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    Varun Beverages

    VBLStrong
    Fast Moving Consumer Goods·10 Feb 2025
    Management Summary

    VBL concluded CY2024 on a strong note with 23.2% volume growth (11.4% India organic + SA/DRC inorganic), 30.5% EBITDA growth and margin expansion of 105bps to 23.5%. South Africa integration progressed well with 12.5% volume growth in year one. Rs 75,000 million QIP made the company net debt-free. Management remains confident of double-digit India growth despite rising competition from Campa/Reliance, emphasizing India's 4M/12M outlet underpenetration. CY2025 capacity additions of 20-25% plus 4 greenfield plants will drive further growth.

    Highlights

    8

    • CY2024 consolidated volumes grew 23.2% to 1,124.4 million cases; India organic growth 11.4%

    • Revenue grew 24.7% to Rs 200,077 million; net realization per case up 1.3% to Rs 177.9

    • EBITDA grew 30.5% to Rs 47,110 million; EBITDA margin improved 105bps to 23.5%

    • PAT grew 25.3% to Rs 26,343 million

    • South Africa volumes grew 12.5% in first year; general trade expansion strategy initiated

    • Gross margin expanded 165bps to 55.5% from PET procurement strategy and backward integration

    • QIP of Rs 75,000 million raised; company became net debt-free

    • India capacity increased 45% over 2022; 20-25% more capacity additions for CY2025 season

    What Changed2

    vs Q4 FY25

    Tone shiftGood → StrongGuidance items2 → 3 (+1)

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue (CY2024)2,00,077 Mn+24.7%YoY
    2. 02Volumes (CY2024)1,124.4 Mn+23.2%YoY
    3. 03EBITDA (CY2024)47,110 Mn+30.5%YoY
    4. 04EBITDA Margin23.5%
    5. 05PAT (CY2024)26,343 Mn+25.3%YoY

    Segment breakdown

    • Volume Mix (CY2024)74.2%55.7%
    • India Portfolio59%44.3%
    Donut· Share of CSD

    Guidance & targets

    3
    CategoryTargetPriority
    Growth
    India Volume Growth
    Double digit annually
    		High
    Growth
    South Africa Growth
    Better than 30% over 3 years
    		Medium
    CAPEX
    CY2025 Season CAPEX
    Rs 31,000 million
    		High

    Risks & concerns

    7
    RiskSeverity

    New competition from Campa/Reliance gaining market share with lower price points and higher retailer margins

    Campa claiming 10%+ share in select states. Management says market is large enough for all, not seeing growth impact. — Analyst downplayed

    medium

    South Africa margins significantly below India due to 80% own-brand mix and modern trade skew

    SA margins structurally lower. Improvement expected through backward integration (1 year) and general trade shift (1-2 years). — Both acknowledged

    medium

    Massive CAPEX cycle with Rs 45,000M net CAPEX in CY2024 and Rs 31,000M planned for CY2025

    Depreciation up 39.1%. Capacity expanded 45% in 2 years. QIP of Rs 75,000M used to deleverage. — Both acknowledged

    medium

    International organic growth restricted to 6.3% due to Zimbabwe sugar tax impact

    Zimbabwe volumes declined due to sugar tax-driven price increases. Expected to normalize from Q1 CY2025. — Management acknowledged

    low

    Areas of Evasion(3)

    • Market share data
    • Specific India margin outlook
    • Detailed SA financials

    Q&A highlights

    3

    “We are only going to about 4 million outlets out of the 12 million FMCG outlets. We are not seeing any dent on our growth”

    Management consistently downplays competition; claims industry expanding fast enough for all players, but analysts probe on retailer margin arbitrage

    asked by Vivek Maheshwari (Jefferies)

    1 min read4 chapters

    Detailed Narrative

    01

    CY2024: Strong All-Round Growth

    VBL delivered 23.2% volume growth (11.4% India organic + SA/DRC inorganic) with 30.5% EBITDA growth and 105bps margin expansion to 23.5%. Gross margins expanded 165bps to 55.5% from strategic PET procurement and backward integration. India capacity expanded 45% over 2 years. Company became net debt-free post Rs 75,000M QIP. Low/no sugar products reached 53% of volumes.

    02

    South Africa Integration Year One

    SA delivered 12.5% volume growth in first operating year. Key strategic shifts: reducing modern trade reliance (40-45% of market) to focus on general trade (60-65%, better margins). PepsiCo brand sales growing while non-profitable packs discontinued. Visi-cooler placements exceeded cumulative total of previous operators. Backward integration planned but 1 year away. Margins structurally lower at ~10-12% but expected to improve to India-like levels over 2-3 years.

    03

    Competition Narrative

    Management consistently frames competition (Campa/Reliance) as market-expanding. India reaches only 4M of 12M FMCG outlets, adding 400-500K outlets annually. 20% of India market was always B-brand at lower prices. Management sees no growth dent and maintains double-digit guidance. Analysts pressed on retailer margin arbitrage (Campa offering higher retail margins) but management dismisses near-term impact.

    04

    Capacity and Portfolio Expansion

    CY2025 CAPEX of Rs 31,000M includes 4 greenfield India plants adding 20-25% capacity. Snacks business starting in Morocco (USD 25-30M expected CY2025), Zimbabwe and Zambia. Tanzania/Ghana SPA signed pending regulatory approvals. Low/no sugar portfolio at 53% with zero sugar variants across Pepsi, 7UP, Gatorade and mid-cal for Mirinda, Sting.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.