Varun Beverages Limited (VBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Varun Beverages Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari of CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q3 2020 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; 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 point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect is included in the presentation shared with you earlier. I'd 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 trust that you and your families are safe and maintaining all precautions against the spread of COVID-19. 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 third quarter ended 30th September 2020. We are pleased to report steady results during the quarter, supported by a higher mix of better realization products and rationalized trade promotions, leading to 3.6% growth in net revenues. As the country moved into the unlocked phase, we witnessed healthy recovery in demand in the second half year, especially coming in from a rural and semi-urban areas. This enabled us to restrict sales volume de-growth at 6%, 7% year-on-year in India. Our international territories saw fastest recovery in consumption and registered a 5.8% year-on-year growth during the quarter. So on a consol basis, we reported a marginal de-growth of 4% in volumes, September being the latest month of the quarter. And it's just to give you an idea, our business witnessed strong [Technical Difficulty] a robust growth of 12% as compared to September 2019. On the profitability front, we were able to sustain certain cost optimization measures implemented during the pandemic, enabled us to report improved profitability and margins during the period under review. From an operational standpoint, all our manufacturing facilities are now operating at near-normal utilization level. Our well-oiled distribution model consisting of own logistics, supply chain and end-to-end infrastructure facilities have also kept us in a strong footing in these challenging times. Part of cost realization shall continue to benefit us in the coming years. We further fortified this strength across micro territories during the quarter. With the reopening of theaters, restaurants, mass transportation and outdoor facilities, we are seeing an encouraging revival in demand on a month-to-month basis. And on the back of our solid distribution network and manufacturing capabilities, we believe we are well positioned to address this growth in consumption. Looking ahead, we are hopeful that the demand momentum will strengthen in the months ahead. Buoyance, rural and semi-urban demand, going to widespread monsoons should lead to broad-based economic recovery. In addition, the upcoming festivities and various support measures announced by the government to boost consumption and spending further more well for our product categories over the medium to long term. On the whole, we are confident of delivering encouraging growth in sales and performance in the quarters ahead. I would now invite Mr. Gandhi to provide highlights of the operation and financial performance. Thank you.

Thank you, Mr. Chairman. Good afternoon, and a warm welcome to everyone joining us today. Let us -- let me provide an overview of the financial performance for the third quarter ended 30th September 2020. In Q3 2020, revenue from operation adjusted to excise GST grew by 3.6% year-on-year in the Q3 2020 to the level of INR 18,026.3 million. Realization per case improved by 8% in Q3 2020, essentially on account of higher mix of GST product portfolio and rationalized trade promotions. With faster-than-expected recovery across territories, we registered a healthy growth of 5.8% in the international geographies during the quarter. Total sales volumes were down 4% year-on-year, at 119.5 million cases in Q3 2020 as compared to 124.5 million cases in Q3 2019. Sales volumes in India were down 6.7% year-on-year at 91.5 million cases in Q3 2020 as compared to 98.1 million cases in Q3 2019. CSD constituted 74%; juice, 6%; and packaged drinking water, 20% of the total sales volume in Q3 2020. On the profitability front, EBITDA increased by 16.9% to the level of INR 3,807.9 million in Q3 2020 from INR 3,256.6 million in Q3 2019, that's the cost spending period of the previous year. EBITDA margins improved by 240 basis points on the back of sustained cost control initiatives. Gross margins declined by 149 basis points during the Q3 2020, primarily due to increase in the mix of promotional tax like Pepsi PET 1.25 liters, Sting PET 250 mL, et cetera. Depreciation increased by 5.7% on account of capitalization of Slice 200 mL, tetra line and lease accounting under Ind AS 116. Finance costs during the quarter declined by 33.2% on account of QIP concluded by the company in September 2019, leading to repayment of debt during the last year. And in addition, the average cost of borrowing reduced significantly to -- around 7% or maybe marginally lower. This enabled us to register a PAT growth of 99% to the level of INR 1,614.7 million in Q3 2020 from INR 811.2 million in Q3 2019. On the whole, we have reported a steady performance during the quarter. Our fundamentals remains intact. As the operating environment gradually improves, we are optimistic of reporting healthy and sustained growth in the quarter. [Technical Difficulty]

Sorry, ladies and gentlemen, it seems we have lost the line for the management. Please stay connected while we reconnect them. Thank you. Ladies and gentlemen, this is the conference operator. We request you all to stay connected while we reconnect the management. Thank you. Ladies and gentlemen, thank you for patiently waiting. We now have the management connected. Over to you, sir. You may please go ahead.

Yes. Thank you. On that note, which we -- I just mentioned, 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 very much.

[Operator Instructions] The first question is from the line of Sameer Gupta from IIFL Securities.

This is Percy Panthaki here. Congrats on a good set of numbers. So -- sir, my first question is on the cost savings that you have done and the implications that it has for your margins. In the past, you have always mentioned that the margins at 20%, 21% are quite healthy, and this should be maintained going ahead, and you're not looking at any margin expansion from these levels. But given the kind of cost savings that you have shown at least this quarter, I just wanted to know if there is a new normal for the margins on a stable state basis? And if so, what would that number be?

I think long term, the margins, which we have said, 21% is a very healthy margin, Percy. So if -- because of certain things, we were able to do because of the pandemic and traveling costs and other costs were reduced, and we hope to curtail some costs. But going forward to say that our margins are going to increase better than 21%, I would not say so. But I think we are trying wherever we can do some savings we are doing and making sure the business is excellent.

Right, sir. And secondly, on the top line. Since now, in September, things have returned to normal. And unless there's a second wave or something, we should see the September trends continuing for the rest of the year as well. So if that is the case, I just wanted to understand what would be -- what would you be focusing on to drive growth? Is it mainly coming from market share gains? Or I mean -- just wanted to understand your construct of how you look at growth? And what kind of stable state volume growth for the Indian business do you think is something we should look forward to?

Well, I think the key focus has been in-home consumption, which is what has grown drastically during the lockdown period. And that is why we launched one of the consumer pack, which is easily fittable in all the refrigerators in the consumer homes, which was a 1.25 liter at a special price, magical price of INR 50, which has done exceedingly well for us. And going forward, I think what has changed and which I think is going to be very good for us is people have started getting used to drinking at home, which was much less than what it should have been. And as the go-to-market starts, where the metros and buses start moving and railways start moving, then I think our go-to-market will also come back to normal. And we expect both the places, the growth will start happening instead of only in-home consumption growth, which is coming right now.

Right. Sir. And lastly, on your direct distribution reach, are you at pre-COVID levels? Or are you still below that?

No, we are pretty well there. I mean we never stopped our distribution except when in the...

No. I mean, some shop itself might be closed, and that's why you might not be reaching them?

Yes. But if you look at hotels and restaurants, some of them are still closed. So wherever the outlets are closed, of course, there's no point going to them. But as they are opening, we are servicing all our outlets. And we are seeing that -- if you see the business is pretty well back to normal, and rather more profitable business is coming because what is down is really the water sales, which was basically being consumed in hotels and restaurants. And that is what is down, but our actual CSD volumes are actually going up. So going forward, it is looking quite positive.

[Operator Instructions] The next question is from the line of Abneesh Roy from Edelweiss.

Sir, one question was on the whole product consumer behavior. So what we are getting is in terms of ice cream and beer because there also it is cold product, consumer has shut down significantly, even in Q2. So how you have managed to address this pushback, especially in TSB?

Well, we have not had that feeling. So I mean our consumer seems to be enjoying the cold drink. And I think the only difference is, they are consuming more at home because they are not in the market that much. And as I said, the crowded places, like bus stations and railway stations, that's where our volumes have declined. But everywhere else, especially home, the consumption has gone up quite a bit. So we are not taking that challenge.

Could you elaborate on that bit, how much is in-home consumption versus last year? So both the segments out-of-home and in-home, how much was the growth and dip the correction is?

Well, our home consumption has gone up by between 20% and 25%.

And that would come off because now as people start traveling again, could that come off?

No, I don't think. We hope once you get habitual to it, I think we are hoping that, that will stay. And once the people start going out, the on-the-go consumption will come back to normal what it used to be. So that's why we are expecting a healthy growth going forward.

Sir, why I'm asking because biscuits if you see from a 24%, 25% growth in Q1, Q2 became 9% growth. So similar benefit is based on 1 quarter in advance because the companies are open, so you think that will not happen here, in-home consumption? %

No, I didn't get your question properly. Sorry. Can you just repeat?

So, essentially, in-home consumption has benefited all food and beverage companies. But Q1 versus Q2, biscuit saw significant slowdown from 24%, 25% growth to 9%, volume growth. So in your case...

Biscuit and all, people bought ahead of the curve. I think with soft drinks, it has not happened that well. So people are buying as per their requirement. So I think that's why you see a slowdown. But that is not the case with soft drinks. As things are opening up, our business is coming back to normal.

And sir, last question, large PETs, again, because it's in-home consumption and people are buying in bulk also. So any number you can share there, large PETs versus last year how much is the percentage or how much is the growth?

I don't have the exact percentage right now, but there is -- it's in double digits. That's for sure. But I don't have the exact number. So off-line, if tomorrow you want to know, we can give it to you.

But it would have grown faster, right, that was my...

Absolutely. Absolutely. It has grown in double digits. That's what I'm saying.

The next question is from the line of Chirag Shah from CLSA.

My question is a little structural. If you have to -- if you look at the last few years, we have done a great job in terms of cost cutting, especially of the acquired territories as well. I was wondering if there is also an opportunity to improve working capital turns here? We had close to about INR 900 crores of inventory as on December '19, and that increased to about INR 1,000 crores in June '20, now I understand the context of lockdown. But on a slightly more structural basis, is there an opportunity to improve the inventory turns?

This actually, Chirag, is happening. If you see, when the listing happened, it used to be in 2 capitals, which is about 14 to 15 [Technical Difficulty]. So improvement is coming, and even the working capital in spite of new territories coming in is not going up much. And December is the off month. When we have to prepare for the entry season, that's a one-off kind of a thing. But presently, inventory levels, are INR 848 crores. So it's not INR 1,000 crore anymore. Sure.

But Mr. Gandhi, I mean if I have to look at a slightly longer-term view, where is the opportunity? How do we plan to reduce inventory? And how do we improve the terms? Not just looking at the next quarter, but slightly on a 2, 3-year view.

See, I'll tell you, this is blended average number of days when we say. What happens is during the off season, people want to -- based upon the batch size, the number of days, it will work out high because the sale is very less. So it will turn out to be for higher number of days. But during the season, inventory with any distributor or at our warehouses is not more than 3 days because it fills the moment it's produced. So less than 3 days will become always a challenge during the season, which according to us is the best which can be done.

Also, there is one more thing, which is the PET risen prices are always the lowest in the quarter of fourth -- quarter 4, which is November, December, should we try and buy a little extra to take benefit of the pricing because the cost of carrying is much lower than the change in pricing which happens.

Understand. Fair enough. And just a second question, on the Kerala plant, is there any write-downs that we are expecting from the shutdown that we have taken over there?

No, there is no write-down at the moment, please.

The next question is from the line of Vivek from Jefferies.

Two questions. First question on the volume bit, did you mention in your release that September is a double digit in India. Is there a base angle to it? Or that is how the like-for-like, so to speak, numbers are? And is the trend continuing in October, therefore?

No, you see, as -- so July onwards in this quarter, if you see, as the lockdown kept reducing, the volumes kept going up. And if you see, we were, I think -- what percentage we were negative in July?

About 20%.

About 20% we were negative in July. And in August, I think it came down to 6%, 7% negative. And in September, it's -- when everything has opened up, we became positive by 12%. So I think fundamentally, unless until we see a second wave or something very negative happening, there is no reason why this should not continue, and we should be back to normal business.

Sure. And by any chance, would you be able to comment on October's numbers?

October is pretty good. And it's coming -- continuing with the growth. So that's what I can tell you.

That's great. Okay. Sure. And second question, to one of the participants what you responded about margins, if I look at your other expenses in this quarter are down 11% on the -- now, I know there is a bit of an anomaly in India versus outside India and the product mix, et cetera. But on the margin side, I also feel that -- is there a case or are you being a bit conservative on the margin outlook? Or given that in the context of the revenue growth, you are down 11% on the other expenses side. Can you just elaborate a bit on that update, please?

Vivek, as Chairman has already stated on this, yes, there is a possibility of reduction of cost, but it's better to be conservative than extra bullish. If there will be any savings, we will be definitely coming to the accounts, but up to 21% margins we want to give the guidance. Beyond that, because there are few commodities which are consumed, PET prices or the sugar prices or at times pulp prices, so -- which are very difficult to predict. So at this moment, giving you guidance on the improvement in the margin, I don't think will be very desirable. So yes, whatever we had been doing, we are back to that, and we'll be able to maintain that at least.

The next question is from the line of Devanshu Bansal from Emkay Global.

Congratulations on good performance in the presenting quarter. Sir, 9 months margins are at 20%. With Q4 being a sessionally low-margin quarter, are we still sticking to maintain margins in CY '20?

See, the margins over -- from the last year, in this quarter, we have shown an improvement. At least the trend, we can say, will continue. But of course, the fourth quarter margins, as you rightly said, it's a weaker quarter, where we'll not be matching to the second quarter.

Sure. And my second question is just to understand arbitration for the upcoming season. So what is the expected number of maybe coolers that we shall place in CY '20 and in CY '21?

Well, I think it's going to be consistent what we have been placing up to now. So it would be similar numbers. I mean, we are not drastically going up or going down. So we are consistently going to maintain what we have been doing, and we'll continue maintaining that for the next few years.

Sir, in CY '20 also, we added around 40,000 visi-coolers?

This year, in fact, there were some balance left because after the 22nd of March going to the market, there will be debt. So there is some carryover. For '21, as a one-off case, you can add that openings carryover from this year. Otherwise, as Chairman said, about -- around 40,000 plus/minus will be the visi-coolers placement in coming years. But for the...

For '21, it might be additional because it will combine both the years and average 40,000 per year.

Sure, sir. That is helpful. Can you also quantify in terms of new distributor additions that we have done in preparation for the new season...

Now depending on AOPs, the markets have just opened up everywhere, so I think it's a bit early. But there will be quite a few new distributors because of the new territories which we wanted to enhance and we couldn't do it properly this year. So there will be large enhancements, but the exact number is a bit too early. We'll know it by most probably before the end of the year.

And one last bookkeeping question. What is the current level of debt? And what has been the free cash flow generation in 9 months CY'20?

Debt level is, I think, maybe INR 2,830 or INR 2,840 crore. And the PAT level is given, depreciation is to be added, INR 758 crore is the cash profit for the year. And CapEx, if we reduce about maybe roughly INR 400 crore, so balance INR 360 crore roughly maybe the free cash flow before interim dividend within the year.

The next question is from the line of Shantanu Bansal (sic) [ Shantanu Basu ] from SMIFS Limited.

So I have 2 questions. Firstly, with regards to institutional sales, so can you give an idea as to the percentage of institutional sales in India that happened in Q3 CY '20? And what was the on-the-go consumption in the same quarter, that is Q3 CY '20? And what is -- what are their positions in October?

See institutional sales is quite low. It's about 2%, 3% only for us. It's not very large, if you talk of specific large institutions. So it's a very small part of our volume. It's basically modern trade and eateries and go-to-market, which is our big numbers.

Okay. Okay. And what about on-the-go consumption in Q3 CY '20?

Yes, the reduced volume. See, in the main season, our water sales from 27%, the mix came down to 7%. So 17% that reduction -- after that reduction and smaller pack reductions replaced by the home packs, it is high single digit, maybe 7% to 8%.

It's 13% now.

13%.

13%. Okay. And is the same trend getting reflected in October as well.

Yes, October is about the same, slightly getting better depending on each state and how it is opening up. So slowly, people are moving out as you see certainly the metros running, some of the buses running. So I think in the next 1 or 2 months, once everything is open, the whole trend is going to change back again.

Okay, sir. And with respect to your rural and semi-urban consumption, so with respect to the total India sales, how much percentage is rural and how much is semi-urban in Q3 CY '20?

Rural is about 30%.

And semi-urban, sir?

Semi-urban is about very close to that only.

Okay. Okay. Right. So I mean, based on the commentary, one can assume that in-home consumption has not picked up that much in urban market, which is somewhat contrary to demographic trends and...

So in-home consumption has picked up everywhere, no? It is not only -- because if your on-the-go is down, then that has -- and as our volumes are very close to last year, then the balance has been picked up by in-home only.

But sir, what was your rural and semi-urban consumption in pre-COVID times?

This is generic data.

See, this is the normal data. This year, specifically, our rural market has gone up from 30% to most probably close to 40%. So this is a one-off. How long will it continue? That is not very clear. And that has come off from basically urban.

Right. So urban has lost, right?

It's a basic change which has happened.

Right, right. Okay. Okay, sir. And one last question is with regard to your CapEx. So how much have you spent? Still, what is the cumulative CapEx that you intend to spend for the whole year?

We have spent around INR 400 crores, as we have stated in our calls earlier. There was -- this includes INR 200 crore, which PepsiCo had given us last year for some equipments to be purchased in the plants, which we had taken. So another INR 200 crores, which we had given the guidance, up to 50% of depreciation figure. So around INR 400 crores. Majority of our CapEx for the year is already happened.

Okay. So no more CapEx in last quarter?

That's right.

Yes, practically very low, if there is any.

The next question is from the line of Bharat Shah from ASK Investment Managers. And this is -- this must be a remarkable quarter in Varun's history, where third quarter in the calendar has exceeded the numbers in the second quarter. Probably in the wildest dreams that may not have been confused, but that's a tribute I think...

And I hope our second quarter is always much better than the third quarter.

No, it's a tribute to Varun that in the third quarter, it has raised the bar. And in the second challenging quarter, it still tries to manage situation a lot better, so much so that finally third quarter has ended up better than the second one, which was unthinkable. But my 2 points, I wanted to -- on the expenses, there was an extensive discussion prior to this. But I always thought Varun stands for operational excellence, and this is a business of execution. This is a business of managing operations very efficiently. So Varun has obviously been a cost warrior and very efficient operator in running the day-to-day business. So I really wonder how much there is a scope for any dramatic economy of expenses?

No. As I have said -- I mean, further reduction is going to be very difficult. I mean whatever we could, we have squeezed ourselves looking at the pandemic and our main quarter getting hurt. So we have become even much more cost-effective than we used to be. But we don't want to predict any numbers better than 21% because at 20%, we are the high -- most profitable company in soft drinks, actually in the world, amongst the top large companies. So I think we want to keep it at that. And then it would depend on the oil prices and the sugar prices. Those are the 2 main commodities we have. So at the moment, the oil prices are quite favorable for us. So that would also help. But we don't -- because sometimes sugar goes down, sometimes the oil prices go down, so it keep on balancing. So we don't like to predict.

Yes. In other words, the costs that you can control, which are within your jurisdictions, I suppose you have squeezed everything that you plan. What is outside the...

Whatever was possible, I think, we are pretty well done. Now our only thing is not to let the cost go up and the volumes will keep going up.

And secondly, Raviji, supposing this nightmare of 2020 wouldn't have occurred and assuming that there is no recurrence of challenge in the calendar 2021, we feel likely that calendar 2021 would be as per our original plan, say, if 2020 did not recur? Whatever disruption in '20 has occurred, has had to occur is occurred. But if we have to, for a moment, think that, that was not to be the case, our original plans in 2019 for '21, would that certify, if assuming...

It would be very close. We hope we can actually do better because the cost cuts which we have done, that, I think we expect the numbers to come back to some reasonable reality and the cost cuts, which we have done would help us going forward. And specially, for next year, I think we don't see the oil prices going up at the moment. And if the oil prices don't go up, that will help us.

And Shah saab, adding to what Chairman has said, Pepsi and Varun jointly are also working the activation plan for season '21, which normally starts from the January. To prepone it from the November itself, with Southern West with warmer territories coming to us, so preparation for next year are going to start activation process from next week itself, in properties, in placement, et cetera.

That means 2021, in all probability, should represent a year as if our normal long-term plan would have rolled it out for us? And hopefully, on the cost side, we would get some extra, which means in all probability 2021 is considerable that it can be better than our original plans in 2019?

We hope so, sir, and we are trying for that.

See, we will try for both. If there is some shortcomings in one, hopefully, may get compensated by the other and the end product, the net result, should be quite near to as U.S.A.

And secondly, on -- strategically if you look at why given the nature of the business, seasonality is deeply embedded and is structural. But at margin, can we reduce the intensity of the seasonality given the unused event that has rudely interrupted your most important quarter. So going forward, can we strategically on a long term do something, whereby our -- at least at margin some amount of intensity of the seasonality can be broke down?

See what we are doing -- it's like a chicken and egg story, actually. As we grow the market, the newcomers we add are normally added in the peak summer season. So on one side, we are making our seasonality flat by giving more product to the same customer. On the other side, the new customers we are adding he's only coming in the month of March, April, May, June. So we keep on going back and forth, actually, as the volumes keep increasing. And there is such a huge rural market India still has that still we potentially go deeper and deeper for the next few years. I think on one side, we'll flatten the urban curve, but the rural market will keep on developing in the peak season.

No, I appreciate. I appreciate. And I think...

And the difference which will make is now with the new territories coming to us, which are much less seasonal because we were more skewed on North, which was very seasonal. Now with the south and west coming to us, which is a little -- much less seasonal. I think that itself will start showing a change. And also juices are doing well even in the off-season. So that will make a little bit of a dent.

The next question is from the line of Deepak Poddar from Sapphire Capital.

Sir, just wanted to understand more on the medium term. Like, if you set aside this year, what sort of volume growth or maybe in the top line we are looking at, in terms of maybe next 3 to 5 years, which we can grow consistently given our focus on new territories, new products?

Our guideline was clear before also that we -- I mean, after this year, we hope to come back to our normal growth, which were -- if you just take out -- we have to treat that 2020 does not exist, and we have to go back to our normal growth, which we will take from 2019, skip 2020, and go back to '21, basically. So we don't see any reason why the growth will not come in the next 3, 4 years.

Okay. So what is that normal rate of growth that we are taking?

Yes. I mean, we are fundamentally looking at double-digit growth, which we still believe will happen.

The next question is from the line of Vidhi Thadia from [ Leviathan Securities ]

I have 2 questions. First off, from Q1 CY '18 through Q4 CY '18, result presentation reflected carbonated juice-based variance of Slice: the flavors of guava, chili, apple, orange. And succeeding presentation for CY '18, no longer have these brands listed. So could you cite the reason for the discontinuation of this product? As we personally believe the offtake would have been great. And my second question is, how is the offtake for our dairy-based products?

Well, our dairy-based products had started doing extremely well, but it was a new product, and we had planned proper marketing and proper expansion of the products. But unfortunately, as COVID happened then we sort of semi-withdrew the products and -- as we could not launch it properly. And we will again launch it properly again in the starting of the year. Even though we are still selling it but we slowed it down, and now, again, from January, February, we'll put it across the country. So the product was liked and it did extremely well, but during pandemic, we had to withdraw it to a point.

And the other part of your question on the fizzy Slice juice-based product, there -- these were launched at low cost at the rural areas. These were 0 sugar products. But what we people talk, they should consume less sugar products, but it was just the reverse. People did not like that much, these products which were without sugar. So the -- which was very small. And these were meant for the rural areas, but the results were not very good. So for the time being, we are not producing those.

The next question is from the line of Varun Goenka from Nippon Mutual Fund.

First of all, I think you -- I mean, the team never falls short of surprising us. Last -- it's been, I think, more than -- I think, around 12 quarters, even on volume and now good quarter on cost. So my heartiest congratulations. I think all my questions are answered. Just your thoughts on our e-commerce sales? Where they are? How are we approaching that? Are we approaching a 1P model or a 3P model where we use the distributors to do the fulfillment? That's about it. I think rest of the questions have been answered, sir.

See, we are in all e-commerce stores, but that is going through our main distributors or directly from ourselves, either from the plants or from our large distributors. So we are mainly in the major towns, and all e-commerce platforms we have activated, and we are supplying to them. And we are, of course, looking at it in a much bigger way going forward.

Okay. And what could be our sales today, just on an annual basis, a percentage of sales or anything, sir?

It's very negligible for the time being. It's just a platform, which has just started for us. So it's not large.

Right. Just a more macro question. I think going forward, are we looking at much larger plants and scaling down the smaller plants? Is that the thought eventually?

It would be ultimately because smaller plants don't -- are much more costlier. So as we open any new plant now, it will be much larger than what it is. And slowly, the very small plants, which we have acquired, we might either replace them with larger plants or shutdown, which is not needed, if we have another plant close by.

Okay. And you would need a large plant in south, right?

No, we have enough plants in South. So South, the capacities are more than comfortable right now. We don't need anything. South and west, both we have enough plants.

Even Tropicana, we have sufficient capacity?

Tropicana is the only thing when we launch -- when we need extra capacity -- right now, we are transporting so we are bearing the cost. But ultimately, Tropicana, we will have to open another plant.

Okay. So that would be what kind of an investment, Raviji? What size of the investment?

That would be a couple of hundred crores, especially, for Tropicana, but it won't be for the coming year, at least.

No, no. I mean, anyways, then investment in juice is actually very good for our growth and development.

The next question is from the line of Rakesh Roy from Indsec Securities.

Sir, my first question is regarding, sir, can you highlight on the international business, especially, on Africa region?

Well, international business was much better than -- they opened up much faster than the India region. So that's why you are seeing a growth in this quarter, and it is continuing the similar way. So there's very little lockdowns anywhere in the international market. So the international markets are doing pretty well for us.

Right, sir. Sir, my second question is, sir, India volume is near by 91.5 million cases. Out of this domestic volume, how much is from southwest India, sir, new titles?

Just 1 second. 77 million is for 9 months out of 274 million, and we're just checking for the quarter.

The next question is from the line of Manjeet Buaria from Solidarity Investment Managers.

The first one was I wanted to understand the juice market a bit better. We have strong incumbency in probably Real and B Natural. So when Tropicana reached to scale up the juice segment, how do we fight these brands? Do we offer the channel better terms in working capital or margins? That's one from the channel perspective. And second from the customer perspective, what do we do to basically make the consumer shift from the existing brands to Tropicana? And when the second one is unrelated.

See, if you see, the distribution network we have is much stronger than Real or anybody else. So we are going to leverage on our distribution system and that is why you're already seeing growth coming in the juice segment. And secondly, we have a huge volume number of visi-coolers in the market, which our competition does not have. So those are the 2 things we are going to leverage. And with that, we believe our volumes in juice will steadily keep going up.

And sir, could you give me a sense of how the retail market share is in the juice industry as of now, within the top 3 players?

So we are -- how much are we growing last quarter in juice?

19% last quarter.

We have grown 19% in the last quarter. So that itself gives you that we are growing even in the pandemic, and that is basically on the strength of our distribution and chilling equipments. And we expect, going forward, to be growing at even a faster pace than this.

Correct. And sir, does Tropicana have 35% market share in the juice industry?

We are not sure. I mean, we don't have the exact numbers, and I don't want to say we didn't get the exact cut. So I would not like to speculate.

Sure. Sir, my second question was the concentrate pricing which Pepsi has. How often does that is renegotiated?

No, it's not renegotiated. It's already fixed and it does not -- it will not change. We have an agreement for 20 years.

20 years. So post 20 years is when you again have to kind of sit across the table and figure out what...

Yes, when we have to -- it's based on our selling price. So it's, what we call, our net realization value. So our price is based on that, and it will continue to be based on that.

The next question is from the line of Sunny as an individual investor.

Sir, my question was regarding the cash attrition in this quarter. So what I remember that the net debt of last quarter was somewhere in the range of INR 2,900 crores. And what I see is that in this quarter, the profit after tax and the appreciation, if I add those up, they are around INR 300 crores. So -- but the net debt what I heard earlier was INR 2,100 crores. So I was not sure of what -- how has the cash generated this quarter been utilized? If you can answer that, please.

Majorly, I think we can divide it in 3 parts, 100-plus crore is the reduction in the debt. About INR 80 crore, INR 90 crore distribution of the dividend. Third is, in the last quarter, there were certain benefits of deferment of GST, PF, tax, which in this quarter are paid, which altogether will make up to this total, which is sum of the PAT and of the depreciation.

Sir, can you break it up into the 2 and the 3 components. INR 100 crore you said is the attrition to the...

INR 100 crores is the reduction in debt. About INR 90 crore -- INR 85 crore to INR 90 crore is the distribution of dividend. And the balance INR 100 crore approximately was the GST and all which we got benefit in the pandemic period, and we paid that during this quarter.

Including CapEx.

Including some CapEx.

The next question is from the line of Aman Pereira from Bellwether Capital.

Am I audible?

Yes, yes. Absolutely.

Good set of numbers. Sir, just one question regarding the CS gains.

One question regarding?

Aman, you are not audible now? It seems we have lost the line for the current participant. We will move for the next question, which is a follow-up question from the line of Devanshu Bansal from Emkay Global.

Sir, my question is for international margins. So we have pretty much seen a very strong rebound in international margins. We were operating around 12%, 13% earlier and now we are almost approaching 20%, 21% in 9 months. So what is leading to this strong improvement in margins in international operations?

See, actually, every territory, territory by territory, Morocco, which took off in the last 2, 3 years has built up good portfolio of its own with water and other things getting introduced. Nepal, we increased the capacity with the second plant, which is fully operational. Zimbabwe, we added preform manufacturing there itself; canning line, we shifted; and water line, we are adding, too. And so that's with the full capacity. Every year, one or the other expansion has been happening there. And all these things combined have started showing results.

And even Sri Lanka has done extremely well for us. They have shown good growth. And everywhere, as we have said, we have tried to cut wherever we could cut some costs. And so there has been a cost reduction everywhere. At the same time, the volumes have come back, so the margins are good. And oil prices were down, so that also partly helped us.

Just a follow-up. Do we expect to sustain these levels of margins in international operations? Because I'm coming at from that side. Like, in India, we were already operating at 22%, 23% margins. And it's in international operations, we get back to that level, then shouldn't we -- shouldn't our company level margins also move towards 22%, 23% level?

We will review it next year. As of now, I think we just don't want at this moment...

We don't want to give that guideline. We hope we can, but I don't think we want to give that guideline at the moment. And we are trying everywhere wherever we can improve our margins, which is happening. So whatever we are learning from each country and understanding it, we are making the changes to make it more profitable. And some of the countries, when you enter, the margins are low because you are just entering the market. So it takes time. But now most of these markets have become mature for us. So I think going forward, it should be good only.

Yes. We're containing these for future -- Zambia, Zimbabwe, the season is November, December. So that's still in the pocket.

Actually there, April, May, June is October, November, December. So this quarter is the best for these 2 countries.

The next question is a follow-up question from the line of Vidhi Thadia from [ Leviathan Securities ].

So out of the 91.5 million cases of India business, could you give us a zone-wise breakup, if possible?

No. We don't have the zone-wise breakup right now. But offline, if you want to know, you can call us and we will give it to you.

Ladies and gentlemen, that will be the last question for today. I now hand the conference over to the management for their closing remarks. Thank you, and 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 soon. Thank you very much. Have a nice evening. Bye.

Thank you very much. Ladies and gentlemen, on behalf of Varun Beverages Limited, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.