Please note that this conference is being recorded. I now 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 and H1 FY 2022 earnings conference call. We have with us Mr. Ravi Jaipuria, Chairman of the Company, Mr. Varun Jaipuria, Executive Vice Chairman and Whole Time Director, Mr. Raj Gandhi, Group CFO and Whole Time Director, and Mr. Kapil Agarwal, Whole Time Director of the company. We will initiate the call with opening remarks from the managers, following which we'll have the forum open for a question and an answer session. Before we begin, I would like to state 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 request 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 of our operational and financial performance for the second quarter and half year ended 30th June 2022. We are pleased to share that we've delivered a record performance during the quarter. Our continuous effort to invest in our business despite the pandemic-led disruption of peak season during the last two years and return of normalcy in day-to-day activities translated to robust demand, leading to consolidated sales volume growth of 96.9% year-on-year. In addition, we were able to improve our realization per case by taking price hikes in selected SKUs, reducing discounts, incentives, and improving the mix, leading to doubling of our top line during the quarter as compared to last year. On the profitability front, despite the inflationary raw material environment, we witnessed limited impact on our gross margins during the quarter because of our early stocking of key raw materials and improvement in realization. Further, operating leverage due to high volume growth translated into improved EBITDA margins of 25.2%. Healthy cash flows during the period enabled us to significantly reduce our debt, thereby strengthening our balance sheet position. I'm happy to share that in recognition of our operational excellence, end-to-end execution capabilities, governance practice, and strong track record, VBL was recently awarded from PepsiCo as the best bottler in Africa, Middle East, and South Asia, AMESA region for the year 2021. I'm also pleased to share that in line with our dividend policy, the board of directors has recommended an interim dividend of INR 2.5 per share. With sustainability being a core principle of our business model, we continue to undertake efforts towards waste recycling and improving energy and water efficiencies with the goal of having a net positive impact on the planet. On the demand front, we are seeing encouraging consumption trends across markets. Directionally, we continue to implement strategic initiatives to solidify our market position as a key player in the global beverage industry and are confident of continuing our journey of sustainable value creation 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, 2022. Revenue from operations adjusted for excise GST grew by 102.3% year-on-year in Q2 2022 to the level of INR 49,548 million. Consolidated sales volume registered a solid growth of 96.9% to 300 million cases as compared to 152 million cases in the corresponding Q2 of 2021. On account of strong demand during the peak season, driven by return to normal day-to-day operations and our continuous investment in expanding the distribution network and capacity. Realization per case improved by 2.7% to the level of INR 165 in Q2 2022, led by price hike in select SKUs, reduction in discounts or incentives, and improvement in mix. CSD contributed to 73%, juices 9%, packaged drinking water 18% of the total sales volume in Q2 2022. On the profitability front, gross margins for Q2 2022 reduced by 32 basis points to the level of 50.5% from 62% in Q2 of 2021, primarily because of increase in commodity prices by 30% over Q2 of 2021. The increase in input cost was more than offset by operating leverage, leading to improvement in EBITDA margin to the level of 25.2% during the Q2 2022 from the level of 22.3% in Q2 of 2021. EBITDA increased by 119.1% to INR 10,506 million in Q2 of 2022 from INR 5,702 million of Q2 of 2021. Depreciation increased by 69% to the level of INR 1,531 million as compared to INR 1,288 million in Q2 of 2021. This is because of capitalization of assets in Q1 2022. IT increased by 151.6% to the level of INR 8,020 million in Q2 2022 from INR 3,188 million in the corresponding period last year. This is driven by high revenue from operational improvement in margins and transition towards lower tax rate in India. This is under the new regime to which company has transitioned in this quarter. Our debt reached to the level of INR 20,555 million as on June 30th, 2022, as against INR 10,053 million as on December 31st, 2021. Equity to the level of 0.4 and the debt to EBITDA to 0.8 as on June 30 was there based on the trailing twelve months data. H1 2022, the capex was INR 6,700 million, primarily for setting up of the new greenfield production facility in Bihar and Jammu and territory expansion in Manila territory. On the working capital front, working capital days reduced to 17 days as of June 2, 2022, compared to 24 days as on June 30, 2021 as the business returned back to normalcy and most of the new strategic inventory stock for the new season got utilized. Overall, the company's financial position continues to be solid and we look forward to delivering healthy growth in the years to come. On that note, I come to an end of the opening remarks, and I would like to now ask the moderator to open the forum for any questions or suggestions that you may have. Thank you. Thank you very much. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi, good evening. Good evening. Hi. A few questions. First, you know, on the retail touch points that you have given about 3 million. The last numbers that we have, it was a while back at about 1.4 million. Can you just, you know, highlight the expansion in this number and how much you would have done in this year YTD? Here, actually this number we have updated based upon the recent reports provided to us by PepsiCo and Nielsen. Here they have also said that exclusively about 400,000 new outlets have been added because of the Sting sales. Total 6.4 million are dedicated to Sting. This makes 3 million, and this also includes the overseas about 250 or whatever. Sorry, what do you mean by exclusive Sting? Which will be those objects which just carry exclusive Sting? What it means is 2.6 million outlets are selling all our products, whereas 400,000 outlets additional got added because of our energy drink, Sting. They are mainly right now buying Sting from us and hopefully going forward they will be buying all our other products. It's the initial, they have joined selling our products, but it's just Sting, which is our energy drink. In fact, you know, we need to leverage on the strength of Sting to sell our other products at these outlets. We will be doing actually, and it's a starting point, so hopefully the 3 million will become reality for all our products going forward. Okay. That's very interesting. Second, on the growth, volume growth. There is obviously a, you know, a base angle over here, but still, adjusting for that the growth is very strong. First part is can you just highlight, you know, there is a big divergence between, like, or let's say, South and West outperforming meaningfully the North and East geographies? See two things. One, I think the territories which we had taken and we had said that we are increasing our go-to-markets, which we could not do because of two years of COVID. That is the first year we have been able to bear fruit from all the expansion of go-to-markets which we had done. That is showing huge results for us. All the weak territories we had acquired from different plants from PepsiCo as well as the other franchisees are now all showing results. Which we could not show in the last two years. Consolidated as the market has opened up. The other big thing which has happened is initially, you know, people got used to drinking our product at home. Fortunately that has continued and our go-to-market has also started. I think both places now we are getting a growth. I think our go-to-market and our chilling equipment and our plants expansion capability, our availability of products has really made the difference, which has shown this kind of growth which is practically unheard of. Just to supplement what chairman has given directionally. See, all our territories, be it, you know, our core territories of, North and Northeast or the territories acquired from PepsiCo, South and West. It is very secular way. Everything has grown in the H1, say, 58%-59%. The only difference which is, you know, performing much better than the rest are the five underpenetrated territory where the PepsiCo share was around 50%. Those are giving huge opportunity, which, you know, in the past we had been saying about, maybe NC, Odisha, Bihar, Jharkhand, Chhattisgarh. Here the, I think chairman can mention about the new capacity in Bihar, which we've added. We already have gone out of capacity and In the first year, which we had put up a capacity in Bihar, which we had actually planned would be good enough for us for the next three to four years. We have already run out of capacity and we are expanding further capacity in Bihar to fill the demand of the people of Bihar. Clearly showing wherever there was real weakness and wherever we have enhanced our go-to-market, added our vehicles, putting more chilling equipment, that is all showing results and giving us the benefit. Interesting. I have a question on capacity as well. Just to complete. Mr. Jaipuria, if you have to take a, let's say, a medium-term view of just the next three-year view, where do you think, I mean, given that there are hardly any organic opportunity in India, where, how should we think about, you know, the volume growth for your business, say either at India level or at an overall level, assuming no further acquisitions? I think realistically, I mean, I can't really tell you exact numbers, but we've always said double-digit growth really looks quite inevitable. Hopefully how high the double digits go. Pardon me. That's right. Volume growth, right. Minimum we are expecting, and so how much it can be, we don't know. The market is looking good, and our products are being very well accepted. Our energy drink has surpassed all our expectations. Our dairy is doing extremely well and our juices are doing extremely well. All our products have been well accepted and doing extremely well. Sure. Just to clarify, double-digit growth implies double-digit volume growth, right? Volume is what you're referring to. Yeah. Yeah. Yeah. Okay. My last question, your press release talks about, you know, 90% capacity utilization. You spoke about Bihar. Can you just highlight the plans on the CapEx side, calendar 2024, 2023 and 2024 if possible, what you are thinking on the CapEx side and capacity expansion? Well, we are already in the process of setting up two large greenfield plants, one in Madhya Pradesh and one in Rajasthan. We are adding a few more lines. Like I said, we are expanding Bihar and few more territories, there are which are brownfield plants where our CapEx will be much lower. Hopefully next year we are looking to add about 30% more capacity. Right. Mr. Raj Gandhi, can you just quantify in terms of, you know, rupees million that you are going to spend this year and next year? The exact amounts are not completely here right now, but we are looking at approximately about INR 1,200 crore. Perfect. Thank you, and wishing you all the best. Thank you. Thank you. Next question is from the line of Nihal Jham from Edelweiss. Please go ahead. Yes, thank you so much, and congratulations on the strong performance. Three questions from my side. The first one was, would it be possible to give a breakdown of the volumes that you're selling between, India and the international territories? And in that also, if you could break it for the South and West, part of it. India is what, ma'am? India is. India is about 410 million. This is H1. This is H1. You want quarter or you want... If you could give us quarter or second quarter. Second quarter is 262. That is my example. For India, 233. 37.7. 37.7 Q2 of international. 37.7 is international and 262 is India. Approximately what of this 262 would be South and West? I mean, we don't have that breakup right now, but, I mean, growth has been practically identical South as well as West. Understood. Just second question, Mr. Jaipuria. What is that generally, you know, how do you look at your market share, I mean, after such a strong season where, you know, the statement is coming up, I just wanted a sense from you that how do you think your share has performed because you highlighted some of the underperforming territories in the Eastern region along with the ramp-up of South and West this season. Versus, say, three years back, even two years back, has the share of Pepsi, the overall increased in all categories or any specific you wanna highlight? Well, it's very difficult for me to say, but I think the market which has to judge. I mean, everything is open. Coke has just quarterly disclosed their numbers, and we are giving you our numbers. I think for me to say we have gained share or lost share, I would not like to comment. We can only say last quarter, retail in India has grown 7.6% volume-wise. That's it. Understood. My last question was after such a robust quarter where I'm assuming that, you know, we've seen some benefits of the strong summer season. Historically post such a season, is it possible or are we still targeting a double-digit volume growth, maybe assuming that there is some element of the strong summer season that should be enough as we look at next year? Just, you know, trying to conceptualize on that. We're definitely looking at double-digit growth, so there's nothing which has after the summer. Obviously little bit in the rainy season, it depends where it rains little bit more or less. Fundamentally overall, I mean, if one territory might perform a little less for one quarter because of the rain, we are still looking at double-digit growth. Nehal, here, you know, this confidence is coming from the fact that we have seen in this season what were the constraints we found on the supply chain or on the preforms or on delivery or on the production, etc. This is what we've been achieving with our constraints. You know, all these CapEx which is happening and the creations are happening in for the next year, just to you know, enhance to its full capacity what we have missed out during the year. I think that if other things being equal, that should be a possibility. Understood. Just one last thing. If you could give me a confirmation of Sting, which quarter it will be back. Yes. Sting we have grown 185% and, you know, that mix is about 7.2% of the total volume. That's very helpful. I wish all of the best. Thank you so much. Thank you. The next question is from the line of Chirag from CLSA. Please go ahead. Yeah, thank you so much for taking my questions and congratulations to Varun team for such excellent numbers. Mr. Jaipuria, you mentioned the dairy portfolio is also doing quite well. Could you just give us a sense around. I can't hear you. I can't hear you. I can't hear you properly, sorry. Sorry. Am I audible now? Yeah. Please. Yeah. You, Mr. Jaipuria, you mentioned that the dairy portfolio is also now doing quite well. If you could, give us a sense of how many states have you launched the products and how many distribution touchpoints have you covered thus far? Well, we have not been able to go very far because of our capacity because dairy we can only produce in one of our plants which is in the North in Punjab. We have restricted most of our products to the North region only, and whenever we had some extra capacity we have sold to other provinces. Fundamentally we restricted it to North. Hopefully by year two for the season 2024 we will be able to supply most of the other territories after we have got the plant going. Understood. Can we assume that the annual volume report will have a sustainable load of dairy? Yes, Chirag, by the end of 2024 or in the beginning of 2024 we will double the capacity. That's right. Understood. Mr. Raj Pal Gandhi, can you just elaborate a little bit around, you know, the right-sizing of the business? We have seen some unexpected write-offs on the revenue in the last quarter. I understand that, you know, there's been some gains from RGB to PET. Is there any further write-off that is required now going forward on the RGB side? Chirag, if we would have been any further we would have been right away. See, this is something which is a real-time exercise and you will recollect even in the last quarter, when we were reviewing it for Roha plant, we had you know written off those assets. As we have stated, the mix is undergoing a lot of change. PET is what is growing faster than the glass. The mix of glass has come under 10% and before it was necessary to bring the value of the assets producing glass bottles, chilled water, etc., in line with that which has already been done. Right. Just one last question on the CapEx, on the greenfield CapEx number. That number is to be spent towards how many financial years? Well, see, the capital work in progress, you know, starts because the land is purchased and things keep on happening. This is already started. The capitalization from capital work in progress will happen when the assets are put to use, which will be sometime in February, March 2023. Understood. The cash outflow will happen by February 2023. All the cash outflow, right? I think that, even for last year also happened the same day. This is something because our year ends in December and some part of CWIP stays and, it will create little problem for calculating ROCE, but, for that purpose, June is the best way. Understood. That's very clear. Thanks so much. All the best. Thank you. Thank you. Next question is from the line of Dhruv Bhimrajka from Monarch AIF. Please go ahead. Yeah, congratulations on a good set of numbers, sir. Sir, just to get the clarity on the CapEx part. You said for CY 2022, what would the CapEx be? Yeah. It's about INR 800 crore and about INR 200 crore because of the foreign exchange, et cetera, adjusted. The amount spent is about INR 620 crore. No. I'm asking the guidance for the full year, CY 2022. 2022, this is already done for 2022 because the season is over. Now, whatever we'll be spending will be for. This will be for 2023. Which will be parked as the capital work in progress and will be capitalized as a capital expenditure when the assets will be put to use. Which will be early next year. Okay. Sure. Got it. Sir, on this part, I missed. You said domestic volume grew at 262 million cases. What will be the South and West combined contribution? We don't have the breakup right now, and I think that India's volumes are 262. South and West both have grown and done well for us. Okay. I'll follow it up. Thank you so much. Thank you. Thank you. The next question is from the line of Nitesh Seth form Vedant Securities. Please go ahead. Good afternoon, sir, and congrats for the good quarter and a very good execution. Sir, my question is regarding more on the qualitative aspect. Like, could you please share some qualitative details about the direction of the volumes and the territories which are still under-penetrated and where there is a definite scope, I mean, more than double-digit, 20%, 30% scope of the penetration and volume, incremental volume, sir? See, most of our territories which we acquired are under-penetrated, and there is still a lot of scope, but there are challenges with it. If things go well. That's why we are quite confident that the double-digit growth looks very feasible going forward for the next few years. Sir, still there is any suggestion, like, whether there is more scope in South and West territories? In North and Northeast also still there is a different scope? There is scope in every territory. North, South and West, obviously there is more scope. Even in East, which we acquired, there is enough scope. North was the only original territory we had, where the growth will be the regular growth. The rest of the territories we expect better growth. Sir, thank you very much, and congrats once again for the scope execution. Thank you. Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Yeah. Hi, good afternoon. Congratulations on the great results. I've got two or three questions. First one is I would like to understand distribution numbers that you have shared a little bit better. Just to get a little bit correctly, 3 million outlets as you mentioned includes about 250,000 overseas retail outlets, 400,000 exclusive Sting outlets. So the balance would be, you know, India outlets where you are able to sell the entire portfolio. Am I understanding correct? Yes. The 400,000 is also Indian outlets. Got it. Right now they have started with Sting. Understood. As every month passes by, they will start carrying our other products also. Got it. INR 3.3 million includes INR 250,000 international? That's right. That's right. How does this compare versus Coca-Cola in India? as per the same data. You know, your overall India outlets today. We are still less than them. That's why our share is much lower than this. A lot of our territories are much weaker which I said there we are holding 15%-20% market share. There is lot of scope. The only thing I can tell you, there is enough headroom and enough opportunity for us to grow. Is it possible to give us an idea what is the magnitude of opportunity if you would? I would not like to comment on that. Sure. Secondly, sir, you had indicated that you were, you know, at the time of acquisition for South and West, you had indicated that you would remember target at that point of time was to double distribution in 3 years. We have passed 2 years. You know, how much of this distribution expansion has come from South and West? If you can give us some color, 2 million-3 million. Three years have passed, but two years were complete disaster for us because both the years, COVID happened in the peak season of April and May. The real expansion has happened only this year. You cannot double your distribution in one year. We are on the right process. Things are happening in the right way, and that's why you're seeing such healthy growth. That's why I'm also saying that going forward, it looks very positive and we feel that double-digit growths are very doable. Hopefully we can do better, but I don't know. But that's those are the numbers which look very feasible. All right. Do you see a scenario where outlet will accelerate from here on? While, you know, the growth over the past maybe couple of years would have been more South, west, and east, all three. Because north was the only original territory we really had. Even in east, a lot of territories came later on, which was Bihar, Jharkhand, Orissa, all these territories came later on. As we have mentioned, as when we have put up a plant in Bihar, the growth has been just out of proportion. We have already run out of capacity. You know, I really don't know how large it can be. We had planned this capacity for three years. We've run out on the first year, so I don't know. Some of these territories are so under-penetrated that is very difficult to really answer. Actually, on Sting, you know, is there an opportunity for Sting in overseas market or are you already, you know, selling? We are already selling Sting in overseas market. Oh, okay. We have just launched in Nepal. In other countries we were already selling. Okay. Finally, the 1,200 crore CapEx number that you indicated for this year and next year in terms of expansion that you have sort of planned, does it only growth CapEx or does it include maintenance CapEx over and above this, right? Maintenance we write off. We don't in the P&L. We don't take it to in CapEx. We write off on our P&L. From a cash flow perspective, what will be the total outgo this year and next year including INR 670 crore that you have done in the first half of this year? This year is INR 670 crore, and next year when the plants by March, which is when we capitalize because all the lines start, you know, the expansion happens. The cash flow keeps going from as we purchase the land, the buildings are happening. Part of it is this year and part of it is going to be next year. About 40% would be this year and 60% next year. Understood. Thank you so much. Thank you. Thank you so much. Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead. Overall organic volumes, if we see before COVID overseas by 2018-2019, so organic volume growth was about 16%. Now also post-COVID after unlocking, if we see on a three-year CAGR basis, it's about 15%. So, I wanted, if you can since you have provided that you can see double-digit volume growth going ahead and it's quite encouraging. If you can sort of narrow it down into in terms of low teens, mid-teens, high teens, then it would be really helpful for us to sort of understand this growth better. It is not possible, you know. I mean, when I'm telling you I wish I could predict that specifically, but double digit itself is a good enough number, and this is what realistic we look at. It could be 12, it could be 18, I'm not very sure. Depends partly on the season and depends on our execution. We believe we are executing well, and depends on our competition also, how they execute. Sure, sir. Secondly wanted to understand, within categories, juices have seen relatively positive growth for this quarter versus carbonated water. If we see on a three-year CAGR basis, wanted to check currently versus carbonates, what would be the extent of distribution for juices? The distribution or, the volume we are asking, what I'm asking, if there are about 3 million retail outlets, in how many outlets we are distributing juices? I would say about 60%-70% of the outlets. The exact numbers we don't have, to be honest. All the rest, 30%, 40%, we can service or distribute juices to those outlets as well, or there are certain limitations where. Yes, some of the outlets don't take juices. All the outlets don't take juices. As we have said, 400,000 outlets out of this, which is about 18%-20%, have only started with our energy drink. Ultimately, as I said to you, they will start carrying our other products also. It takes time to enter a new market, a new outlet. Sometimes we have to accept what he wants. Slowly, once you have a relationship, you start penetrating with your other products. Sure, sir. Last question is to understand the margins of Kerala. Currently in this year, despite significant material inflation in PET cases, et cetera, most likely we will be doing, let's say, COVID sort of margins at about 20%. When these gross margins start to recover going ahead, can we sort of give in better than 21% EBITDA margins or how should we? I think you'll have to ask Mr. If he stops packing and the oil price should come down. Very difficult. Again, you know, the world scenario is such that key raw material, one of the key raw material is PET resin, and that depends exactly on the petroleum prices. I think, depending on the world market conditions, but I feel it has already reached the peak, so hopefully it should get better. Assuming they come off. Assuming they come off, obviously our margins will improve. Sure, sir. Sure. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Just a question on the pricing. First of all, let me know if the data I have with me is right or not. On a three-year CAGR basis, for India, the volume growth is 20% CAGR. Sorry, 15%, and the value growth is 20%. It assumes a 5% pricing on a three-year CAGR, which means about 15 percentage points point to point. Am I looking at this correctly or is there some other sort of explanation to this? No, I think fundamentally you are pretty close to it. See, what happens is partly because our lowest value product, which is glass, has stopped selling and reduced. Our high-value products have started selling more, so that's why you're seeing a change in the value of the products. Also, as I said, our energy drinks are doing better. Our dairies are doing better, which are little high priced, and our Tropicana juices are doing better, which are slightly higher of value. Both ways, as we said, double digits, volume and plus of course some value. We'll keep on. This is what we anticipate the growth to be coming for the next few years. Of this 15% difference between volume and value on three-year basis, would you be able to split up that 15% between pure pricing and mix? No, it's very difficult at the moment. If you have some queries offline, maybe they have to dive deep into the exact numbers and see. Sure. When you earlier said that we would be able to do a double-digit volume growth stable state going ahead, is that? I mean, I just wanted to understand how much of this would you attribute to the industry growth itself and how much is sort of your confidence of growing faster than industry? If let's say you have a ten-year- I have never said I'm growing faster. I believe that we are doing a good job, and the rest I leave it to the market to judge. The industry is growing very healthily and I think we are doing a bit, a good job. Basically over the next three, four years, you believe that the industry itself can do double-digit volume growth? It should. Okay. Understood. Lastly, I know you have said this. I just wanted to again ask because it was not clear to me. What is the CapEx plan in CY 2022 and 2023? Here I am talking about, I understand the CWIP moving into gross block related permits, et cetera. I am looking at it from the point of view of the year in which it moves into gross blocks. Let's ignore the CWIP. Let's ignore the cash flow impact of the CapEx. Let's look at when the CapEx come into the balance sheet. On that basis, what's your CapEx in CY 2022 and in CY 2023? 2022, it is INR 670 crore, which was given in the presentation. For next year, Chetan has estimated INR 1,200 crore. Approximately INR 1,200 crore. INR 1,200 crores. With this CapEx, 670 plus 1,200, what percentage would it result in expansion in the capacity? We have already said about 30%. 30% is already captured in this year, which we have already, you know, used that capacity. INR 1,200 crore will be adding about 30% of capacity. This 1,200 is all in India? This is mostly in India, yes. Okay. Okay, sir. No problem. Thank you. Thank you. Thank you. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead. Yeah. Thanks for the opportunity. Sir, in case of distribution, giving more color on it, can you indicate what is our current share of e-commerce, modern trade, B2B channel like HoReCa and then the general consumer market? Also, what is the revenue share of in-home consumption versus out-of-home consumption? Maybe 10 ml SKU and below and 10 ml SKU and above share for us. Our mix is approximately on-trade about 23% and off-trade about 77%. This includes HoReCa modern trade as well. The 23% includes that. Wow. Sorry, please repeat. 23%- Yes, the same. Okay. HoReCa is about 2% and modern trade is about 4%. Of the home consumption is 23% and off-trade is 77%. Okay, understood. Sir, lastly, on the Sting, can you indicate the current market size of total market potential for this brand and? Very difficult to say because there are very few players in the energy. Coke has just entered the energy segment. Worldwide energy segment is doing extremely well, and we believe it should do extremely well here also. If we see in a lot of countries, it has reached about 12%-15% of the mix and even larger. In India it is currently 7%. No, it is not 7. 7% is our mix. It's not 7%. Because Coke was not doing the energy drink. Okay. Overall mix, in- No, no, it's very low. Energy drinks are very low. I mean, Red Bull and all are very niche, products. They are expensive niche products. There is huge opportunity to grow this product. Okay. Sure, sir. Understood. Last question. Those 3 million distribution outlets that we are looking at, where do you see this number by end of CY 2023? Yeah, that's it. Thanks. Well, we normally look at about 8%-10% expansion in our footprint. That is what we expect. If we can do better, it'll be great, but that is what we expect. Okay. Sure, sir. Thank you. Thank you. Thank you. The next question is from the line of Chetan Gindodia from Alf Accurate Advisors. Please go ahead. Hello, sir. Congratulations on the great set of numbers. Sir, is it possible for you to give some color on region-wise international geographies? Secondly, I wanted to understand, so last year if I see for CY 2021, the profitability in Nepal region, Sri Lanka region, and Morocco region was slightly lower compared to the company level EBITDA margins. What could be the reason for this, and you know, what are the steps that we are undertaking? Internationally every year something or other. Now Sri Lanka this year the profitability, I mean, Sri Lanka itself is shaky. You know, things keep happening. That's why we consolidate international and give you one number. All our markets are doing well. Sri Lanka has its challenges, but it's such a small portion of our overall business that it really doesn't affect. It's about 1%, so it doesn't really affect us to that level. That also we believe even though we are growing there, we believe it will come back and it might take a little longer. Okay. In Nepal and Morocco region, any updates around. Nepal is doing well for us and we are growing and we are quite happy, and profit margins are also increasing, so they are in line with what we had for our businesses. Okay. I just actually wanted to understand what is the industry volume growth, long-term volume growth for our carbonated drinks category over last decade or so, you know? Do you think this is changing going to change going ahead or do you think the increased penetration impacts this number? Well, it's basically because of increased penetration you are getting double digits growth. Otherwise you, why would you get the growth? Because we are penetrating where we are saying 8%-10% new outlets are being added and our the markets have opened up. Go-to-market as well as home consumption, both are growing. Even HoReCa channel is growing. If you see fast food is growing as fast. Everywhere consumption is growing. Okay. Thank you so much, sir, and I wish you all the best. Thank you. Thank you. The next question is on the line of Sumant Kumar from Motilal Oswal. Please go ahead. When we talk about the underpenetrated market like Bihar, UP and West Bengal, Jharkhand, can you discuss about how the penetration in these markets compare to a developed market like West and some markets in South? You see each state, I mean, if I start describing it'll take too long. As we said, most of the territories we acquired, a lot of them were very underpenetrated where we had 15, 20% share. There all we need to do is keep on increasing our distribution and as we said, Bihar was one state where we did not have a plant. After putting a plant, we've had extra, real heavy growth and we've run out of capacity in the first year. These underpenetrated markets, as we are putting more, go-to-market vehicles and Visi-coolers, they are all growing at a faster pace than our regular, markets. There is still so much scope because we, when you are at 15%-20% market share, then it is, gap is so large that hopefully next few years we don't see any shortages. Just, you know, putting in enough, vehicles and Visi-coolers and go to market. When we talk about the underpenetrated package, you are talking about your distribution and number one. Number two, it also includes changing consumer behavior, consumer drinking pattern also. Well, it does, because if your product is not available in lot of outlets, I mean, under penetration is basically your availability in outlets is much lower, and that's why we have to keep expanding our number of outlets and keep on increasing our distribution. As we keep doing that, the basic products are, you know, the local people like the product. It's just that it's not available. So as we are making it available, the volumes are growing. Thank you so much, sir. Thank you. Thank you. The next question is from the line of Sanjay Satapathy from Ampersand Capital. Please go ahead. Hi, sir. Thanks a lot, and congratulations for a fantastic set of numbers. Just to clarify, can you please clarify your distribution outlet expansion growth plan? I heard that you are annually targeting 18%-20%. Just wanted to re-check with that. That's right. You've got it right. That's what we are saying. Okay. The second question, sir, I just wanted to understand is that this CapEx plan which you have said will take up your capacity to 60%, so it will be ready by onset of next summer season. Is that right, sir? That's what we are planning. Okay. Last thing that I just wanted to check, that your margin which you said you have protected by buying these preforms in advance, that probably you have run out of your stock now. So how will the costs shoot up from here in the near term? Secondly, as people have been trying to prove that now that south and western market is kind of completing the turnaround and your- No. Our margins are what we have shown would be approximately that. Until the oil prices come down and resin prices come down, then our margins could improve. We have got very healthy margins, and we have never seen better margins than this. We should be able to maintain our margins. We don't see a challenge. Despite running out of those preform stocks? Yeah. This is ongoing. You keep buying and you keep selling, so you keep adjusting that. Understood. If I can just check with you that the kind of operating leverage which we saw in this quarter was it something which was affected somewhat because you ran out of capacity? No, as it is, you know, we have grown 106%. Actually things, you know, are fine, actually as a guide for building capacity for the next year. Otherwise, it's rather we have taken advantage of operating efficiency in spite of direct costs going up, improving the EBITDA margins. We have availed such advantage to the fullest. If I can check one more thing that what I feel is that the beverage market has been growing so fast that the advertisements and brand visibility gained by the respective brands has probably come off. That at least appears from the minutes of advertisement that we see on many media channels. Is that something which is reminding. Budgets are going up only. They're not coming down. Advertising levels don't come down. Okay. Also in terms of product innovation, from your side, I'd like, are there more colors on the anvil and likely to keep the excitement going? Absolutely. Although every year first we need to consolidate what we have added, but then there is always categories in our portfolio. Whenever we need, we can take out and start selling. The reason why you have chosen this greenfield capacity in these two states is because, again, under penetration in that particular region or Not under penetration. Because our capacity is much lower, has become lower than what our requirement is for these two states. Okay. Because if you can repeat a Bihar-like experience here, and these are two much bigger states. Rajasthan we already have two plants. This is because our sales are higher and our capacity has come to exhaustion. That's why we are adding more capacity. Similarly, in Madhya Pradesh, we already have a plant. We are putting on the border near Chhattisgarh, so there we don't have a plant. Madhya Pradesh and Chhattisgarh will be catered from this. Okay. Got it. Thanks a lot, sir. Thank you. Thank you. The next question is from the line of Akash Patel, an individual investor. Please go ahead. Hello. Yes. Sir, I have one small query about the company. The company is doing fantastic. As per we seen result today also and following the other quarter also. Can you just highlight on the debt plan of a company that after some five years or seven years, can we see VBL can be a debt-free company or it can be manageable? It can be debt-free if we don't expand even one year. No, no. I'm saying that after some five years or seven years after, can we see a pure-play low-debt, net debt-free company? Do we want to be debt-free? Do we want to be debt-free? The question is do we want to be exactly debt-free? Our debt is so low. Yes, we'll keep on getting some opportunities or the other, and we'll keep expanding. If we really want to be debt-free, we can do it any year. Okay. Okay, sir. Thank you, sir. Thank you. Thank you. Participants who wishes to ask a question, press star and one. The next question is from the line of Gautam Jain from GCL Securities. Please go ahead. Good afternoon, sir. Congratulations for very great set of numbers. You have exceeded all the expectation of all the people, I think so. Thank you. My question pertains to, is there any deliberation regarding any new product to be added to the Pepsi side and or any new geography still to be added? Well, India, there's nothing very much left. We are always open to Pepsi. If they give us any territory which is good, we are always looking to expand and what we can handle. Limited expansion we'll keep doing in geographies, whichever Pepsi keeps offering us. Okay, in terms of new products? New products, you know, there is always Pepsi already always has a slew of products which are available. Question is, once we launch a couple of products, then we need to make sure that they are properly serviced. Just by adding new products, it doesn't help. Once we feel that we have reached a scale with those products, then we keep on adding more products. There is no shortage of new products. Can you just highlight few points on the recent tie-up with Pepsi regarding Kurkure? That we are going to start the manufacturing, I think by end of October or November. Once we start that, then hopefully in the coming year, we will expand with that. The license would be same like other products? No, we are producing for PepsiCo. PepsiCo is doing the marketing. We are going to manufacture and give it to PepsiCo. Okay. In future, PepsiCo is also there. I mean, we can get that, distribution also, right? I wish I could decide for Pepsi. There's opportunities there, and we can keep trying. Thank you so much. Wonderful results. Congratulations. Thank you. Thank you. Before we take the next question, reminder to the participants, anyone who wishes to ask a question, press star and one. The next question is from the line of Aarushi Lunia from Hem Securities. Please go ahead. In the last concall, you had mentioned that in Zimbabwe, you are adding capacity by end of May or early June. Could you please throw some light on the development? We have added one line in Zimbabwe, and the line has started producing, so it will give us results for this season. Because their season starts at end of August, and we will have enough capacity to feed that market. Okay, sir. Thank you. Thank you. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Assuming that you are very close to full capacity utilization, your current asset turnover on a gross block basis is about 1x. I'm adjusting the gross block for whatever index adjustments happened in 2016, and on that basis it is approximately 1 or 1.1x. Now, with the sales of INR 8,800 crore expected approximately in CY 2022, if I add 30% to that, which is your capacity enhancement, it can generate INR 2,600 crore of sales with INR 1,200 crore of CapEx. The incremental asset turnover on this CapEx would be more than 2x versus your overall India sales by gross block of about 1.1x. Can you explain why the asset turnovers for the incremental CapEx is going to be higher? Whenever you are adding brownfield CapEx, it will always be less. Because your cost of land, the development around it, there is no cost. It's only cost is of the line. Your cost is higher when you are doing a greenfield plant. Of this INR 1,200 crore, a large part is greenfield, right? No. About 60% is greenfield, 60%-65%, 35% is. Whereas in that 35%, it is practically the same capacity. Okay. I see. This calculation is correct, right? That for the INR 1,200 crore of CapEx you put in, that once it is fully utilized, then you will be able to generate INR 2,600 crore of sales from that. It's a very, I mean, you have to look at the overall company's, because it depends where you are putting the line, what's the seasonality of that territory. If it is put in South or West, the turnover per line is much higher because the seasonality curve is much lower. There are a lot of permutations and combinations, but overall you have to look at the overall company's turnover and, based on that, your CapEx and ROCE. Sure, sure. I'm not asking what would be the turnover generated from those plants. I'm just saying that, once you do this INR 1,200 crore of CapEx at all India level, you would be okay to add INR 2,600 crores of, I mean. Technically what you're saying, yes. It could be a little higher, depending on what products we are making. Okay, understood. That's it. Yes. Thank you. The next question is from the line of Jenish Karia from Antique Stock Broking. Please go ahead. Joint venture with IVL Dhunseri, as in how do we expect the benefits from it and what is the scale of PET recycling that we are expecting, some color on that front, sir? I don't get your question. Sorry, I couldn't understand it. It allows a joint venture stake which has been completed with IVL Dhunseri, correct? In May. Your line is not clear at all. I can't understand you. Is it better now? Your voice is breaking, Jenish. Is it better? Yeah, please. Yeah. I was saying that recently we announced plant purchase in a joint venture with IVL Dhunseri for PET recycling. Are we expecting some benefits on PET preforms from that venture? What is the scale of PET preforms? Some color on that front, sir. Well, there are two things. One, that is the need of the hour because we need to. We have commitments, and we want to make sure that we recycle our products on our ESG platform also. At the same time, we are going to produce our own resin out of that, so we will get benefits out of that. Any color on what would be the size of recycling? How many PET bottles do we expect to recycle in a year or something like that? I don't know. The first capacity we are looking at is about 30,000 tons. Okay. That's it. Okay. Thank you. All the best. Thank you. The next question is from the line of Gagan Goyal from Trinity Capital. Please go ahead. Hello. Can you hear me? Yes. The question might have been answered earlier, but how are we envisioning the dairy business expansion across geographies and product mix? Well, the dairy is doing extremely well. It has done extremely well. We are adding, we are doubling our capacity next year. As our sales keep on going up, we'll keep on adding. At the moment we are doubling our capacity for next year. In terms of geographies, like, are we, like, expanding? It will be in the western region, which would service western south. In terms of product mix? No, dairy, you. I just said no? Dairy. Dairy, I'm telling you. Within the dairy, what product mix are we expecting? Product mix which we have, we can't supply right now the mix we have right now. We are just going to add that to the western and the southern region. Okay. Thank you. Thank you. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Thank you very much all the participants for their participation. I hope we have been able to answer all your questions as clearly as possible. Should you need any further clarifications or you would like to know more about the company, please feel free to contact our investor relations team. Thank you once again for your interest in Varun Beverages and for taking the time to join us on this call. Look forward to interact with you soon. Thank you very much. Thank you. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us, and you can now disconnect your lines.