Varun Beverages Limited (VBL) Earnings Call Transcript & Summary

[Audio Gap] and thank you for joining us on Varun Beverages Q4 and CY 2019 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Chairman of the company; Mr. Varun Jaipuria, Whole-time Director; Mr. Raj Gandhi, Group CFO and Whole-time Director; Mr. Kapil Agarwal, CEO and Whole-time Director; and Mr. Vikas Bhatia, CFO 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 state that some statements made in today's call may be forward-looking in nature and a detailed statement in this regard is available in the results presentation shared with you earlier. I would now request Mr. Ravi Jaipuria to make the opening remarks.

Good afternoon, 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, which provides details of our operational and financial performance for the fourth quarter and year ended 31st March 2019 -- 31st December, sorry. I'm pleased to share that CY 2019 has been a year of solid operational and financial consolidation. We have delivered a top line growth of 40%, EBITDA growth of 44% and PAT growth of 58% in calendar year 2019. The performance was primarily driven by robust volumes reported in both the Indian and international markets. Improved performance in underpenetrated territories acquired in 2017 and early '18, resulted in a healthy organic volume growth of 13% in the domestic business. Our international business also registered a solid growth of 34%, driven by double-digit growth in markets like Morocco, Zimbabwe and Sri Lanka. In addition to this, the full year performance also includes the impact of South and West India sub territories acquisition from May 2019 onwards. In the quarter, we have reported a robust top line growth of 55% and a strong EBITDA growth of 142%. While quarter 4 is typically a seasonally soft quarter, the losses was notably lower in comparison to quarter 4 2018 on account of better business efficiencies and integration of new territories that are relatively less seasonal. We expect this trend to sustain as we work on further fortifying our core strengths and aim to improve our penetration in the newly acquired territories. On the operational front, we undertook a series of investments and strategic incentives during the year, including value assertive acquisitions, introduction of new products and expansion into new geographies. We are confident that these investments once optimally utilized will enable us to deliver substantial performance in the coming years. With respect to the recently acquired large territories, we will be consolidating and expanding deeper into these regions in order to garner a bigger foothold and improve our market penetration. These high potential markets could certainly help accelerate our growth rates, profitability and cash flows going forward. On the whole, development of new markets and increasing presence in high potential territories will be a key growth driver for us. In sync with this approach, the company shall continue to evaluate strategic opportunities for growth and development in various markets. Going forward, we will continue to build upon our key position in the beverage industry with presence in fast-growing markets. Solid infrastructure and well-entrenched distribution network. We are fully focused towards enhancing our market presence in the recently acquired territories in the upcoming years. Furthermore, we are constantly looking at opportunities to innovate and upgrade our product portfolio to tap the shift in consumer preference across existing and new markets. This, along with improving demand in our core markets, should enable us to deliver higher and sustained performance in the longer term. I now invite Mr. Gandhi to provide highlights of the operational and financial performance. Thank you.

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 fourth quarter and year ended 31st December 2019. As you are aware, our business is seasonal and best monitored on an annual basis, especially since Q4 is a seasonally soft quarter for us. Revenue from operations adjusted for excise/GST grew by 55.3% year-on-year in quarter 4 2019 to a level of INR 12,202.5 million, while EBITDA increased by 142.2% to INR 1,157.4 million. Our performance for the year has been strong with the revenue growth of 39.7% to INR 71,295.8 million. Total sales volume were up 80.7% year-on-year at 82.5 million cases in Q4 2019 and were up 44.9% year-on-year at 492.7 million cases in calendar year 2019. Realization per case has come down by 3.6% in 2019, essentially on account of change in product mix in India post consolidation of South and West sub territories, introduction of water in Morocco and lower sales utilization in Zimbabwe in USD terms. The sales volume growth was supported by robust performance in India as well as in the international territories. India business recorded an organic volume growth of 13.1% in 2019, while our foreign territory reported a strong organic growth of 34%. Morocco, Zimbabwe and Sri Lanka have all grown in double digits during the year. On the profitability front, EBITDA increased by 142.2% to INR 1,157.4 million in Q4 2019. For 2019, EBITDA increased by 43.8% to a level of INR 14,476.5 million. Even though gross margins declined by 120 basis points during 2019 due to change in product mix and higher PET prices, EBITDA margins expanded by 59 basis points in 2019 and reached to the level of 20.3% on account of operating leverage in the business. Depreciation has increased by 45.5% during the quarter and by 26.9% in 2019, owing to capitalization of Pathankot plant and consolidation of South and West India sub territories with effect from 1st May 2019. Finance cost has increased by 47.2% during the quarter and by 45.7% in 2019 as we purchase consideration for acquisition of South and West India sub territories was funded through debt. As discussed earlier, the QIP proceeds net of issue expenses of INR 8,836 million had been utilized for repayment of the debt during Q3 2019. Losses reduced to INR 539.5 million in Q4 2019 from the INR 708.2 million in Q4 2018. As shared by the Chairman, enhanced business efficiencies, cost control strategy, the integration of new territories that are relatively less seasonal, has enabled us to report lower [indiscernible] in this quarter. In 2019, PAT increased by 57.5% to INR 4,722.2 million in 2019 on the back of robust volume growth. I would like to highlight here that post changes in the corporate tax structure, the management plans to conclude the evaluation of this option in conjunction with its tax year ending 31st March 2020 as the company carries unutilized minimum alternate tax credit, MAT credit and has other tax benefits, tax holidays available. The benefit of lower MAT has resulted in a net saving in new -- in the cash flow of INR 194.3 million during the year. On the balance sheet front, net debt stood at INR 32,461 million as on 31st December 2019 as against INR 26,715 million as on 31st December 2018. Debt-to-equity ratio stood at 0.97x as on 31st December 2019. Working capital days have remained stable at 22 days as was in 2018 on account of efficient working capital management even after consolidation of new sub territories in India during this period. Inventory, creditor and debtor days have remained stable even after increase in net revenues and number of production facilities. To conclude, this has been another exciting year for us. We have demonstrated strong cash flow generation, working capital efficiencies and ability to grow our market presence. In the coming year, we will be focused on generating strong free cash flows as well as leveraging upon the notable investments made by us over the past few quarters. On the whole, we look forward to delivering a healthy and sustainable operational and financial performance going ahead. On that note, I come to an end of the opening remarks and would like to now ask the moderator to open the lines for the Q&A. Thank you.

[Operator Instructions] We have a first question from the line of Sameer Gupta from India Infoline.

Sir, this is Percy Panthaki here. Sir, first question is on the CapEx that you have done this year with Pepsi, there is some INR 210 crores of adjustment, right, which is the CapEx that you have to do next year, and therefore, it is deducted from the payment made to Pepsi this year. So my question, sir, is that including this INR 210 crore of CapEx that you will do in CY '20, what will be the total CapEx that would be required on a consolidated basis?

Percy, the guidance given in the past few calls, we still stay at the same, that is around 50% of our depreciation figure, and also stated in the past that this INR 210 crores or odd figure, this is received from PepsiCo and the last time we added because we got concession, but has to be spent by us in reality and when we spend over and above 50% depreciation figure in calendar 2020.

Okay. So therefore, I would be not wrong if I calculate that, including this INR 200 crore, your CapEx would be lower than the depreciation for CY '20?

Yes, definitely.

Yes. You are correct.

Okay, sir. Secondly, just wanted to understand your strategy for South and West of India since it's been less than a year you have acquired versus the North and East where you have been sort of improving and tweaking the business model and now it is sort of business as usual. In South and West, I'm sure there are -- compared to what it was previously, there are some low-hanging fruit, there are some changes in business model, et cetera, which you might have planned and might be in the pipeline or going on as we speak. So what are those initiatives? And what are you doing to really sort of increase market share in those states where the market share is weak in South and West?

I think the key initiative which we are going to take is improve our go-to-market and our presence. Because at the moment, the number of outlets we are going is much less than what the number of outlets are, and we are expanding that by putting more infrastructure and improving our sales force. And actually, the key issue will still remain go-to-market will be improved, and that's where our expectation is that our results and our penetration in the market will go up.

Right, sir. And lastly, on international business, is there any sort of inorganic growth on the horizon that you can see?

Well, not at the moment. We have -- unless until something Pepsi really offers us and makes sense. But at the moment, we are not looking at anything for this year.

We have next question from the line of Jithin John from CLSA.

Sir, this is Jithin John from CLSA. Congrats on a strong set of numbers despite the weak consumer sentiments, especially. Sir, my question was on the headroom for the distribution expansion. You have been delivering strong double-digit organic volumes also supported by the enhanced penetration in the acquired territories. By -- when do you think the new territories will reach a distribution coverage level similar to the core territories?

I think that's a long process. It will take us a couple of years before that will happen. So I think we are looking at least next 2 to 3 years to bring it to the levels where we are in our core territories, but we have a long way to go.

That's really helpful, sir. So secondly, it would be great if you can share how the competition is reacting to your market share gains in these new territories? That's all from my side.

No. We have a formidable competition. And of course, they are doing what they think is right for the market. And we are doing what is right for us. And so I think both the businesses are growing. So the market is growing. So I think both of us are fighting in the market healthily. And I think overall the soft drink business and the beverage business is growing in the country.

We have next question from the line of Rajiv Gupta from RBC Financial Services.

Yes. My question was on the cost of funds, are you expecting the cost of funds to come down this year because of your improvement in the credit rating and also the benign interest environment?

Rajiv, you are right. Actually, this is one news we can proudly share. Last quarter, our average cost of borrowing was 8.9%. And as of now, it's somewhere 8.10%, 8.15%. So it has come down as a result of our rating improvement and the benign interest scenario in the country.

And if you can give me some this thing, did it become effective end of this quarter? Or did it become effective January? Would you give some indication on that? Or is it already factored in, in last year's results?

No. This is in current year. Some banks did in the beginning. Some did in the beginning of February. But it's...

I think the full effect will come this year -- in this year's consolidation figures.

That's quite substantial. One more question I wanted to know. This is a question I've asked on all previous occasions also. The provision on Africa business, you've been making some provisions, have you made another provision this year? And what is the status of the old provisions? Have you have made, you have made? I guess, what amount of liabilities was it? And is there any chance of reversal of that provision, which was made in earlier quarter? Just a brief -- a little bit of detail on where we are on the provisions and where do we see it going forward?

Sure. As in the earlier calls, we have stated the total provision made over the quarters was INR 130 crore, approximately. And after that, the Reserve Bank of Zimbabwe, they signed an MOU, wherein -- a MOU, wherein they said that about $30 million, which was our liability before the changeover from multicurrency to the single currency came in. So they said that the investment came because of our promise in this, and we will provide you the currency at the same conversion rate, which was applicable when you invested. So they are honoring it. Out of this $30 million, the 4 installments are already released by them. However, the provision made in this, we had not yet reversed keeping in view the tight monetary position in that country. Once we'll be reaching the total wiping out of this dollar exposure in the company, we will have to, in that time, yes, we will be reversing this currency fluctuation provision made in the books.

So if I understand right, your liability in Indian rupees was about INR 210 crores, you partially repaid 20%, 30% of it and you have created a provision of INR 130 crores on a INR 210 crores liability as of now?

We paid about 10% of that and that 10% provision we had not yet reversed, we are keeping it because as a conservative policy because the balance is yet to be paid and Reserve Bank of Zimbabwe has to honor their commitment. Yes, we already have, on the other hand, the agreement signed by them.

Okay. I'm sorry to be persisting, you said $32 million debt, which is INR 210 crores, and you also said a provision of INR 130 crores. So that is -- that's about 65% of the debt?

No, that's right. That's what we have made a provision. But out of the $32 million [Technical Difficulty] has already been repaid. So that we have not reversed the provision, that's what we are seeing.

Okay. Just one last question on the international business. If you could throw some light on the pricing and the market share and the -- without giving numbers, of course, forward-looking numbers, what's your estimate of growth in market share and pricing in Zimbabwe and Sri Lanka?

Our growth, we have given is -- international business has grown at about 34%, which is a fabulous growth. And with this growth, obviously, our market share is improving, but some of these countries don't provide the exact market share mechanics. So it's all estimates, so -- which we don't want to guess. So -- but we are definitely with a 34% international growth, we are growing faster, hopefully, than our competition.

And how is it looking going forward? Do you think we could sustain? I'm not asking for exact numbers, but would -- what kind of growth or what...

I think so as of now, it's sustaining, and we are doing pretty well. And hopefully, we should be able to sustain it and grow further.

I'm sorry, I've asked too many questions, but one last question, where do you see your net debt at the end of this calendar year?

Well, if my depreciation is -- my CapEx is going to be under depreciation figure, so PAT last year was 472, so this year -- 472 plus the growth of PAT for this year is going to be used for reduction of debt.

We have next question from the line of Vicky Punjabi from JM Financial.

Just quickly on the international business. So we -- I mean we -- I mean I'm trying to calculate the figure by taking the difference between the stand-alone and the consolidated entity. And it's kind of showing some deceleration in the revenue trajectory here. Is this -- I mean have you seen any kind of deceleration sequentially? Or are there some differential treatment that's being kind of taken for the exchange losses in the African countries?

Yes. Vicky, there are 2 main contributors for this. One is, as we have stated in the past, we have introduced water in Morocco, so water has grown much faster. The realization for water is much lower. So per case basis that has resulted in reduction in realization. Second is Zimbabwe. Earlier, we used to sell in dollars and then convert and it used to be firstly recorded in our top line and then recorded as exchange loss. Since we have only one currency there, so neither that gets added to the top line nor any provision now is required. So these 2 changes has resulted into a less per case realization. But on the profitability side, it has become much healthier than the last year. So it has contributed at PAT level first time on overall basis.

Okay. Okay, sir. And just on this -- on the domestic side as well, you've seen some dip in gross margin on a Y-o-Y basis, what was the reason for that?

This is a product mix with South and West, which is added effective 1st May. There the mix of water is higher than our earlier territory of North and East. And the gross margin-wise, that's slightly reduced, but with the operating leverage. At EBITDA level, we have improved over last year.

Okay, sir. And secondly, I mean, I just wanted to understand the Pathankot facility. So you've mentioned that CapEx of INR 550 crore and last year, I remember, there was a CWIP mentioned of INR 350 crore. Is this INR 550 crore in addition that you have spent or that includes the CWIP that was mentioned last year?

This is inclusive of CWIP. Here, I would like to -- for the benefit of everyone, would like to say. When the asset is put to use, we capitalize only then, so that there is no confusion and the CapEx gets reflected in the year when it comes in production for that season. Till then, any payments as advance or whatever way or LCs opened are parked in the books as CWIP or advances to the suppliers.

Okay. And sir, how would this Pathankot facility's economics look like? I mean what is the kind of production volumes we are expecting from there? And what is the kind of asset turns we're expecting there?

Well, the production has just recently started in the last quarter, practically of last year, and we expect full utilization of the plant this year. And asset turns...

It should be anywhere 1.9 to 2 it can go on the full capacity utilization basis.

Which is what we expect this year.

Okay. And sir, what would be the product mix in the Pathankot facility? How much would be juices? And how much would be CSD out here?

About production-wise, maybe close to 50-50.

And in Pathankot, we also have backward integration preform machine also.

So we manufacture our own preforms there.

Okay. Okay, sir. And sir, after this integration with South and West, what is the kind of benchmark we are looking at organic volume growth in the domestic territory?

Well, it's so far looking good. We had good year, and I see no reason why it should differ this year.

Vicky, here, I can give you additional information. Pathankot also is helping us in producing ambient temperature value-added milk-based beverages also. So the same plant is producing that new segment which we launched and which is really fast-growing from the same plant.

We have next question from the line of Kaustubh Pawaskar from Sharekhan.

Am I audible?

Yes, sir, you are. Please go ahead.

Yes, you are.

Yes. So my question is on the operating margins. Sir, this year, despite the fact it was a year of integration, we have seen improvement in the margins on yearly basis. Going ahead, since the integration is ongoing process and as you said that you will take another 2 to 3 years for some of the new territories to get in line with some of your existing territories. But sir, in terms of margins, once these territories are getting scale, should we expect margins to be better in CY 2020 and '21 compared to that which were in CY 2019?

Well, I think our margins are still one of the highest in the industry in the world. And I think we would not like to speculate on better margins. But if we can maintain this and maybe slightly better, we'll be very happy.

Okay. Sir, my second question is on the tax. As you have changed to the new corporate tax. So the tax rate in India and the international, this thing, operations would be different. So for CY '20 and '21, what kind of tax rate we should assume?

We should assume the same taxation as far as the provision is concerned, like the last time, because we have not yet opted for going to the new design. However, about 4% to 5%, there is a cash flow saving because MAT, which is reduced, we had already started availing of the same. And we have gained a figure of INR 196-or-so million saving in tax payments.

Right. And sir, I just missed out the CapEx figure because my call got disconnected. What is the CapEx you're looking for next 2 years?

Well, this year, we are looking at CapEx less than our depreciation, which is a guideline we have given. So we are maintaining that.

We have next question from the line of Dipan Mehta from Elixir Equities.

Yes, sir. This is more of a long-term question. In terms of all the health concerns surrounding soft drinks, so what is the -- I mean, normally, we should be asking this question to Pepsi, but we can ask you as well, so what is the kind of product profile going forward to counter this threat or one may say health issues surrounding soft drinks in terms of new product launches?

Well, our new products, as you know, we have launched Tropicana in PET bottles, we have launched value-added dairy beverages. So these are all new products and which are much healthier than our core products. But going forward, we are reducing sugar content. So we are moving slowly to the healthier portfolio, but we are actually supplying whatever the market is demanding, and the market is still interested in the core products.

Any idea of what percentage of sales would be from healthy products?

It's very small at the moment. But juices mix is about 7% and water is about 22%. So between the 2, you can say about 30%.

Okay, sir. Congratulations on good set of numbers, sir.

Thank you.

We have next question from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, how much of the consolidation of Pepsi will flow in CY '20, if you could tell us in cases? So how much is consolidated this year and how much is to be consolidated?

So we consolidated from May 1. So the first 4 months, obviously, will further get consolidated. And any growth that we can get out of -- over and above, so that is what is going to be consolidated.

Basically, if -- a number-wise, total, we paid for 135 million cases and 40% of that of the first 4 months will be inorganic coming in first 4 months in the calendar year '20.

So about 54 million cases is yet to be -- will flow to CY '20 as well?

Approx, yes.

Okay. Okay. And let's say, hypothetically, assuming that in absence of, let's say, an inorganic growth, is this calculation correct that you will be able to repay your debt in 3 years' time, the entire INR 3,000 crore debt is repayable in 3 years based on the cash?

My...

If the growths are not happening, yes. If the growths are happening, then some CapEx will be added. So if our growths are going to be substantial and then our EBITDA will also go up and our CapEx will also go up.

No, I actually didn't understand that. So you have a INR 250 crore CapEx plan, INR 250 crore, INR 300 crore, is the -- number is half the depreciation?

I mean for this year, that's what we have plus what we received from Pepsi. So it is -- it will be less than our depreciation. It's not INR 250 crores, it will be close to a little less than INR 500 crores because we have received INR 210 crores from Pepsi, which was reduced from the purchase price and has to be used for CapEx for the territories which we have received from them and plus 50% of depreciation that is what is going to be our CapEx this year.

Okay. So it is INR 200 crore plus half the depreciation is your CapEx next year?

That is right.

Okay. So even considering these, what should be case -- what should be a situation where you would be able to repay your debt in 3 years' time even if we consider that?

Well, it all depends, as I said, if our growths are high, then we will have to keep on adding some CapExes. And clearly, our PAT will be clearly available to reduce debts, but as our guidance is we are not planning to invest more than our depreciation. So we will stay within that range and -- as our PAT and our EBITDA keeps going up.

Pritesh, how we calculate it is, it's a simple, one is my debt-to-EBITDA as of date is around 2. So basically, if there is no CapEx, it's -- we can pay debt within 2 years. However, there is going to be some CapEx ongoing basis because we need growth also. That's on the static situation, but as we need growth and we want to grow that every year we need to evaluate the fine-tuning, we will have to do. There, what we have done is we have just given a guidance how much out of the depreciation on CapEx normally we spent and we are likely to spend.

Okay. So this actually doesn't include the capacity expansion related CapEx. See, why I'm asking because in your past calls, you have said that your peak month capacity utilization is 60%, 65%. So automatically, there is a room for 30%, 35% extra volumes there because if your peak capacity is 65%.

It was. As our volumes are going up, that -- the gap is narrowing. So every year, as we are -- if we are growing at 15%, then that gap has narrowed by that much.

We have next question from the line of Udit Bokaria from Catamaran Ventures.

Yes, sir. Sir, I wanted to understand what would be the distribution reach for your juices category? And what was the volume growth last year?

The -- just 1 second. Juices, last year, we have grown by about 12%. And the -- it's mix from 6% has gone to 6.7%, and penetration is going ahead. See, again, one is the ready-to-serve drink, which is Slice. This is sold with a normal distribution, which historically we are doing.

But this year, we expect the juice to become larger because our new facilities only started production in the last quarter of 2019. So this year, this -- we'll have full year of production this year. So we expect juice growth to be quite substantial this year.

Understood. Understood. And are you seeing increased competition in the 1-liter Tropicana category?

Well, there is competition, but we are having very healthy growth. So I -- competition will keep on happening. This is a category which every few years, you see a new entrant coming in. So I don't think something we are really concerned that we see.

And how do you view the dairy sector, which you -- like, what would you say the potential you see in the next few years from...

Well, we see huge potential in it. We've had a resounding response on our products. Now we have to just muster and increase our capabilities of backward integration and production capability. So as we will ramp it up, our volumes will start showing big numbers in that. And we feel that's one more category apart from our Tropicana juices, which can really make us grow in this country.

And any challenges which you are facing on the procurement side and managing the cost inflation for dairy category?

No, not at the moment, please, because we are not playing in pennies. So I don't think it really makes a difference to us.

We have next question from the line of Devanshu Bansal from Emkay Global.

So my question was on the penetration front in all the 4 regions which we operate in. So can you give us some idea, be it qualitative or quantitative, as to the level of penetration in all the 4 regions? And where -- at what level do we want this penetration to go?

Well, we have -- first part, we are hoping that our penetration in the newly acquired territories come to our original territories, which is -- there is a big gap and that's what we have said it will take us a couple of years before we can penetrate to that level because the gap is very large. So that itself, if we are able to achieve, I think we'll see huge growth and potential for the next couple of years.

So sir, just to get some quantitative outlook. So we are expecting about 135 million cases to be sold in the South and West region, newly acquired, so can you give us some idea as to what is the number of cases it can go up to in the next 2, 3, 5 years?

Well, we can't give exact numbers. The only thing we can tell you is that the same territory with PepsiCo, 3 years back, did 210 million cases. So there is huge opportunity and growth potential, which is available. It will all depend on how fast we can ramp up our distribution and penetration.

Okay. Just one more to -- I'm sorry if I'm prodding you further. So of the 13% growth in India this year, so can we break it into how much came from penetration and elsewise?

This 13% basically is the organic, and this is always -- we don't track how much because of penetration and otherwise. Yes, normally, if you ask me some ballpark figure about 4% distribution network, we, every year, have been increasing. And this we try maybe put the visi-coolers to the new outlets. About 40,000 visis are added every year. It has a population of 775,000 visi-coolers, which we have placed in the market. So those are the places where we definitely reach. And equal number, you can say, is where we reach out, but we have yet to place our visi-coolers. So more than 1.5 million dealers carry our product. And this number goes up around 4% every year. And the 13% overall organic growth we have registered, which has come up category-wise about 12% carbonated about 17% this year, juice has grown. Juice is growing faster. Water has grown about 13 -- 14.9% for us. So this all weighted average basis about 13% plus, 13.1% roughly organic growth, during the year, we have got it. I hope this should give you enough insight.

[Operator Instructions] We have next question from the line of Rakesh Roy from Indsec Securities.

Sir, my first question regarding was, sir, can you share the...

Sir, we're not able to hear you. Could you please pick the handset?

Hello? Hello?

Yes, please go ahead. Please go ahead.

Yes, go ahead.

Sir, this is Rakesh, sir. Can you share the domestic or international volume during the quarter, sir? And the India business, how much the volume from the South-West?

The volume during the quarter from -- in India is 32.43 million, and the volume, international...

No, no. Hold on.

This is organic. Organic India is 32.43 million. And -- just one second, just one second. This is Q4, organic India, Yes. Overall, including inorganic India, 62.41 -- 62.21 million cases. And international, 20.25 million in quarter 4.

Okay, sir. Sir, my next question regarding, sir, any price hike in near term, sir, in near future -- next financial year, sir?

Actually, I tell you, price hike invariably we take it just to pass on any input costs. We are lucky, inflation is not that high and so there is not much of the necessity to increase prices across.

Okay, sir. Sir, my last question is regarding, sir, your dairy products, sir. Can you highlight the -- on the product or any new launches apart from the last quarter, sir?

Pardon me. Just repeat, please, sorry.

Sir, regarding your, sir, dairy product, sir. Last quarter, you launched 3 products, sir. Sir, this year any new products, sir, from you dairy business?

We might launch 2 more flavors, but I think with our production capability, I don't think we will do anything beyond that because I think we'll be able to sell our production capability fully with what we have.

Sir, is it possible to, sir, share the volume for dairy business, sir?

Well, it's too early. We have just started the year, and it's only came in the off-season last year. So I think we need to have 1 year before we can really start projecting numbers of [indiscernible]. Give us a quarter or 2, definitely have much better insight.

Okay. Sir, my question is, sir, any target for CY '20 for dairy business for volume -- in term of volume?

No, our belief is we'll be able to sell the complete output we can make. Our question is going to be how much juice we produce and how much dairy we produce because it's the same line, which produces both the products.

Okay, sir. Sir, how much of the realization in, sir, dairy business, sir? Can you share that?

Dairy business is even more premium than the juice. It's about 40% higher than the juice category.

We have next question from the line of Manjeet Buaria from Solidarity Investment Managers.

This is my first call in, you may have answered this before. I wanted to understand the dynamics of your relationship with PepsiCo. Does Pepsi have a certain level at which they would want to cap the return on capital you make on the business via Pepsi or there is no such cap on the return on capital you can make in terms of what are operating efficiencies you bring in over a period of time?

So there is no cap. Pepsi has a clear standard of what they would charge us for concentrate. And the rest, our profitability depends on our efficiencies and the price we can generate from the market. No limitation on what our margin has to be or what our profit has to be.

Okay. And sir, in terms of the pricing for the concentrate which Pepsi has, is there any defined path as to how they increase it every year or over a period of time? So how does that work in terms of the concentrate pricing they charge?

It's a clear path that they take percentage of our net realization, and which has been standard for the last 25, 30 years. And we have an understanding and agreement. Going forward, it remains the same.

So it should stay at the current level, basically?

In percentage terms, yes.

Yes, in percentage.

As we keep increasing prices, the value keeps going up, but the percentage doesn't change.

We have next question from the line of Devang Patel from Crest Wealth.

Sir, you gave the organic growth for the full year, can you also give it for the fourth quarter overall and for India?

India, quarter 4 was around 10%. And overall, for the company, on consol level, 15.5%.

Okay. And I didn't understand when will you be shifting to the new tax rate?

[Technical Difficulty] evaluating because we -- on the one hand, we have enough MAT credit and on the other hand, we get certain benefits [ ATIE ] on the new investments. And on the other hand, the benefit on the MAT basis, which accrues us, we have already started availing, is now the only thing left is the reversal of the deferred tax liability, which can happen -- could have happened in this quarter, can happen in next quarter, but then we want to defer it on a conservative basis to make more assessment of the -- how the things do happen nationally with other companies are on the tax front. And by then, our own any investment plans are frozen. But having said that, we will, again, be reviewing in the tax year, which is March '20 and with something definite will come back.

Okay. Sir, a question on the organic growth for the full year is 13%, you said for Q4 is 10% for India. So did we start the year on a higher rate and then are we exiting at a lower rate? Are you seeing this slowing down further?

No. I think a couple of percentage points depends on the weather. So I mean North is our biggest market and North really showed the highest weather -- it was the coldest December -- November, December this year. So that has slightly affected it. But otherwise -- and it's a low part of our year, so it didn't make that much of a difference.

And specific answer to your question, we started high and closing low, answer is Q1 in 2019, growth was organic. India was 1.6% as against we ended 10.1%. However, our bigger quarter of Q2 was 18.5%. So it -- sometimes there is extended winter or there is extended summer, all those things may seasonal industry slightly can shift results from one quarter to the another. That's why we always say that we monitor our business on an annual basis.

We have next question from the line of Saurabh Ginodia from Stewart & Mackertich.

Sir, if you can share some qualitative idea on this volume growth, whether it is driven more from the smaller SKUs or it's driven by more larger SKUs your 2 different packs?

It's both, actually. As we are penetrating deeper and deeper, the single SKUs are increasing. As we are going more in modern trade, the larger SKUs are growing...

Urban markets are larger.

And urban market, the larger SKUs are growing. So it's both -- both are growing at -- practically at the same pace.

Okay. Okay. And secondly, sir, I would like to understand what efforts are we putting as a company in the plastic collection?

Thank you for asking this question. In fact, last call, also, we have said that we are working on this and will be coming out with something very definitive. And I will draw your attention to our quarterly results presentation here, given the Page #18, where we have stated the efforts taken by the company and the Producer Responsible Organization, which we have hired and how much we have already -- it has been collected for recycling and what is the target, et cetera. A detail note is given in presentation, Slide #18.

Okay. I will refer to that. And sir, broadly speaking, if you can help us giving some idea on business, which we are getting from glass bottle versus plastic?

Glass has been around 30%.

13% glass and 7% is the 250 mL green tea.

Yes, this is number-wise.

Glass is slowly reducing, so it's about 15% sales the glass now.

It's a volume.

In the volume terms.

In volume terms. And rest would be plastics?

Rest would be plastic and can.

We have next question from the line of Parth Kejriwal from Narnolia Financial Advisors.

Just one question. If you could give the realization per case for different segments seeing soda versus juice versus water?

If you hear it, we -- actually, broadly, we have always stated [ tea-wise ], it becomes very difficult because our mix keeps on changing. But however, having said that, if CSD is 100, you will see water is around 1/3 of that and juice maybe 120 of that. Broadly, this is the guideline.

We have next question from the line of Rajiv Gupta from RBC Financial Services.

Yes, just to repeat -- just to reconfirm my understanding that if Reserve Bank of Zambia honors its commitments in the next couple of years, you will reverse about INR 130 crores of provision, which will come back to your bottom line? That was one question. The other one was, in the new territories and in the international business on existing products, what kind of cushion do you have where you don't require more CapEx for the next how many years? And the third question was more something for consideration. The VBL stock is very illiquid. Have you ever considered splitting the face value or something for to increase liquidity in the stock?

Well, let me answer you one by one. First of all, your first assumption is correct, if we get the Reserve Bank to honor then we will be reversing our INR 130 crores, which we have -- yes. And the second was...

On the CapEx side, see, as far as glass capacity is concerned, we are having excess about 40%, further we can go. And PET, there are certain territories, we can go 20%, some places, maybe 40%. However, the challenge may come in the fastest-growing juice category, where we will have to be on our toes and keep on looking the capacity on absolute periodical basis. And fourthly, backward integration, PET is another new territory, which has come up. We may have to spend as early as possible. And four -- and the fifth, your question on the splitting of the stock. I think that actually doesn't make any difference. As far as the industry is concerned, it's only a perception. Moreover, as a management, we focus more on delivering the results, that's up to -- we leave to the market actually.

All right. I was -- my this thing on capacity was more targeted towards the new territories and the international territories.

Right. New territories we have enough capacity.

Yes, we have enough capacities, but it depends on some certain times, certain territories go faster than the capacity -- existing capacity than in certain categories, there, we have to keep tweaking to meet, like the PET business is growing much faster than the glass business. So the glass capacities will always be there, which are more than substantial, but maybe in certain territories, the PET capacities will start getting choked. So we will have to keep on tweaking.

But overall -- overall -- I'm talking about new territories and the international territories. Overall -- except -- there is not major -- in existing products, you're not expecting major substantial CapEx in the next...

Not major, but some CapEx will keep coming. And especially in the juice and dairy, we'll have to enhance our CapExes going forward.

Okay. Which is always good news. And what about the international business?

International business, we are, right now, reasonably capacitated, except Zimbabwe, the way it's growing, maybe we have to add something, but nothing of any major consequence.

We have next question from the line of Devanshu Bansal from Emkay Global.

I have only one question. So will we be incorporating Ind AS 116 starting next quarter?

That's right. That's mandatory, and we have no choice. We will -- we are evaluating, and we will be coming up with whatever adjustments are needed.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, over to you.

Thank you, once again, for your interest and support. We will continue to stay engaged. Please be in touch with our Investor Relations team for any further details or discussions. Look forward to interacting with you. Thank you very much, once again. Thanks. Bye.

Thank you very much, sir. Ladies and gentlemen, on behalf of Varun Beverages Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.