilal Oswal.
So can you talk about any operational efficiency left post acquisition of South markets? And any benefit of operational efficiency in H1?
Absolutely. And that's why you see that even North was completely rained out, that we've been able to do better than last year, maybe very slightly, but our results have been better, it's because of South and West and East. North was completely washed out, this is the peak season for North actually.
Okay. But when we see the rainfall in some part of North side, which is still deficient, Odisha, Bihar and -- suppose there are some pocket of North, Bihar, Odisah and [indiscernible].
North, nowhere it's deficient this year. Bihar is not North, Bihar is East.
The next question is from the line of Pritesh Chheda from Lucky Investment.
Just one thing which I missed in the call, I don't know if it was covered, this INR 1,900 crores CapEx that we are doing in which a large part is India. So in India, how many cases capacity that we are adding? And in that, how much will flow to juices and water?
This is very difficult, and we would not like to bifurcate in that basis. Because cases is a very complicated way of putting it because it depends what size of bottle you are making, what -- each size has a different capacity. So to start calculating it, the only thing we will have more than enough capacities to do double-digit and even further growth, we will have enough capacities.
Okay. And we are constrained -- whatever I'm listening to the call, we had limited capacity or constrained by capacity in juices and dairy, right?
That's right.
Whereas -- so these are specific capacities for juices and dairy, and everything else is fungible.
No, the soft drink lines are different, and juice and dairy lines are different. So in these plants, we are adding juice and dairy lines also, apart from soft drinks.
Okay. Okay. And this INR 1,900 crores CapEx, the asset in this business, the asset turn in the CapEx will be 2x or less than that?
It is what we looked at, approximately 2x.
The next question is from the line of Jenish Karia from Antique Stock Broking.
Sir, first question is with regards to other income. Why is there a sharp increase on a Y-o-Y basis?
See, there are various components in this like one of that is foreign exchange, currency appreciation and depreciation. That keeps on fluctuating. That's one thing. Majority of that we don't have control.
Okay. And the second question is with regards to the recycled PET that we have started using in some of the products in some geographies. So 2 questions with regards to that. Firstly, how -- what is the cost differential on a year perspective for that for us? And secondly, how much of the product portfolio going ahead we target to use recycled PET?
Well, long term, we are looking at least 25% of it. But at the moment, it's too early. We have just started using it. And...
The cost differential.
The cost differential is very difficult to say because it's a very fluctuating market. It would depend on what's the raw material and fresh freight. And depending on that, there will be a cost difference, positive or negative.
Sir, any color with regards to the verticals that we had used in the quarter. With regards to virgin PET, how much your premium or discount that we pay?
That's what I was saying, we just started using it. It's not even 0.5%. It's too early to say, we have just tested it out.
The next question is from the line of [ Omkar Ghangurde from Shree Investment. ]
In terms of competition, with the launch of Coca-Cola, what competition -- what kind of competition have you seen? What's the initial take on this?
I think it's a bit too early. I mean we have to see what they do. We don't have -- we are not aware of exactly what they are doing, how they are planning. So I think it's a bit too early. I think most probably next year, we'll see some.
Since there were -- okay, okay. And the question was on the integration of South, North and West, all the territories, you have said that...
Hello?
Yes. My question was regarding you have said that the seasonality factor is no more because of South and West integration. What exactly do you mean by that app, which you have...
Well, the North seasonality is very skewed towards summer, whereas the rest of the country is not so skewed just in summer. Because even in the winter, the weather is not so harsh. So that is what we mean by the seasonality.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.
Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would you like to know more about the company, please feel free to contact our Investor Relations team. Thank you once again for your interest and for taking the time out to join us on this call. Look forward to interacting with you all soon. Thank you very much.
Thank you. On behalf of Varun Beverages Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.