Varun Beverages Limited (VBL) Earnings Call Transcript & Summary

We welcome you all into 26th Annual General Meeting of the company. Along with us, we have our Chairman, Mr. Ravi Jaipuria, other Board members and our Chief Risk Officer and Group Company Secretary, who has joined us through WebEx facility providing by NDSL. To comply with [indiscernible] of companies act, our company is conducting this AGM through WebEx facility provided by NSDL without [indiscernible] of the members. [Operator Instructions] These remote [indiscernible] facility was provided to the members to pass their votes electronically on all the resolutions set out in the notice commenced at 9 am on April 4th, 2021, and ended at 5 p.m. on Tuesday April 6th of 2021. Company is also providing e-voting passionate during the proceedings of AGM to enable members across their board who have not done through to remote e-voting. During the possibly AGM, members may raise query through the chatbox facility provided by NSDL. If any member face any technical issue, kindly contact help line numbers of NSDL as provided in the notice of AGM. Now I request [indiscernible] to kindly chair the proceedings of the meeting. Thanks.

Good day, ladies and gentlemen. A very warm welcome to everyone present today at the Annual General Meeting of your company, which is being conducted virtually. I hope you and your love forms are well and safe during this trying period of the COVID-19 pandemic. I would like to confirm that all the Board members, including the Nomination Committee and Stakeholders Relationship Committee are present in this meeting. [indiscernible] present, the meeting is therefore called to order. Let me start by briefly taking you through the key developments and performance of the company in 2020. The before the pen demented, we started the year 2020 strong note and healthy demand and robust volumes. Growth across our domestic and international markets. However, the spread of COVID-19 pandemic in early March 2020 resulted in country-wide log terms and similar restrictions in many of our Express yes. This led to significant disruptions in our production levels, supply chain and disruption in operations. Our primary focus during this challenging period was towards taking -- undertaking all necessary. Measures to maintain our business operations, ensure safety of our employees, business partners, communities and to overall safeguard the interest of all our stakeholders. As the country moves to the unlock phase towards the end of May 2020, we also started witnessing a steady revival in demand. Especially from [indiscernible] and semi-urban areas. Consumption across markets continued to strengthen on a month-to-month basis during the course of the year and sync with revival in demand. We increased production in a staggered manner across our [indiscernible] facilities and were in a position to cater to the consumer demand throughout the year. So even in an extremely challenging and unprecedented macro environment, we reported a resilient performance during the year and were able to restrict the revenue growth at 9.5%. On the profitability front, we were able to largely sustain some of the costs optimization measures implemented during the pandemic period that enabled us to report steady profitability for the full year of 2020. We believe an important component of delivering value to our shareholders and returning capital in a constant and transparent way, therefore, in line with our demand dividend distribution policy. The Board of Directors recommended an interim dividend of INR 2.50 per share in 2020. I would like to take this moment and give a special mention to all our business partners, communities and employees who efficiently navigated through these operating constraints and help to maintain continuity in our business operations with minimal disruption. Even in such a difficult year, we continued on our journey to build and create a stronger franchise, undertaking strategically significant initiatives including enhancing our operations, operational efficiencies, improving product offerings, managing cost effectively and expanding reach. As we look ahead, we will continue to augment our key position in the domestic and global beverage industry with improved market presence across high potential geographies. From the cooperating standpoint, we beat is solid and stable, and our focus remains on generating strong free cash flows over the coming years. Overall, we are confident that further stabilization of the macroeconomic environment will lead to gradual and sustainable growth going forward. Before I conclude, on behalf of our entire team, we would like to express volatility with all the people and communities affected by COVID-19 disease, and we pray for their speedy recovery and also hope that the global situation attains normalcy at the earliest. We thank all of you for accompanying us on the journey [indiscernible] journey ahead and your ongoing trust and support. Though there is no negative qualification observation in the auditor's report, but to follow good governance, I would suggest, Mr. Ravi Batra to read the full shareholders' audit report and Mr. Raj Gandhi to take up the agenda item [indiscernible]. Thank you. Thank you, sir. Hello, Ravi. [indiscernible] I just joined a little while ago. So Gandhi, do I have to do any formalities about signing in? Or I'm okay?

No, we are in the process. We'll let you know. And let's proceed with the agenda.

To the members of Varun Beverages Limited, the report on the auditors stand-alone financial statements, opinion 1. We have audited the accompanying stand-alone financial statements of Varun Beverages Limited, the company, which combined currently as of December 31, 2020. The statement of profit and loss, including other comprehensive income, the cash flow statement and the statement of changes and equity for the year-ended and a summary of the significant accounting policies and other explanatory information to -- in our [indiscernible] best of our information and according to these positions given to us, we force stand-alone financial statements give the information required by the company in the [indiscernible] and fair view in [indiscernible] with the accounting principles generally accepted in India, including Indian Accounting Standards specified under Section 133 of the Act of the State Of Affairs of the company as at December 31, 2020. And it's profit including other comprehensive income is cash flows and the changes in equity for the year ended on that. We saw included and our audit in pages with the standards on accounting specified under Section 143 [indiscernible] under these standards are further described in the auditors responsibilities for the audit of these stand-alone financial statements section of our report. We are in [indiscernible] in accordance with the code [indiscernible] the Institute of Chartered accountants of India businesses, together with the ethical requirements that are relevant to our audit of the stand-alone financial statements under the Commissions of Act and we rules there [indiscernible] and we have fulfilled other ethical responsibilities in accordance with these requirements and code of ethics. We believe that the audit evidence have been obtained is sufficient to provide a basis or opinion. Point number four, [indiscernible] has read, including key audit matters. And however, audit addressed matters our income has rest. Point number six, information other than stand-alone financial statements and not to report on. The company's Board of Director is responsible for the other information. The other information from [indiscernible] information included in the management discussion analysis report on COrporate governance and Directors report, but does not include the stand-alone financial statements and our auditors report their own. Our opinion on the stand-alone financial statements does not cover the other information, and we do not expect any form of assurance conclusions thereon. We are required to report the fact that we have nothing to report in this regard. Point number 7, taken as read. Point number 8, taken as read. Point number 9, though, those Board of Directors is responsible for overseeing the company's financial reporting process, auditors' responsibility for the audit of the stand-alone financial statements are object to obtain reasonable assurance about whether the standalone financial statements as the whole are free from material [indiscernible] whether due to [indiscernible] and to issue an auditor's report that includes their opinion. Reasonable assurance is a high level of assurance, but it's not a guarantee that an audit concluded [indiscernible] with the standard and [indiscernible] will always detect them with this statement [indiscernible] Point number 11, taken as read. Point number 12, we communicated with the [indiscernible] with the governance regarding, among other matters, the planned scope and timing of the audited significant [indiscernible], including any significant efficiency in internal controls that we identified during our audit. Point number 13, taken as read. Point number 15, report on other regulatory requirements as required by Section 197 [indiscernible] based on our audit report that the company has [indiscernible] with directors during the year in participations of and limit late the Section 197 [indiscernible] scheduled by of the act. Point number 16, taken as read. Point number 17, taken as read up to 17 F. Point number G, with respect to the other matters to be included in the auditor's report in accordance with rule 11 of the company's audit and auditors report 2014 as amended, [indiscernible] the best of our knowledge, information according to this question given to us. Point number 1, 2, 3 taken as read. For the disclosure pigments related to Holdings as well as sealing in specific specified banknotes were applicable to the -- for the period from 8 November 2016 to December 30, 2016, which are not relevant to these standalone financial statements, hence reporting under the [indiscernible] not applicable. [indiscernible] partner for [indiscernible] Company, Sumit Kathuria Partners. Further, all the applicable statutory registers annual board and other statutory documents are made available for inspection by the members on the [indiscernible] the company. Now I'd request Mr. Gandhi to take up agenda items. Thank you.

Thank you, Mr. Batra for reading out the standalone auditors report. Now we will take the items that [indiscernible] with the entry statement based is February 16, '21, convening the 26 virtual [indiscernible] of the company was sent to e-mail on March 12, 2021. And your permission, I take it as read. Now I will take all the agenda items for your approval. Item #1 to receive considering that of the audited stand-alone financial statements of the company, together with the report of [indiscernible] directors and auditors thereon, the audited consolidated financial statements of the company, including auditors report thereon. For the financial year ended December 31, 2020. The proposed resolution is placed before the mean to be passed as an ordinary. Item number two, to appoint, Mr. Ravi Jaipuria purities by rotation and being eligible offers in for the appointment as a director. The proposed resolution is placed before the meeting to be passed an ordinary resolution. Considering the fact that [indiscernible] in item number 3, that's the next resolution request our Chairman to take it further for approval of members.

To appoint Mr. Raj Gandhi, who retires by rotation and being eligible offers himself for reappointment as a director. The proposed reservation is placed before the meeting to be passed as an ordinary resolution.

Now we resume proceeding of special business, Item #4. To approve continuation of directorship of [indiscernible] as non-Executive independent Director who [indiscernible] 75 years of age on others, the [indiscernible] will be completely certified and is currently [indiscernible] that is November 30, 2023. The proposed resolution is pleased before the meeting will be passed as a such [indiscernible] resolution. Item #5, to approve, saving the profit related commission up to [indiscernible] of 1% of the net profit of the company to nonexecutive directors of the company for the financial year ending December 31, 2021. The proposed resolution displaced before the meeting to be passed as a special resolution. Now I request our members who are not cast their remote e-voting or e-voting during the proceedings of AGM to finally vote on the proposed resolution through e-voting for another 30 minutes after [indiscernible] by the Chairman till then they will be open. Mr. Chairman, may I now request you to take up certain question that we have received to e-mail or in checkouts from the members for participants benefit in reptation [indiscernible] questions are growth and are under. First of all, few members have expressed their hearty congratulations on company's managing the adverse impact of pandemic earlier than expected and also successfully maintaining healthy margins.

We are thankful by members for their continued support as being to enable the company to continuously improve its performance. We had a challenge of losing sales during peak seasons affecting the profits. However, by expense, rationalization, we endeavored to maintain sufficient margins to perform well.

Now let me take a 2 questions. The first question is as the new wave of coronavirus has covered full of India with a particular deeper impact on Mahrashtra, how is the compancy strategizing it's business to handle new likely lockdowns or night curfews being imposed by various state governments?

Beverage is normally treated as an essential and the India's traditional trade is very resilient and is less affected by the lockdowns. The [indiscernible] segment, which gets affected maximum was already operating at lower than unusual capacities.

The next question is how has been growth for new product launches?

Our energy drink still witnessed a remarkable growth of 2.5x in calendar year 2020. In February '21, we have also introduced a new product variant under the powerful brand Mountain Dew. It is a lemon fruit juice drink -- based drink, namely Mountain Dew Ice. We are encouraged with the initial response that these products have received, and we remain highly confident of the long-term growth prospects of this new variant, especially in the upcoming season.

Now we take up the next question. It's how are the integration efforts coming along for our newly acquired South and West territories?

The South and West territories acquired in 2019 have been fully integrated in our system, and our focus now is to improve our go-to-market strategy, increased penetration by activating -- activation of new reads, appointments of additional distributors and investments in visicoolers, distribution vehicles, et cetera, over a period of time.

Now we take up the next question, which reads, what has been the contribution of international operations for the [indiscernible] year 2020. And is it expected to increase in future?

Our international operations contributed 25% of our consolidated revenue in CY2020, as the Indian operations were relatively more impacted in CY2020 because of strick lockdown measures during the peak months. We expect the contribution from Indian business to increase in the coming future and in the coming years.

In fact, most of the questions are identical or repetitive in nature and has been bucketed as above, we also have received a lot of questions which are seeking information at value level. What we will do is, we will be placing these before the Chairman and the replies as provided by the Chairman of these shall see for individually to the members from [indiscernible] and will be send through to e-mail. And with this, may I request the Chairman to please [indiscernible] to all the participants members and the members of the committees.

I declared the meeting as officially concluded and would like to extend our special thanks to the Board members, management and the members present for attending this AGM. Stay safe, stay healthy. Thank you very much, everyone.

Thank you very much.