Varun Beverages Limited (VBL) Earnings Call Transcript & Summary

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

Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q4 and CY 2021 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; and Mr. Kapil Agarwal, CEO and Whole-time Director of the company. We will initiate the call with opening remarks from the management, following which we'll have the forum open for a question-and-answer session. Before we begin, I would like to state that some statements made in today's call may be forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with your earlier. I would now like to request Mr. Ravi Jaipuria to make his opening remarks.

Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope all of you had the opportunity to go through our results presentation. This provides details of our operational and financial performance for the fourth quarter and year ended 31st December 2021. We delivered a strong and resilient performance in the year 2021, registered a top line growth of 37% and a PAT growth of 109%. Our performance was driven by a robust volume growth of 34%. While the year started on a healthy note, short-term disruptions due to second COVID wave of the pandemic severely effected our domestic business in the seasonally strong month of May. Given the learning from the first wave of the pandemic in 2020, our team was able to handle and mitigate the business impact due to these restrictions, to a large extent in 2021. As restrictions started easing from June onward, we saw a fast recovery in demand that brought back the growth momentum and which we started the year. Improved offtake across our international territories further aided growth during the year. We continue to sustain the cost-optimization measures that we had undertaken during the pandemic period. Despite decline in our gross margins due to higher PET prices, our cost-optimization measures, in combination with a higher operational leverage on the back of strong volume growth has translated to enhanced operating profit in 2021. I'm pleased to share that even in a seasonally soft quarter, we have reported profit for the first time ever in quarter 4 on account of these factors, along with the improvement in profitability of international operations and lower financing costs. On the whole, we have delivered an encouraging performance during the year. The third wave of COVID has not had any impact -- significant impact on our business, and we will continue to further strengthen our distribution in underpenetrated territories, enhancing volumes and increasing our market share. We are confident of delivering a much stronger performance going forward. I would now invite Mr. Gandhi to provide highlights of the operational and financial performance. Thank you very much.

Thank you, Mr. Chairman. Good afternoon, and a warm welcome to everyone joining us today. Let me provide the overview of the financial performance for the fourth quarter and year ended December 31, 2021. Revenue from operations adjusted for excise and GST grew up by 30.3% year-on-year in quarter 4 2021, to the level of INR 17,343.4 million. For calendar year 2021, revenue from operations grew by 36.8% over the calendar year 2020 to INR 88,232.3 million. Consolidated sales volume for the quarter 4 year -- calendar year '21 registered a solid growth of 28.5% to 112 million cases. And for the calendar year '21, total sales volume grew up by 33.8% to the level of 569.1 million cases driven by strong recovery in demand and low base of the calendar year 2020. In the year '21, CSD constituted 70.3% of the mix, juice 6.4% and packaged drinking water 23.3% of the total sales volumes. Realization per case for the calendar year '21 increased by 2.2% year-on-year, driven by improvement in realizations in international operations. On the profitability front, EBITDA increased by 20.5% to the level of INR 2,075.7 million in Q4 calendar year '21. For the full year calendar '21, EBITDA grew by 37.7% to the level of INR 16,546.5 million year-on-year. Gross margins in calendar year '21 declined by 288 basis points and by 476 basis points in the calendar year -- in the quarter 4 of the calendar year '21, primarily because of the higher PET prices, which increased by almost 18% this year. Despite the decline in gross margins, the company was able to improve its EBITDA margin to 18.8% during the year because of higher operating leverage, driven by strong volume growth and on account of cost-optimization measures. Finance cost declined by 39.8% during the quarter 4 calendar year '21 and by 34.3% in calendar year '21, primarily because of the lower cost of borrowing. This is the first time the company has ever reported a positive PAT at 325.2 -- INR 325.9 million in a seasonally weak quarter, such as quarter 4. This was primarily led by improvement in profitability of international operations and lower financing cost. For the calendar year '21, PAT grew by 108.8% to the level of INR 7,460.5 million, as, along with India, most of the international territories also reported healthy profitability. On the balance sheet front, the net debt stood at the level of INR 30,053 million as on 31 December '21 as against INR 30,158 million as on 31 December '20. Net debt reduced marginally despite increase in capital work in progress of -- by INR 4,300 million and incremental stocking of PET chips/preforms of INR 2,000 million as on 31 December for the next season in order to mitigate against logistics and pricing breaks. Debt to EBITDA -- debt to equity ratio stood at a healthy level of 0.72x and the debt-to-EBITDA ratio stood at 1.82x as on 31 December '21. Working capital days increased to 35 on December 31 primarily because the higher stocking of PET chips/preforms. During calendar year '21, net CapEx stood at INR 3,500 million, out of which INR 1,300 million is primarily towards brownfield expansion in certain parts -- plants in India and INR 2,200 million is primarily towards brownfield expansion in Morocco and Zimbabwe. As on December 31, '21, capital work in progress stood at approximate level of INR 5,000 million primarily for setting up new greenfield production facilities to Bihar and Jammu and brownfield expansion in Sandila factory. In line with the guidelines of dividend policy, the Board of Directors recommended an interim final dividend of INR 2.50 per share during calendar year '21. Total cash outflow for dividend payout was INR 1,082.6 million. On the whole, the company's financial position remains strong. We have seen a healthy month-on-month trend in sales and consumption and the outlook remains positive for all our product categories over the medium to long term. Overall, the focus remains on generating strong free cash flows over the ensuing quarters and coming years. On that note, I come to an end to the opening remarks and would like to now ask the moderator to open the forum for any questions or suggestions that you may have. Thank you very much.

[Operator Instructions] The first question is from the line of Chirag Shah from CLSA.

I would say, congratulations on reporting profit in Q4, difficult to perhaps achieve that. Just very quickly, Mr. Gandhi, you mentioned that the focus going ahead would remain on generating strong free cash flow. Can you just touch upon what would be the CapEx trends in the next couple of years? What will be the investments in some of the newer geographies that you are planning to enter? And then finally, what is the plan to improve further on the working capital cycle, please?

Thank you, Chirag for asking these detailed questions. Firstly on the operating free cash flows and the CapEx going forward. As mentioned that this year the CapEx planning was for 2 greenfield and 1 brownfield for different 3 locations. In CapEx breakup as given in the last call of INR 700 crores is going to be there. And out of it, about INR 500 crores is already incurred and -- but what is more important than the year-wise breakup is that in the longer term, we always give the guidance that our CapEx is going to be on a long-term basis, whether we see last 5 years or on a moving basis, somewhere around the depreciation figure, which still holds through in the longer-term basis. This CapEx of 2 plants is coming in the light of last 2 years there was no expansion, one. Second is new territories, new geographies opening up in greenfield. As of now, there is nothing, no CapEx plan for new geographies. But that inorganic as when the opportunity comes in, we definitely share with all the market, bankers, everyone. And as and when I mean, it will come, we will definitely be doing it. I think you had one more question, Chirag?

Working capital cycle.

Working capital cycle. Working capital remains always with every volume going on and every year is improving and improving. At standard basis, it's about 14 days and 31 days at the year-end is on the volume in December or low months is lower as it is, it shows 21 to 22 days and it got accelerated with our conscious decision of delisting the company by stocking preforms as well as the PFT resins to derisk against the logistic price issues. And although luckily, the third wave is subsiding now fast, but initially it was not possible to predict, but we wanted to protect our sales, which we did. Yes.

Understood. I understand the one-offs that you have on the inventory days. But on a structural basis, as the juices capacity also gets spread across India, is there a spread to reduce the inventory days that you have in the system -- the normalized inventory days, I mean.

No, I think less than 14 days will be very difficult, Chirag. I think 14 days is very, very optimum and I think it would not get reduced further.

Sure. I'll take it offline. I was just talking about the inventory days, but I'll take it offline. Mr. Jaipuria, I think we have you here. Can you also talk about dairy expansion plans now? And secondly, the expansion plan from the visi-cooler rollout, please?

So our dairy expansion because of the last 2 years of COVID being in the peak season, so we really couldn't do very much with it. So this year, hopefully, if the things work out well. We have a large plant in Pathankot partly in Arunachal -- not Arunachal, sorry, [indiscernible], where we are producing dairy products. And hopefully, this year we will -- our volume growths are expected to be more than double to maybe even triple. So once we reach that, then we would be looking at putting up another unit in Maharashtra.

Understood. And on the visi-coolers?

We are investing in 40,000 visi-coolers.

Visi-coolers, we are normally putting about 40,000 visi-coolers every year, which we have done this year also.

The next question is from the line of Nihal Jham from Edelweiss.

Yes, congratulations to the management for the strong performance. Sir, 3 questions from my side. Starting over the quarter, ideally, we have been discussing about the out-of-home and in-home split. And considering that you mentioned that this quarter, you did not see any impact coming in from COVID, is it safe to assume that the out-of-home and in-home split is similar to what it was pre-COVID? And also if you could highlight the performance of certain star products like Sting or any of the other...

Yes. Fundamentally, this last quarter, we had practically started coming back to pre-COVID in the normal system. And...

The split.

Yes. The split on the go was 65% and 35% home consumption. So that is what the split has been on a normal working.

That is helpful. And then just to understand any specific product categories. I would want to know about Sting's performance. And if possible, to share the contribution for this year now that we have seen decent time period since it has been launched?

Sting has done extremely well for us, and it's already close to 5% of our mix and the volume has been phenomenal. So 5% of our mix itself is a large volume and still growing at a huge pace.

Absolutely Mr. Jaipuria. Mr. Jaipuria, the second question was you...

Just for your information, the growth has been about 440%.

Better of -- then the share of this last year would have been just less than, say, 1% to 2%?

Absolutely. So with the 440% growth, I don't have the exact number what the mix was last year. but this has really gone up, and we -- and it is still doing extremely well. We hope this share will further go up this year.

This is very helpful. Mr. Jaipuria, the second question was in terms of -- you did mention about the visi-coolers. Just in terms of the retail touch points, I think we ended last year at around 2 million retail touch points. Just to get an update that what was that number at the end of this year in case that's available?

The retail outlets remained more or less the same because of the COVID year and the visi population [ maintained at 40,000, ] out of which was covered by our visi presence in those outlets.

Because lot of outlets temporarily shut down, which are still not opened actually. So a lot of restaurants and all are still not back to operation.

Right. So for the coming year, what are we building in? Would we like to say, catch-up given the miss in the COVID year that we would want to add, say, 300,000 to 400,000 outlets higher than the past run rate? Or are there any internal targets on this one?

Well, we hope to add about at least 10% to 12% outlets. And of course, if the outlets, which have shut down also open up, so it will be much higher. But a lot of restaurants especially, we are not sure if they will open up or not. So we are still waiting and seeing what is going to happen. And unfortunately, January had COVID wave again. So it's still too early to say. Luckily, it has not impacted us this time because the lockdowns were not severe. So as long as we don't have severe lockdown, then it's not a problem for us.

Moreover, last 2 years, COVID waves were during the peak months, and this year, COVID wave 3 was in our weakest month of the year.

Absolutely. Sir, just one last question from my side. This quarter towards December, you did mention about entering Congo, which is a bit of a different setup than what we've traditionally entered some of the other geographies. So if you could just comment on that? And could that be a way of entering some of the other African markets and also the setting up of the subsidiary in Dubai. If there is anything you may want to highlight to us and I'll be done.

Basically, we are just in the finalization stage of entering Congo. But initially for a year, 1.5 years at least, we will be distributing product there. We have capacity in our plant in Morocco and our plant in Zambia. So we will be supplying 2 parts of Congo, one from Zambia and one from Morocco. So we will be -- which will help both these countries and utilization of their capacities.

As you will notice from our filings that we will just be testing the market and we will be importing and supplying. And while importing one territory, which we explained out of Morocco, the off-season of Morocco coincides with the busy season in DRC, so we will try to -- we want to leverage our existing facilities without any CapEx initially. And if it turns out to be promising, we will -- definitely, we will not shy away from considering for the CapEx. And the second filing of the office in UAE, which you are mentioning, that is only a coordination because it's -- DRC is not going to have any manufacturing facility and 2 countries will be supplying. So the coordination and -- that becomes easier from a place like UAE. It's only that objective.

The next question is from the line of Kashyap Javeri from Emkay Investment Managers.

Two questions from my side. One, if we look at our stand-alone numbers, there is about 30% revenue growth and merely any EBITDA growth on Y-on-Y basis. So in stand-alone ops, if you could throw some light on the margins as well as the volume growth. And in the domestic market or let's say, India operations, how would the growth be split between the other 3 product lines in this particular quarter?

See, India, the volumes growth over '20 was 27.2% and then we had PAT growth of 61.9% in India. While in the international market, volume growth was 32% and PAT growth was 17.2%.

Sorry, you said India PAT growth of 61%?

27.2% on the sales volume and 61.9% in PAT.

Okay. And international?

32% on the volume and 17.2% in PAT.

Okay. And in both the businesses, would margins have behaved differently on a per unit basis?

This is for the quarter, I have to say.

Yes, I'm asking for the quarter also.

Yes. What is your next question, please?

And the second question is that in India operations, what would be the volume growth across 3 categories?

India, the volume growth only I said 27.2%.

Right. I am asking the growth split between CSD, juices and water.

Okay. The split in calendar year '21, CSD is 70.3%, juice 6.4%, water 23.6%. This is on overall basis. If you want to split between India and overseas...

Can you repeat those numbers? Actually...

This is the mix. 70.3% mix of CSD, juice mix is 6.4%, water mix is 23.6%.

This is on overall basis?

This is on overall basis. Yes.

And would you have that number separately for India and international ops?

We do have.

We -- I think right now, we have a combined number. So...

The next question is from the line of Dhruv Bhimrajka from Monarch AIF.

Sir, my question is that when I see the stand-alone and the consolidated numbers, the India PAT for this calendar year is INR 489 crores, correct?

Yes, that's right.

And last year, which was INR 226 crores?

That's right. We've seen 115% growth.

Right. And similarly for international, it has jumped from INR 103 crores to INR 257 crores?

That's right. [ 20.8 to 256. ]

Okay. So how -- why do we see this big jump and what has contributed mainly to this jump in international PAT for us?

See, international growth in PAT is...

Volumes have grown up.

Volumes have grown up. And over the last year, PAT growth in international is 96%. India is 116%. So both are in line actually.

Okay. Sir, if I see the realization per case in the international market. So last year, it was INR 179 per case, and this year it is INR 193.7. So again, I wanted to get a sense of what is the volume for us in the international market that we are generating this kind of a realization, which is better than India.

Because the pricing has been -- we have taken some price increases internationally. And that is why you see because of the PET and we have passed it on to the consumer. So that's why you see it.

Okay. Okay. And sir, just last question on the volumes front for the India business, do you have the absolute million basis number for CSD, NCB and water?

Well, the total volume is what?

India, INR 316 million for the CSD, juice INR 33.4 million, water INR 105 million.

The next question is from the line of [indiscernible]

Congratulations on a great set of numbers. Just 2 questions. How is that for your company, are you gaining market share? Can you give us some color on market share trends for different products of yours?

I think both the companies are doing well. We are -- I think we are in the range of 0.5% up or down. So both the companies are growing at a reasonably fast pace. The whole industry is growing. So we haven't got the latest results, so I don't know. But we're definitely not losing any market share.

Okay. And my second question is that opening remarks, you mentioned that you were looking forward to far better performance going ahead. Is there any way to kind of quantify it or are you looking at better volume growth or margin expansion? What really are the drivers of your optimism for next year?

One, I think is clearly that the last 2 years, we have gone through, in our peak season, which has been pandemic and we hope that this year is not going to be the same. So we expect a major growth in the second quarter of our -- which has been both years affected by pandemic. And that itself will give us a bump in our overall volumes. And that with the volume growth automatically our margins as well as our PAT and EBITDA will go up. So we expect a very healthy growth this year. And we have been able to mitigate most of our cost, which has been increased by PET, by lightweighting the preforms and also partly passing the price -- consumer price a little bit. So we don't -- and we have got enough resin for this year. So I don't see any further challenges for us as far as cost escalation is concerned.

So overall, what kind of -- I believe that earlier you were looking at some 20%, 21% kind of EBITDA margin at a sustainable margin. Is that something which one can look to...

I think we can definitely look at something in that range going forward.

Okay. Okay. And sir, if I can just ask one more question that you talked about the competition and that both of you kind of -- not kind of considering any institute that it looks tight. So in that kind of [indiscernible]

We are trying not. I don't know if we are.

Okay. But the fact that you are getting into Bihar and a couple of others, so this is the kind of geographical thing that you are doing. So overall, I thought that you might be gaining market share.

We hope, we are trying, but I don't have full numbers to say that we are. So, I don't want to say it, but I think we are doing reasonably well. And I think our -- the other company is also doing quite well. That's all I can tell you.

And there is no impact of this Omicron wave on this latest quarter?

Pardon me?

This latest quarter, there was no impact of lockdown or anything, right sir? The quarter -- December quarter.

Last quarter, no. October-December, there was no effect of...

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

Congrats on really good set of numbers. Sir, can you give us some color on January trends? I mean how have been the trends in January? Because this was relatively more impacted month.

No. As I've said before that we are -- unless until there are major lockdowns, we are not getting affected and we are, I think, back to our pre-COVID days. So we are looking at a very positive year, actually.

Okay. And in December quarter, we have seen about 17% volume CAGR on a 2-year basis. And in previous quarters also, as we have indicated that the volume growth in nonimpacted month has been upwards of double digits. So with -- assuming that CY '22 is going to be a normal year, can we bake this growth into assumptions for coming years as well?

Well, definitely, this year will be -- the growth will be much higher, provided we don't get any pandemic again and they are not locked down. And as I said, we expect a very healthy growth and a very healthy margin, which is 20%, 21% growth margin because last 2 years, we've had a bad second quarter, which is our main quarter. So if we don't have pandemic this year, we should have a very healthy quarter and going forward for the full year, it will be a great year.

Okay. So just to reframe the question. So in current year season quarter, if things remain normal, can we see sort of a 10%, 12% sort of a CAGR relative to pre-pandemic levels in the June quarter?

Let me give you one data point and rest we'll leave on you to extrapolate. In '21 in the -- when Delta came onto us in May '21, the volume was 66% lower than 2019. And overall, we had grown. So we definitely feel it will be higher than 2019 and rest of the month to take the volumes, and you can workout what growth in the second quarter we can expect.

Sure, sir. And there has been a change in revenue mix as well as improved international realizations that have led to our overall realizations to improve. As this revenue mix normalizes, so should we see this -- our overall portfolio level realizations to moderate slightly in the coming year? Or we can still grow over the CY '21 level?

Look, it's a continuous process. We'll keep on growing. As and when new packs, new sizes, new things are introduced, they always come with a premium like for Sting, which is 5% of our mix, comes at a good premium to us.

If you look at our products which are growing faster, Sting, which is a premium product, dairy, which is a premium product, Tropicana is growing at faster. So all these products are premium products. So that's why -- and we expect a much better year this year. So that will all bring in healthier top line and -- as well as the bottom line.

Sure. And my last question is, sir, you indicated that this Zimbabwe currency reversal provision should continue for like 5, 6 quarters. And this quarter, I think we have not reversed about $2 million of this provision. So anything on this trend you can highlight?

Yes, we've -- out of INR 130 crores, if my memory goes right, I think INR 50 crores, INR 52 crores we have already reversed in the balance. As and when -- based upon that quarter, currency rates will keep on amortized. And this quarter currency movement was such that there was no reversal, but [indiscernible] to conclude the P&L account in due course.

And what is this INR 33 crores other income in stand-alone financials?

Varun India gets dividend from its subsidiaries, mainly from Nepal, that is recorded as other income.

The next question is from the line of Deepak Lalwani from Unifi Capital.

Sir, just wanted to understand how much price hikes have you taken in this quarter?

No, it's not very much on a couple of pets. Wherever there was room, we have taken, which is basically to mitigate our PET resin input costs by -- one, by lightweighting and the second by taking a price increase. So we have basically mitigated it. So this year, we will not have much impact. And that's why I said we would still have a 20% -- we will still be able to maintain our 20% EBITDA margins.

Okay. Sir, just wanted to understand a little deeper on your pricing mechanism. So how does the company think about price hike? Like does it depend on competition or do we need to take a pre-approval from Pepsi or something like that?

No, we don't need a pre-approval, but of course, it depends on how the competition is behaving. It's not -- because we have to see what the market can take and where we can put it. So whatever we feel the market can accept then that is the price increase we take normally.

Got it. And sir, since next year is going to be a good year in terms of free cash flow, what is the debt reduction target for CY '22?

We are from INR 3,000 crores at least somewhere about 40% or so we should be able to reduce.

Okay, sir. That's helpful. And sir, if you could share the percentage from -- percentage of revenues coming from Tropicana and the dairy segment. And what has been growth rate in this year?

Tropicana mix is 2.3% and Sting is 5%.

Okay. And what about the dairy business?

Dairy, we could not launch in the proper way because of the COVID that it was launched. It's negligible, but it's promising for the current year.

The next question is from the line of Sumant Kumar from Motilal Oswal.

So can you talk about the overall growth in rural and urban market for our products?

See, urban has slightly behaved better than rural. Otherwise, there had not been much of a change within the 2. It was broadly in line with the overall growth levels.

So rural is growing at faster pace versus urban?

Slightly lower than the urban.

Urban has been growing slightly faster. And that is mainly because of the COVID happening in the peak season, which is where the rural is much more buoyant.

Yes because of base effect also the rural has a lesser impact in Q4 '20 -- CY '21?

Q4 our volumes are very low in rural. You see the main volume, which comes from rural is in the peak seaons, which is April, May, June. And because of COVID being in end of April and May, that's got affected quite badly.

Okay. So particularly, this quarter also rural is lagging urban growth?

Not this quarter, but if you look at the year that's where the lagging is coming. So hopefully, this year, rural will be much faster growing than urban.

When talking about the current scenario in Q4 CY '21, how is the rural versus urban, particular quarter?

So the growth has been about equal. So there's no -- not been negative in the rural. It started coming back.

The next question is from the line of Sameer Gupta from IIFL.

Just a clarification. So you mentioned 27% volume growth in the India business and 31% is the sales growth. So that's a difference of 4%. Suffice to assume this is the kind of price hikes taken this quarter?

Internationally, the realization had been better. That's right.

No, no, not international, domestic, I'm saying.

Domestic, for the quarter, 27% increase and 31% in the realization.

So actually, realization is better.

Yes. So this is suffice to assume that is a...

Product mix, which is changing. No. So Sting has increased, which is a higher-value product and Tropicana is a higher-value product. So...

Okay. So this 4% difference is largely on account of mix, and that is what is reflecting in this number?

Yes.

Okay. Okay. Sir, another clarification. On Tropicana, you mentioned 2.3% of sales. This only pertains to the juices and nectars, right? Doesn't pertain to the Slice or whatever fruit drinks that are sold under Tropicana, right?

Not Slice. It's only juices and nectars.

The next question is from the line of Nihil Parekh from Tamohara Investment Managers.

I'm sorry, sir, if it is a repetition. Can you please share with us what is the price hike you would have taken for this calendar year '21?

As I said, we have not taken a price hike initially. It's only in the later part, which is maybe in December, we have taken a minor tweaking in pricing and balance we have mitigated by lightweighting the preform.

Okay. And second question is, sir, on the South and West markets. Sir, I wanted to know what would be the contribution to our CY '21 volume. And if I recollect the numbers, I think it was about 150 million, 160 million cases market when we got it from Pepsi. So just wanted to know what numbers we would have done this year. And what are the growth opportunities ahead?

Well, South and West is growing quite well for us. And it have been 142 million against what we had taken in from Pepsi, which was much lower than this.

So what is the growth that you're expecting? Because if I'm recollecting the numbers, I think, 180 million or 190 million cases was our target.

The last 2 years, both the years have been COVID years. So you can't expect the growth actually. So that's why the growth has been very little, but it's been still better than what we had taken.

Okay. And in terms of improving the go-to-market strategy...

The numbers if you want to know, we have grown 33%.

Sorry, sir?

We have grown 33% in South and West over last year.

Okay, okay. And in terms of improving the go-to-market strategy, that is still an ongoing process?

You need to -- we've not had 1 proper year, and our business is skewed to April, May, June quarter, in which both years have got disturbed. So hopefully, after this year, I'll be able to give you much better answers.

All right. All right. And sir, one last question is, can you share the absolute volume numbers for Sting?

5% of our total volume.

5% of our total volume. Yes, overall volume.

Okay. 5% of total volume.

The next question is from the line of [indiscernible]

Sir, am I audible?

Yes, yes. Very audible.

Sir, I just wanted to understand that as the 2 years back Mountain Dew was on the counters of main shops and showrooms, mean to say shows like restaurants. But now the thing has changed. Are you looking in that way or are you looking in the different ways? Mean to say are you willing to fill the gap with the Sting, the gap which you realized in the Mountain Dew? Or are you viewing it in different ways?

Why do you feel there is a gap in Mountain Dew? I didn't get you.

I'm just asking that as I go to any shop in the village or any city, they said that Mountain Dew is losing its market share in the sense of its taste and Coke is gaining the market share in spite of Dew. So I'm asking in that sense.

That is not true. That is not true. Mountain Dew is very much doing well, and we are quite happy with it. And Sting adding additional volumes to it. And that's why you're seeing such large growth.

You have to see like this. If I have grown 33%, so the growth is coming with Sting and other things, which are facilitators of growth. So if Mountain Dew, which is always a winner, if it's coming down, it will never be able to grow.

The next question is from the line of Kunal Shah from Jefferies.

Sir, I had just one question. So I understand our debt levels increased because of higher inventory and some part of CapEx sitting issues. Any trajectory or guidance that you would like to give for the debt going forward, given our CY '22 is looking up in terms of operating performance and cash availability?

We expect at least the debt to come down by at least 1/3, if not more.

After taking care of organic CapEx for the next year, at least 40% it should come down if not more. It can -- rather can be 45% coming down from this year.

[Operator Instructions] The next question is from the line of Abhisar Jain from Monarch AIF.

Sir, can you give some update on the CapEx progress in the Bihar location that we have taken up. By when is that expected to get commissioned?

Bihar and the Jammu plants we are expecting to be ready before our ensuing season. We always plan putting up the plants so that we can immediately take advantage.

I think by March, we should have both the plants operating.

Right. So sir, basically, for the season, we should get the positive impact and you had given that those locations have much lower per capita and that's the growth area, which you can realize, right?

Absolutely. So both the plants Bihar, J&K and our expansion in Sandila will be all completed before March and it will be in production.

In fact we need those plants very badly because, one, Pepsi's penetration is very low, second per cap is very low. Third, those territories of Bihar, Odisha, Chhattisgarh, Jharkhand [indiscernible] that belt is growing 50% plus products every -- year after year.

Right. Right. Right. Sure. And sir, I also wanted to understand now the company's direction going ahead since we can enjoy some normal years starting CY '22, hopefully. So on the balance between growth and debt reduction, what should be the direction that we should assume because if at all, you pursue any other growth opportunities, say, in international market, then the deleveraging could be lower than what you have just indicated, right? So what would be the direction that the company would like to go over the next 2, 3 years? Could you look at further growth opportunities after only achieving some level of deleveraging or we'll see it on an opportunity basis?

So leverage, if you look at it, we are not really leveraged that much anyway. But we are always looking for new opportunities. And as and when, as Mr. Gandhi has said, we find any good opportunity, we'll definitely take it because our balance sheet is more than healthy to support it.

And moreover, there is no M&A after May 2019.

The next question is from the line of Kashyap Javeri from Emkay Investment Managers.

Just to clarify on my earlier question, you mentioned about India operations, there is a 61%, you said, of PAT growth. Like what you're basically mentioning is actually the decline in losses, right, for the quarter?

This quarter INR 62 crores to INR 20 crores.

Which means the quarterly numbers, which you mentioned for India operation...

That's right.

If I look at our revenue growth is about 31% on 27% volume growth. But if I look at the EBITDA number, that number is actually sort of flat last year. So was there any EBITDA per case contraction in Indian operations?

This is because of the input costs going up. This was the impact in this quarter.

So this was the quarter where the -- all the cost of PET resin actually went up. And that is why during this quarter is when -- by which we have lightweighted and the effects of that will start showing in January onwards. And we have also increased our price in the end of -- pretty close to the end of December. So those effects will also show this year.

This is in India market, domestic market?

India market. India market.

And if I look at your global operations, which is Africa and some -- the Nepal operations, there despite a similar kind of growth in revenues, the margins have sort of held up in those geographies. So was it the product mix?

There, we increased the prices much earlier. And in India, we could only increase at the end of December practically.

And that should reflect in fourth -- sorry, first quarter this year numbers?

This quarter, it can reflect.

Okay. And international operations because we had already taken a price increase that should continue steady state in the first quarter of this calendar year.

That will continue.

The next question is from the line of Anirudh from JM Financial.

Two questions from my side. If we look at the volumes that were delivered in 2019, would it be fair to assume that this year, the volumes will be, in absolute basis, higher given that we are expecting a normal summer season domestically as well as internationally?

Domestically more, internationally less because the lockdowns internationally were much lower. And the timing, it was winter internationally when it was peak summer here.

And how should those volumes behave?

So internationally, I don't think it will be regular normal growth, which we are getting. Whereas domestically, you'll see major growth.

Okay. And second is, to what extent would you have the pricing power in terms of -- so if you were to, say, take a 5% or 10% price hike, what can be the effect on demand? Or even if you were to take...

It's all relevant. We have a competition here. So question is I can take a price increase, but if the competition doesn't take it or match it, then we have a problem. So we'll have a problem in the market. So we can't take price increases just like that. We have to be very conscious of how we take price increases, and the market must be able to accept it.

But in the past, how have -- right. And in the past, how have these pricing decisions been playing out?

Well, somebody has to take the lead and one of us takes the lead and the other one mostly follows, but there's no hard and fast rule to it. It can be a call by any company what they want to do. I mean if the other person doesn't increase, then you end up discounting it to match it.

Okay. Just to understand it a little bit. Till now what percentage of the raw material inflation you would have kind of covered?

We have covered all our inflation, and we have covered our raw material also. So we don't see any challenges for 2022. That's why I said our EBITDA margins will be healthy and we are looking at again 20% plus EBITDA margins.

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

Thank you. Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our Investor Relations team. Thank you once again for your interest and support and for taking the time out to join us in this call. Look forward to interacting with you soon. Thank you.

Thank you. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.