Ladies and gentlemen, goo d day, and welcome to Varun Beverages Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. 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. Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q1 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 highlight 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 an opportunity to go through our results presentation that provides details of our operational and financial performance for the first quarter ended March 31st, 2023. We are pleased to share that the company achieved remarkable operational and financial performance during the quarter, despite weather disruptions in some parts of India in the month of March. Moving on to our expansion plans, we are happy to report the commissioning of our greenfield production facility at District Bundi, Rajasthan and brownfield expansion of six facilities. The additional greenfield plant in Jabalpur, MP is expected to be operational very soon. With regard to our international growth plans, construction of our new production facility in DRC, Congo has already started. We expect the facility to be operational by the end of the year. Our energy drink product has achieved a significant share in our overall mix and has firmly established our leadership position in the category. Our focus now turns towards new performers like value-added dairy, sports drink, juice segments to sustain the growth momentum. These products continue to be well received by consumers, providing us with confidence that these products will fuel the company's next leg of growth. It gives me immense pleasure to announce, as approved by shareholders in our annual general board meeting, the final dividend of INR 1 per share, taking the total dividend payout for the year to the level of INR 3.5 per share. Furthermore, the board recommended the split of existing equity shares of the company from 1 equity share having face value of INR 10 each into 2 equity shares having face value of INR 5 each. This is subject to the approval of equity shareholders of the company. We are also committed to safeguarding our environment and promoting sustainability in our operations. One of the ways we are achieving this is by investing in PET recycling and implementing measures to improve energy and water efficiency. Our goal is to have a net positive impact on the environment. Overall, we are encouraged by our strong start and remain confident about delivering good performance this year. With our robust on-ground execution capabilities, expanding manufacturing capacities, and increasing distribution reach, we believe we are well-positioned to achieve sustainable growth in the medium to long term. I would now invite Mr. Gandhi to provide the highlights of the operation, operational and financial performance. Thank you very much. Thank you, Mr. Chairman. Good afternoon and warm welcome to everyone joining us today. Before we start with the update on quarterly performance, I am happy to share that over the last five years, the company has demonstrated strong growth across all key performance indicators. Sales volume has grown at a CAGR of 24% in five years, which is a testament of company's execution capabilities. Net revenue increased significantly at a CAGR over a period of five years by 26.7% during the same period of last five years, indicating the company's success in expanding the customer base as well as distribution reach. In terms of profitability, the company has achieved remarkable growth with EBITDA and PAT growing at a five-year CAGR of 35.1% and 50.8% respectively. Now let me provide an overview of the financial performance for the first quarter ended March 31, 2023. Net revenue from operations grew by 37.7% year-on-year in Q1 2023 to the level of INR 38,929.8 million, driven by robust volume growth and increase in net realization. Sales volume grew by 24.7% to the level of 224.1 million cases in Q1 of calendar year 2023, from earlier level of 179.7 million cases in Q1 of 2022, driven by strong demand across regions in India. In Q1 calendar year 2023, net realization per case improved by 10.4% to INR 173.7, primarily driven by a price increase taken towards the end of the corresponding quarter last year in selected SKUs, and continued improvement in the mix of smaller 250 ML SKUs. On an overall consolidated basis, CSD contributed to 71.2%, juices 7.4%, packaged drinking water 21.4% of the total sales volume in Q1 of CY 2023. During the quarter, gross margins improved by 89 basis points to the level of 52.4% from 51.5% in CY 2023, driven by marginal savings in raw material prices and improved product mix. EBITDA increased by 50.3% to the level of INR 798 crores, EBITDA margins improved by 172 basis points to 20.5% in Q1 of calendar year 2023, driven by operational efficiencies on the back of strong revenue growth. Depreciation increased by 31% to the level of INR 1,721 million in CY 2023, as compared to INR 1,313 million. Finance cost increased by 33% in Q1 of calendar year 2023 on account of capitalization of assets and setting up of new production facilities. PAT increased by 61.8% to the level of INR 4,385 million in Q1 of calendar year 2023 from INR 2,710 million in Q1 of calendar year 2022, driven by high growth in revenue from operations, improvement in margins and transition to lower tax rate in India. As shared by the Chairman, we have successfully commissioned multiple greenfield and brownfield beverage manufacturing lines across regions in India, resulting in an increase in our production capabilities for the peak season. We are delighted to report a strong start to the year. We are currently witnessing a healthy demand environment and remain excited about our prospects as we enter the peak season with expanded capacities and stronger distribution network. 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 the questions and suggestions that you may have. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 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. We have our first question from the line of Chirag Shah from CLSA India. Please go ahead. Yeah. Hi, good evening, and thank you for taking my question. Mr. Jaipuria, you mentioned that sports drink and value-added dairy would fuel the next leg of growth. Can you please elaborate a bit more on this? In that context, can you also touch upon how we are positioned to protect our market share in the energy drinks? Juices I understand earlier was restricted due to capacity constraints. Both juices as well as value-added dairy, we were constrained with the production constraints. We are putting up 2 plants which are going to add our capacities in both these categories, which is Tropicana as well as value-added dairy, which is going to be in Maharashtra and UP. That is what is going to for next year increase our capability because right now we are, we don't have the capacity to supply. Sir, when you say value-added dairy, are we looking to further expand our product portfolio in dairy or the products that we have would suffice to for the national rollout? It is a national rollout. We have enough products, but at the moment, since we don't have capacity, we have not looked at expanding it. Once we have the capacity, then if we feel there is a need. Right now, I don't think we have enough products which are enough to take care of it. If we need, we can always add more flavors and more products in it. Right. Just your views on the emerging competitive landscape, especially with Campa looking to tie up with bottlers and packaging partners. Well, you know, it's a big market. We have competition. We had lot of B brands before. There is always going to be competition, and as the market is going to grow, there'll be more people coming in. Campa and Reliance will be a formidable competition, but I think the Indian market is so large, and we are still scratching the surface. I think there is enough room for everybody. Right. On the energy drink side, is there a change in strategy to protect our market share over there? No, I think we are just increasing our distribution, and that is what is required right now. We have still not, as I keep, as I said before, that there is so much room and there is so many more outlets which we can open, which we are adding every year, that there is huge scope to keep on adding further, you know, the volumes and the number of stores. Right. On that same note, I mean. We don't need to do anything else except enhancing our distribution. Right. Right. Right. On that note, I mean, you know, of course, we have come a long way in terms of our Visi Cooler and infrastructure on ground. Of course, last year itself has seen a huge ramp up. What are the plans in terms of the rollout of Visi Cooler and infrastructure going forward and how do we look at enhancing that capacity? That will keep on enhancing because as our number of outlets keep growing, our Visi deployment will also have to keep on going in parallel to that. As we want to open more stores, so we will have to keep on adding more Visi coolers every year. Right. Mr. Gandhi, can you just give us a sense of the raw material prices versus the last year and what is the situation of PET inventory and the price that we have locked in for the same? No. We normally lock in enough for six months for our season, which we did this year also. That's why our inventory levels go very high during this time, and then they start coming down by end of June. Which we try and maintain because the lowest pricing in PET is in the off season. Also as stated, gross margin has slightly improved, basically, because of the commodity prices were under control. Correct. Last question, what was the net debt at the end of the quarter and any clarity on the CapEx spend for the year? CapEx spent for the year, the guidance stays the same, which was around INR 1,500 crore. Out of which a major portion is already spent and which resulted in debt to the level of around INR 4,000 crore. Going forward, in the season it comes down. June quarter is the lowest and the pre-season it's always highest. Right. Thank you very much and all the very best. Thank you, Chirag. Thank you. Thank you. We have our next question from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi. Good evening. First on the Sting, can I get the Sting volume numbers for this quarter? Vivek, Sting is doing extremely well and we are in double digits, but exact numbers we would not like to disclose. Vivek here, you know, as management, we, you know, keeping in mind the competitive scenario and the sensitivities around, we have decided not to share granular level numbers anymore. Directionally and overall number and the overall position, capacity, et cetera, anything and everything we'll always be sharing. momentum continues to be as strong, in Sting? Yes, momentum is still very strong. Okay. you know, Mr. Jaipuria you mentioned about next leg of growth, you know, something what Chirag was also asking about, you know, regarding dairy, sports, drink and juices. Is it only because of capacity or is it also because you think that Sting has reached a level where you think that, you know, you need the next driver because Sting will start to taper off, the growth will start to taper off as we head into this year, because the base has certainly moved up quite a bit in the past, 8 quarters? No, I don't think Sting should taper off. There's no reason for it because we have still a lot of outlets which we still have to reach. We are now. The value-added dairy and our juices and our sports drink, we didn't have capacity. That is what is being ramped up. For 2024, that is what is going to play an additional role for us. Okay. Okay. My understanding, is that, you know, dairy from a return perspective is a low return, low returns business. Is that understanding correct, that, you know, it is going to be return dilutive or how do you think about the economics of dairy business? We are not in the basic dairy business. You know, we are not selling milk. We are selling value-added dairy. Our margins are as good as our soft drink in our dairy business. Right. It won't be dilutive at all. Even for value-added business, you think the returns are as good as it is for the, you know, for the base business? Yeah, yeah, absolutely. It's additional and high value products. We are not selling. Our selling price of dairy is much higher than our soft drink. That's one, revenue realization is higher. Secondly, the tax structure is against 40% GST on CSD. In case of dairy, it's at 12%. Any incremental cost in case of dairy gets compensated based upon the tax structure. Got it. Got it. The other thing is, you know, if I look at your, you know, the trend in console, let's say gross margins versus, standalone versus, you know, for the subsidiaries. Sorry, EBITDA margins. What is the reason, Mr. Gandhi, there is a decline in EBITDA margin at a subsidiary level. What is your outlook on subsidiaries? The subsidiaries are doing well. It's just that we had some weather issues in one of our territory. Vivek, this is Zambia currency last quarter, depreciation was abnormal, which has affected the results. However, during the current quarter, the currency has started either strengthening or at least will remain equal. Instead of spreading that loss to more than one quarter, we have booked a total loss and therefore temporarily it's looking like this. Otherwise, the basic model stays intact like earlier periods. Okay. Just to follow up, Mr. Gandhi, on this, you know, the international margins have moved up quite a bit in the last 3 years. You know, used to be significantly below India business. What is your expectation on where this margin, you know, should settle on the international side? Let me give you a fundamental shift which has happened from this quarter. Earlier, you know, in every quarter we used to discuss about the currency volatility in Africa, and we used to justify how Reserve Bank of Zimbabwe has supported us by giving the currency for repayment of our debt. After the debt is repaid and our transactions, about 90% of this in Zimbabwe have moved to USD, in USD terms. Which in other words, is my 50% of business today in Africa is USD-based. Instead of currency risk on the negative side, going forward is going to be definitely positive. You may notice this in the comprehensive income this quarter also. It's in spite of minority interest comprehensive income to total comprehensive income is higher than the, you know, PAT. These are some structural changes which we have incorporated. The fundamentally, these things are continuing to be strong. Got it. My last question, you know, you are growing so you know, strongly for the last several quarters, I just saw, you know, Coke's comment in the media where they have said that they have gained market share in India. How is that possible if, you know, your growth is so strong and it doesn't look like industry is growing, you know, faster than that? You are all smart people. This, we leave it to you to make your own assessment. Nothing beyond. Okay. All right. Thanks, and wish you all the best. Thank you. Thank you. We have our next question from the line of Nihal Jham from Nuvama. Please go ahead. Yes, thank you so much, and congratulations on the strong performance. My first question was to Mr. Jaipuria. Historically, you have mentioned about Sting ideally being 15% of the market. While we are not, you know, getting into the exact contribution, at least currently it is more or less there in terms of our portfolio. Would it be fair to say that Sting currently has reached a so-called optimum percentage of the portfolio? You still see it becoming a much higher proportion going forward? We had never said Sting is 15% of the portfolio. I had said energy drink is becoming a 15% of the portfolio, which is the industry level. Right. There is still plenty of room for us to grow. Yeah, this is a comparison between other economies where energy drink is launched. Yeah. India, it's a new item. If we had to make an assessment about the industry size, that's a benchmarking, it will keep on growing. We wanted more horses to ride upon. You know, we are increasing simultaneously capacity in the Tropicana, in value-added dairy, in sports drink, et cetera, so that the momentum continues in many more quarters. Understood. Just on that very aspect where you highlighted about the new initiatives, I think there have been questions earlier, that the only aspect about dairy is that given it's a cooperative-driven business, while I know we are more in the beverage and the value-added side, pricing and margins in that segment are controlled. Would it be fair for us to believe that maybe the sports and juice would be more priority for us to scale up, rather than dairy at this point in time? Not necessarily, because our dairy business is very profitable for us. It is both, I think the juice, dairy, and the advantage we have is the same machines do both the products. Whichever demand comes, we can switch from one to the other overnight. Would the gross and the EBITDA margins for the dairy be similar to the current portfolio average? It is as good or better. Better. Just one last bookkeeping question. For the realization increase that we have seen, we I think took a price increase of 2-3% in the corresponding quarter of last year. Maybe there is a reduction in discounts and plus there has been a product mix. If it's possible to just give a ballpark bifurcation of that? Basically it has been, the main reason has been very slight increase in price, but mainly because of product mix and our water level has slightly come down. Water mix has slightly come down. That's helpful. Thank you so much. I'll come back with you if I have any questions. Thank you. We have our next question from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi, congratulations on a good quarter, and thanks for the opportunity. Could you give us some idea in terms of what's the potential of sports drink in India, the way you had articulated earlier that energy drinks can be potentially 15% of the market, when you compare India versus other economies. Where does sports drink in your assessment, you know, how big can it be? We are not sure to be honest, sports drink as more and more people are becoming health conscious, I think it is a category. We have one of the strongest brands in the world, which is Gatorade. We expect that to be a good momentum once we start focusing on it and we have the capacity to supply it. Any color you can give us in terms of in other markets, is it comparable to energy drink, half the size of energy drink or? I know it's too early to put a guess on India, but. India is still not ready for it, I think, we need to really put it in the market properly. We are getting huge demand wherever we are putting it, and the growth is like really exponential. I think because of our capacities, we have not been able to put it. Hopefully by this year we'll have enough capacity, then we'll be really be able to test it next year. Understood. What would be your reach of Gatorade in India today as a percentage of overall reach of-? The reach is there, but it's very exclusive. We are only going to the top outlets, which is really not getting us anywhere actually. Understood. My second question is, if you can give some color, how is the summer shaping up this year? We hear, you know, from time to time we hear about some disruptions in the northern part of India. Well, weather always plays certain percentage of our... It's like sometimes the summer is extended, sometimes it's a little earlier. These things keep on happening. It can only make a difference of 2%, so up and down. You can never really say what would happen. Understood. nothing- Everybody... Got it. Final question is, Mr. Gandhi, what should we model in terms of year-end net debt at the end of this year? We have yet to finalize the plan fully for the next year, although two plants we have already stated, one in Maharashtra, another in UP, which already are inaugurated. Maybe one, third one we will be putting up in Bihar. No, Odisha. Odisha, sorry. Odisha. In Kinshasa, in DRC, that is yet to be completed. Let's be ready with the final number. As stated earlier, the level as of now with more or less completion of these two plants which were planned for this year, with that is around INR 4,000 debt level. We can give you number maybe after a month or so. Sure. Thank you so much. That's it from my side. Thank you, Jay. Thank you. We have our next question from the line of Devanshu Bansal from Emkay Global. Please go ahead. Sir, hi. Congratulations on a great performance, and thanks for the opportunity. Sir, we have started the year with about 28% volume growth in India. Does this contain any one-off or a favorable base last year? Can we expect such trends to continue in coming quarters also? I don't know. We've always said double digits grow, numbers always look decent, but we cannot comment on exact, but we had a good year last year also, and this year has started well. I hope we can end well also. Your last year base was like normal. There was no one-offs, et cetera, because of Omicron, et cetera. No, no. It was a normal year. Okay. typically, sir, what is the revenue salience of this quarter? because there has been a change in geography mix also, versus take away. typically, Q1 is what% of our sales? What is Q1? What is the revenue for the year? For the year revenue growth. Okay. The first quarter, around 24% is okay here. However, this is always a start, and what we do is one quarter, so 25%, and we then keep on building as and when the other quarters start getting over. Broadly, if you see the longer period, it works out to 24% and 61% for H1 and the balance for H2. Got it. In terms of marketing PepsiCo this time around is visibly aggressive this season, with several celebrity endorsements. Do we also foresee any margin impact due to this in our PNL? No, this is being spent by PepsiCo. It's not dilutive to our margins. Got it, sir. Last question from my end. Typically, we have indicated like we'll be adding about 70,000-80,000 Visi Coolers. Is it fair to assume that majority would have been added before the season itself? Mostly, yes. Got it, sir. Thank you. Thank you. Thank you. We have our next question from the line of Percy Panthaki from IIFL. Please go ahead. Hi, sir. Just wanted to check the progress on the distribution, the number of retail touchpoints that we are catering to. Currently, how much have they gone up to on a all India basis? How much is the universe? Just for me to understand what is the upside. We have already given the last year's number. Actually, this data, not on very regular basis. Periodically, we get it from PepsiCo. PepsiCo gets it from their agency. We have not yet updated, but the guesswork is might have gone around 10% because we have put about 75,000-80,000 pieces. But that's only a guesswork. That is how much, sir, in rupee, in number of million outlets? We had about 3 million outlets, so you can look at 300,000-400,000 more outlets. Understood. Understood, sir. Out of these, how many would you be directly going to? No, we don't go directly to any outlets. It's basically our distributors who go. The distributors go to 100% of other outlets out directly where we serve. Right. As we understand it in FMCG parlance, it would be called 100% direct distribution. Yeah. Through our distributors. Okay. Understood. Secondly, on Gatorade, I mean, do you think it can be a big opportunity given the pricing? It's a little bit more niche or premium kind of product. Correct me if that understanding is wrong. Given that constraint, or do you think that you would be willing to break that constraint and price it sort of more to parity versus the rest of the portfolio in India? We have brought it very close to parity, we brought our energy drink, and we are looking to expand the market in quite substantial way next year. See, Percy, earlier Gatorade was available only in the packing of 500 ml at INR 50. Now we also have a pack of 200 ml at INR 20. If you compare with PepsiCo or other products, it's well comparable with that. Understood. Understood. On dairy, value-added dairy here, what is the game plan? I mean, what do you need to do differently versus your other part of the portfolio? Or you think that it can just sort of be one more product and you don't need to think too differently here? No, we don't need to think too differently. The main advantage we have is our distribution and our chilling equipments. All we need to do is make sure that our partners carry it and we place it in our Visi Coolers. The product is excellent, and wherever we've been able to do that or supply, it has done extremely well for us. What is the current market size of this product? Industry size. The market size is very large. We are very small because we only have one plant which can produce it. It's only being mainly serviced in the north because of our distance and one plant being available only in Pathankot. Right. Right, sir. Okay. That's all from me. Thanks, and all the best. Thank you. Thank you. Thank you. We have our next question from the line of Amit Purohit from Elara. Please go ahead. Yeah, thank you for the opportunity, sir. Congratulations. Just on the distribution side, you earlier used to provide some, I mean, guidance in terms of or outline the Sting versus the rest of the CSD. Has that gap further increased? I remember last was some four lakh more outlets for Sting versus, would that have increased? Don't... We can't give you exact numbers, but Sting is doing extremely well for us. On distribution, the exclusive 400,000 distributors which were there, as stated earlier, we get this data on distribution from the agency once a while. The earlier data only we can only do a guesswork, and exact data for the latest period is not available. However, the idea like we are given in the past, this exclusivity, wherever we got a reach to a bigger base, we always then try to cross-sell our other products also. They, once having come in the fold, exclusivity will go away with them carrying our other products also. Sure. sir, just on Gatorade, would the touch points would be, I mean, broadly similar kind of thing because this would be more available in, I mean, gyms or currently how it is getting distributed largely when you say class outlets, is it like gym and all the rest? No, We will expand our distribution. Of course, it won't be exactly like our soft drink. It'll be much less than our numbers in, than our soft drink. Still it is, there's enough scope, and there is it's large enough because we have brought it to the right price point. Yeah. Sir, on the region-wise growth, would you be able to, I mean, please at least give qualitatively whether Southwest has done better than Northeast, or is it broadly similar? No, we are doing well throughout and across the country, give or take one small state or better or worse. We would not like to. Generally, our growth is quite good every year, all across the country. Okay. Lastly, sir, you highlighted the facility in Maharashtra. That would be also for dairy as well? That's right. Okay. That it will be for dairy and Tropicana also. Okay. Including the CSD and Sting everything. Yes, yes. Yeah. Absolutely. Okay. Okay, thanks. Thank you. That's it. Thank you. Thank you. We have our next question from the line of Sumant Kumar from Motilal Oswal. Please go ahead. What is the gross debt and net debt as on date? It is around INR 4,000 crore as on 31st March. Okay. Gross debt? It's a net debt. Okay. The increasing interest in this quarter is combination of increasing debt and interest rates? That's right. Because in the first quarter, these plants had not come to, you know, put to use, and it increases the borrowing. In the next quarter, when the borrowings start coming down, interest will start coming down. Yes, in the last quarter, the interest cost is higher because of these two plants were under implementation and the company had to borrow. Okay. Okay. Can you talk about the rural growth momentum, compared to urban, in for Varun Beverages? The rural has started bouncing back, so our growth in urban and rural is now just about the same now, even though rural is slightly going ahead of the urban now. Currently the rural is ahead of urban growth side? Yes. Thank you so much. Thank you. We have our next question from the line of Sanjaya Satapathy from Ampersand Capital. Please go ahead. Yeah. Hi, sir. Thanks a lot for the opportunity and fantastic results yet again. One thing, if you can just tell us how the weather variation is affecting your sales performance nowadays. That is considering that the summer has not really started the way it used to be in the past. You have also mentioned in the press release that March was not good in terms of weather. Will that kind of affect your growth plan this year? No, no, it doesn't affect, you know, there's always some months which are slightly weather is negative. There are some months which weather is slightly positive. They are also talking of extended summer. You can't. This makes a difference of couple of percentage up and down. This is not really. Unless until something really terrible happens or something really positive happens. Otherwise, the percentage is this. Every month is little different than last year that month. The reason why I was asking that is it, that it has become a bit of a more lifestyle or something that it is no longer as dependent on weather as it used to be earlier, because nowadays Coca-Cola, etc., are talking about much better sales in this term. It is changing what you are saying. I agree with what you're saying. It's changing, it is changing mainly and more in the urban areas. If, when you start going to rural, it is still climate, partly climate dependent. Understood. Sir, you mentioned that your next key growth driver will be sports and fruit juices as well as dairy, which essentially will get to register. Do you have to, and you are putting up capacity for Tropicana and dairy, but do you have to put something specifically for your sports drinks, or you are fully equipped? No. The same plant can make sports drink also. The bottling are different, but doesn't matter. No. Now we can make the sports drink in our bottling plants also. Understood. Sir, last thing that I wanted to ask is that when you were saying that we will be a lot more aggressive on sports, is it, I mean, of course you have mentioned that you have changed some pricing and, but has it got something to do with the fact that the plain vanilla beverages are now seeing new entrant and probably the best way to really keep doing better is to have this differentiated product? No, no, I don't think that is one. I mean, our basic product range will keep growing, so, but we have to keep on adding something to show you guys all good growth. No? We, unless until we keep on adding some new things, how will we grow faster than in the market? Thanks a lot, sir. If you can just highlight that this INR 1,500 crore CapEx that you're talking about, is it cash outgo or it is the this? Total cash outgo. Okay. Thanks. Thank you. We have our next question from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead. Yeah. Hello sir. This is Pritesh. I have two queries. One, did we mention that the CapEx is INR 1,500 crores? If it is so, then have we changed our policy where the CapEx will be more than depreciation now here onwards? That's first question. My second question is, for the movement in EBITDA per case, which we have seen in the last four, five quarters from, let's say, the 30s or 32 to about 35, 36 today. Lot of it seems to have come from operating leverage. Are we at the situation where the assets are fully utilized and this is upper end of EBITDA per case? My third question, if not so, then just if you could- Too much noise. We can't hear you properly. There's too much noise from the background, please. Okay. You heard the first two question? Yes. Yes. Yeah. You answer that, then I will ask you the other one. Sure. Sure. Pritesh, thanks for asking. The first is on the depreciation. The policy still is same, but the policy has to be read in totality. That is for getting growth of low double digit, 10-12%. 12% growth depreciation policy still stays the same. That's very sacrosanct. If, say, instead of 12% if we have growth expectation organically, 24% depreciation has to be, the CapEx has to be equal to 2 years depreciation. This is what actually is happening because we are growing that phase as of now. That's the situation. Policy still stays the same. This is on depreciation. Your second question was on? The EBITDA per case. See, the percentage stays the same. The economies of scale start playing and my realization goes up due to mix change and the high revenue or bigger... smaller packs where realization is higher. Naturally, they contribute higher profit margins. Here, I would like to say that 1% mix of water when changes, we always had been telling that water realization is about one-third of the CSD. Volume is growing even 1% increase there increases 3 x revenue extra. When we divide this by number of cases, it's bound to give you a per case realization much higher. If the same percentage is applied or a better percentage is applied to revenue, the profit kitty also therefore goes up. This is a brief answer to your both the questions, Pritesh. Just a follow-up here. Incrementally this will be valid even when the mix moves for in the keeps moving for juices, sports drink and dairy? See, Pritesh, the realization in those two cases, this will continue much faster because their realization is higher than CSD also. You take it, whether Gatorade or juices. Juice if we sell at INR 30, per serving, as against INR 15 or INR 20 in case of CSD and the tax structure is favorable at 12%, so definitely yes, to, you know, your question. Thank you very much and all the best, Mr. Thank you very much. Thank you. Thank you. Thank you. We have our next question from the line of Onkar Ghugardare from Shree Investments. Please go ahead. My question was regarding the targets which you have set since you are growing this much from last three, four years consistently. Just wanted to know your targets in terms of ROE and ROC for the next couple of years. That's the first question. Our ROC, you know, so far had been growing anything between 200 to 250 basis point. Now we have reached a level around touching 30%, ROCE. Our guidance is 100 to 125 basis points. Still we have a, you know, scope to improve for another couple of years. 100-125 basis points every year you are saying, right? Every year for a few more years, and then we'll keep on reviewing this target going forward. Okay. you are expecting around, say, 34-35 kind of percent ROC in next three, four years, right? It is possible. Yeah. Why I'm saying this is out of our six territories, two, three are already doing even higher than that 35%. Therefore we feel it's achievable, but how much we are able to achieve, how much, you know, on the ground that it turns into reality, we will, you know, watch at appropriate time. Okay. In terms of distribution reach, you have said that you have 2,400 distributors. Is there any target in mind for, say, next two years again, just like the ROC? See, with the more visits, more spreading and going deeper into the market and urbanization, this will keep on growing with the economy. Yeah. internally you must have set some target, right? That we want to reach at this particular point. No. It's very simple. As we are increasing, looking at increasing 10- 12% of the outlet base. We have to keep on increasing our distribution parallelly. Okay. around 10-12% growth you are expecting on the distribution front as well, right? Every year. Mostly, yes. Okay. If I can ask one question, you have said that dairy, sports and other juices segment, I mean all these products command same margins as of the base category? That's right. That's right. Not, if not better. Okay. What are your plans in terms of debt for, say, next couple of years as you will be expanding more and more, and you have been expanding? No. It depends what the growths are. You know, it's all relevant to the growth. If your growths have been like last year, we grew more than 40%. These type of growth you have to expand. If our growths come down to what we've been saying in double digits, which is, then 10%, 12%, then we don't need to expand and then we don't need debt. And- It will depend on where we are and how the growths are happening. See, our debt to EBITDA is, you know, one or a small fraction of more than one, 1.1 or so. Basically if in any year, if we are not expanding, I mean it's equal to one year's EBITDA. Okay. All right. Another question is I wanted to know is the size of opportunity in all the business you are doing? Another thing is that what kind of more products you can launch in this segments, all the segments you are catering to? I think we have enough products and what I have named, there's enough room to grow in these products for the time being. As we keep on growing and expanding, once these start getting saturated, we'll look at more products. Any more products from Pepsi's front? Yeah, it will be mostly from Pepsi's front. Only the dairy is our own product. Okay. like, for example, just to take into, just to take the example of say, main business of Pepsi, how many products are there and how many products are currently available here? There's no end to it. Their portfolio is in hundreds of products. Correct. All the products are not available here, right? That's what I'm asking how? No, no, it depends what suits this market. We can keep picking from their portfolio. There's nothing which stops us. Okay. Okay. All right. All right. Thank you very much. Thank you. Thank you. We have our next question from the line of Ganesh Sirvani, an individual investor. Please go ahead. Hello, sir. Congratulations on a great quarter. Thank you. How are you going to compete with the competition in the category of energy drinks compared now seeing that Thums Up has come up with their charge drink, which also costs the same pricing? They were always there, so it's not that they have come up something new this year. They have been there from, after we launched drink, they've, they launched their product maybe a year or two years later. They've been in the market. They will... They have their share, and we will have our share. The market is large enough. Customer base for them has been gaining rapidly. No, I'm sure they are also gaining and we are gaining. Both are as are energy drink is a big market, so there scope for both of us to gain. Okay, sir. Could you please share some light on how the snack sector performance in Morocco is going on, considering you started your distribution this year? It's too early because we just started in February, so end of January, early February, and then Ramadan had come in March, end in April. I think it's doing extremely well, but it's still too early. Okay, sir. Thank you so much. Thank you. Thank you. We have our next question from the line of Nikunj Gala from Sundaram AMC. Please go ahead. Yeah. Good evening, everyone. My question is on the dairy products. What was the volume contribution in calendar 2022 for us from the dairy products? It's still so small that it has. One plant is what is servicing the whole country, practically. I think it's still very small. Maybe- ... 3, 4 million cases, maybe. Nothing. It's very small. I think we need to wait for next year. Okay. In case of, you know, aggression here in terms of expansion, how the procurement, like we have tied up with anyone or like farmers or like, how are we looking here in case of the, you know? No, no, availability of milk is not a problem, because we are not fighting for pennies here. Our product is not selling plain milk where we are fighting for pennies. Ours is a value-added product, so even if we get milk INR 1 more expensive or cheaper, it really doesn't impact the overall portfolio. We have no shortage of getting the product. Okay, sure. Yeah. Thank you. Thank you. Thank you. We have our next question from the line of Mitul Shah from Reliance Securities. Please go ahead. Thank you for the opportunity. Sir, I have question on this media reports on sugar availability being a sugar production this time very low and prices are also lower. Any direct, indirect impact in terms of procurement as well as on the growth margin side? Because of sugar? Sugar availability is a issue now. Sugar production is lower, so. There is enough sugar in this country, so maybe they will export less this year. Otherwise, the sugar production is still much higher than the consumption in the country, so there is no problem or there is shortage. Maybe, you know, as a commodity, it can go up by couple of percent or come down. That much effect it'll have. Sir, similarly, second question on the PET bottles, price trend, during the last quarter and what is in the April and May trend? It is, it's pretty similar. It's not much difference. I mean, very little difference. In fact, in both the commodities, be it sugar, be it PET, in the last two, three quarters, the prices have remained broadly the same. There's not any. No, any major difference. I mean, minor tweaking, it keeps happening. Mm-hmm. Sir, lastly, on the any update on this recycling which we are planning and so on, sir? We are in the process. We are finalizing land, and hopefully we are targeting that we should be in production by 2025. Any permission and approval which we were seeking, if we already received or still it's under process? No, it's still a national policy which has to be framed. Right now they are not allowing food grade PET to be produced, but it will, it can be exported or you can use, still recycle it, but not use it for food grade. Oh. Yes. Okay, thanks, sir, and all the best. Thank you. Thank you. We have our next question from the line of Saket Mehrotra from Tusk Investments. Please go ahead. Hi. Sir, any color on the snack portfolio that we've got for the India portfolio? You mentioned about Morocco, the popcorn, contract manufacturing and any developments or updates you expect for this year? No, no. We are doing co-packing for Pepsi, and is, we are practically getting complete utilization of our plant, but nothing beyond that. I mean, marketing and selling is PepsiCo's call. We're just producing for them. Okay. The other question I had, you know, you mentioned about Gatorade scale-up. Just wanted to get a understanding as to, you know, what in terms of our strategy is here with this product, because, you know, it's been around in our portfolio for quite some time? No, it was a niche product in our portfolio, and it was for only for certain exclusive clubs and all. Now we want to mass market it and make it available into much more number of outlets, which we plan to do from early next year. Okay. Thank you. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir. Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or 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 the taking the time out to join us on this call. Look forward to interacting with you all soon. Thank you very much. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.