VBL - Varun Beverages Limited Share Price

In the Q1 CY2025 earnings conference call for Varun Beverages Limited, management provided an optimistic outlook following a robust performance. They reported a consolidated sales volume growth of 30.1% year-on-year (YoY), reaching 312.4 million cases, driven by a healthy organic growth of 15.5% in India. Revenue from operations grew by 28.9% YoY to Rs. 55,669.4 million, while the PAT increased by 33.5% YoY to Rs. 7,313.6 million.

Management highlighted key forward-looking initiatives, including the successful integration of South Africa territory, achieving 141 million cases over the last four quarters, and plans to enhance PepsiCo's product portfolio, which is expected to improve realization and margins. The commencement of two new Greenfield production facilities in Kangra and Prayagraj has significantly bolstered capacity, with additional facilities in Bihar and Meghalaya expected to start operations soon.

The Board approved an interim dividend of 25% of face value (Rs. 0.50 per share), leading to a cash outflow of approximately Rs. 1,691 million. Looking ahead, management emphasized immense growth potential in India's beverage market, fueled by rising per capita income and urbanization. They anticipate maintaining a double-digit growth trajectory for the year, underpinned by a strengthened distribution network and diversified product offering.

Going forward, management remains focused on sustaining operational efficiencies, reinforcing robust supply chains, and exploring new geographies for expansion. They outlined a strategic CAPEX plan totaling approximately Rs. 3,100 crore for the year, indicating ongoing investments in growth initiatives.

Here are the major questions asked during the Q&A section of the Varun Beverages Limited Conference Call along with detailed answers:

1. Aditya Soman: "Any sort of early trends from the recent launches you have made of Sting Gold or the lower price point pack of Gatorade, especially as we head into summer?"

   • Ravi Jaipuria: "It's early to assess the impact of Sting Gold and Gatorade since they were recently launched. We believe they have been accepted positively, but we'll need another quarter to provide solid insights."

2. Aditya Soman: "Could you elaborate on why the higher CSD share in India has impacted gross margin?"

   • Raj Gandhi: "The shift of water costs to COGS from other expenses and the focus on CSD, which typically has lower gross margins than packaged water, contributed to a decline in gross margins. Higher sales of smaller packs versus larger packs also led to increased COGS."

3. Percy Panthaki: "How is the summer season going so far?"

   • Ravi Jaipuria: "We do not analyze growth on a month-to-month basis but maintain our forecast of double-digit growth for the year despite variations in monthly performance due to weather."

4. Percy Panthaki: "What's your guidance concerning India margins?"

   • Ravi Jaipuria: "While we aim to defend margins around 21%, we continually strive for above that through backward integration and plant expansions, though we do not provide guidance exceeding this level."

5. Darshit Vora: "Will the India margins surpass previous lower levels compared to international margins?"

   • Ravi Jaipuria: "India margins are improving with our expansions. Internationally, while we've faced challenges, we expect margins to improve, but it may take time to reach parity with domestic margins."

6. Mrunmayee Jogalekar: "What is the current volume from DRC?"

   • Ravi Jaipuria: "DRC is still early in its integration. We are progressing and will have clearer numbers in the next couple of quarters as we navigate some initial challenges."

7. Prashant Poddar: "What is your view on the competitive landscape, specifically regarding Coca-Cola?"

   • Ravi Jaipuria: "Competition encourages overall growth. The market remains underpenetrated, and new entrants strengthen market dynamics. We are both experiencing healthy growth and expect this trend to continue."

8. Nitin Shakdher: "What trends are you seeing in the shift toward healthier options and energy drinks in India?"

   • Ravi Jaipuria: "Hydration and energy drinks are growing rapidly; our hydration product, Nimbooz, is witnessing nearly 100% growth, reflecting consumer preferences shifting toward healthier options."

9. Ashish Kumar: "What is this year's CAPEX spend and geographical split?"

   • Raj Gandhi: "Our guidance for CAPEX is approximately Rs. 3,100 crore. We are on track, having spent about Rs. 900 crore so far, with the detailed geographical split available offline."

10. Ashish Agrawal: "Could you update on the development status of your new drink variants?"

• Ravi Jaipuria: "The malt-based energy drink, a variant of Sting, was launched in March, and while early reactions are positive, we'll need time to assess its market performance."

These summaries capture the essence of the questions and the responses while adhering to the character limits requested.