Varun Beverages Limited (VBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Varun Beverages Limited Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you.

Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q3 and 9M CY2023 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Chairman of the company; Mr. Varun Jaipuria, Executive Vice Chairman and Whole-time Director; and Mr. Raj Gandhi, Group CFO 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 point out 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 you earlier. I would now like to invite 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 that provides details of our operational and financial performance for the quarter and 9 months ended 30th September 2023. We are pleased to report a robust quarter, achieving a top line growth of 22% and a PAT growth of 30% year-on-year. Demonstrating remarkable resilience, our consolidated sales volume registered a solid growth of 15%, making a strong comeback following the unseasonal rains in quarter 2, 2023 in India. Both our India and international markets contributed to this achievement, with a healthy double-digit growth. We have achieved notable progress on the operational front by making significant investments to develop both greenfield and brownfield manufacturing facilities throughout India. In addition, our greenfield facility in DRC is progressing well and is slated to be commissioned in the upcoming months. These strategic efforts are tailored to meet the rising consumption and to capture untapped market opportunities. As part of our commitment to diversify and enhancing our portfolio, we are also enhancing our capacity for juices and value-added dairy beverages to align with evolving consumer demands. As part of our long-term vision and in line with PepsiCo's global PEP+ objectives, we remain committed to substantially and environment -- environmental stewardship. We are making investments that emphasize using green energy as well as reuse of PET, which will be instrumental in mitigating environmental impact. These endeavors are aligned with our pledge to the environment and reflect our ambition to nurture a greener future. Given India's dynamic demographic landscape marked by a burgeoning young population and evolving consumption patterns, we believe the Indian beverage market offers a monumental growth opportunity for the decade ahead. As we intensify our foothold in India and expand our reach in Africa, our strategic initiatives are aimed towards strengthening our position in the global beverage industry. I would now invite Mr. Gandhi to provide the highlights of the operation and financial performance. Thank you.

Thank you, Mr. Chairman. Good afternoon, and have a warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the third quarter and the 9 months ended 30th September 2023. Revenue from operations existed for excise duty grew by 21.8% year-on-year in the Q3 of 2023 to the level of INR 38,705 million. Consolidated sales volume showcased a healthy [ deposits ] growing 15 points -- growing at a level of 15.4% to INR 220 million cases in Q3 of 2023, up from 190 million cases in the comparable quarter of the previous year. This was driven by growth in both Indian and international markets. Notably, sales volumes within India demonstrated a strong recovery after facing demand challenges due to unseasonal rains in the preceding quarter. Furthermore, the net realization purchase rose by 5.6% to reach at a level of INR 176.3 a case an upturn, primarily driven by the improvement witnessed in the international markets. CSD constituted 72%, juice 5% and packaged drinking water at a level of 23% of total sales volume in Q3 of calendar year 2023. Our gross margins during the quarter improved by 163 basis points to the level of 55.3% from 53.7% mainly due to the softening of PET chips prices. As a result of higher gross margins and operational efficiencies, EBITDA also saw a notable increase of 26.2% to INR 8,821.4 million with EBITDA margin improving by 79 basis points to 22.8% in the Q3 of calendar year 2023. Depreciation increased by 11.5% and finance costs increased by 38% in Q3 of 2023 on account of capitalization of assets and setting up of new production facilities. PAT increased by 30% to a level of INR 5,140.6 million in Q3 of 2023 from INR 2,954.8 million in Q3 of '22, driven by growth in revenue from operations and improvement in margins. During 9 months of calendar year 2023, the net capitalization is 20,000 million primarily for setting up of new greenfield production facilities in Bundi, Rajasthan and Jabalpur, MP at a cost of INR 8,500 million and the balance for brownfield expansion in India and international markets. The total cash outflow on account of [ capitalization of INR 20,000 ] million during the year [ by INR 8,000 ] million, the balance INR 12,000 million was paid during calendar year 2022 in advance itself. Further, we have invested INR 16,000 million during 9 months of calendar year 2023 for the next year, primarily for the 3 greenfield plants in India at Gorakhpur, UP, Supa Parner, Maharashtra and Khurda, Orissa and in DRC, in Congo, Africa. Once commissioned, the combined CapEx cost will be '23 and '24 taken together will increase the peak month capacity in India at a level of 45% over [ '22 ] capacity. In conclusion, the company maintains a robust financial position supported by a well-funded strategic CapEx plan that [ offer ] to drive growth and enhance our position in the global beverage industry. We remain confident that it will lead to sustained strong performance and will continue to generate value for all our stakeholders going forward. On that note, I come to an end of 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.

[Operator Instructions] We have our first question from the line of Vivek M from Jefferies.

A few questions. First is on the gross margins. There is a sequential pickup. There is also Y-o-Y expansion quite a bit. And I heard your clarification and also saw the release where you mentioned about patches, what is your outlook for the next few quarters on gross margins? Is adjusting for mix, is the current run rate you think the current number is expected to continue in the next few quarters?

We feel so -- we have always said that between -- our key ingredients we have PET chips and sugar -- so between one of the 2 keeps on going up and down. So we'll maintain our margins at 21%, which we have been maintaining regularly and a little bit up and down. It keeps happening, but we are quite confident to maintain that margin going forward.

Got it. The second thing is on the volume growth and last quarter was a bit soft this quarter, again, our growth is looking very strong. Mr. Jaipuria, when we look at and maybe may not necessarily be apple-to-apple comparison, but generally speaking, FMCG companies are complaining about slowdown and whole host of issues, whereas you have reported very strong growth, and it's not that the base is so, what is differentiating your category versus most of the FMCG categories in your view because of which you are still reporting a double-digit growth, whereas most of the FMCG peers are struggling to go past, let's say, 5%?

I think there are 2 reasons for it. One, I think we are expanding our go-to-market very aggressively, which maybe everybody is not doing as fast as we are doing. Secondly, I've been mentioning that in the past situation improving in the country, we have been able to penetrate much deeper into the rural because a lot of the other FMCG companies have said that rural is not growing fast enough for them and rural is rather stagnating for them, which is not the case with us because we've been able to further penetrate deeper because of better power situation. And because we've been able -- we've been putting much more [ visi-coolers ] aggressively, which maybe is relevant to our industry and not relevant to everybody else's industry.

I think I would just add to that, [indiscernible], this is Varun Jaipuria. I think the 12 million outlets out there in the country today and roughly we own about 3.5 million, 3.7 million outlets. So the scope to improve in terms of numeric distribution, as Mr. Jaipuria is mentioning and electricity in the road gets better. That's one of the big reasons whereas [ protect all ] companies are already at a higher distribution. Secondly, I think a big unlock for us. There's been a price pack architecture also what we paid in the market very aggressively giving more advantage of consumer as well where you can come and consume more at a similar value or a slightly higher value and the leakage is more. Starting at a very value-conscious country, if you give the right value to the consumer, right, the right volume, we can really get the numbers going. So all those have really helped us [ propel ] the growth as well.

Very interesting. I have never asked you this question in the past, but this time around given there was so much of, what should I say, so much of noise around these comments from Coke that they have their market shares in India at a 3-year high. Does that mean that their growth is even faster than yours?

Well, I'm not going to say that, but I think that I leave it to you guys to judge [indiscernible] and Canadian numbers available for people to check, but we don't get into that. I think they are doing a great job, and we are trying to do a better job.

Right, right. And lastly...

I request you to join back the queue, please, as we have other participants waiting.

Sure. Thank you -- all the best.

[Operator Instructions] We'll take our next question from the line of Percy Panthaki from IIFL.

A couple of questions from my side. Firstly, I see that you formed a subsidiary in Mozambique. Now Mozambique is a geography which we were in earlier on exited, I think, in 2016 or '17. So what is the thought process here in terms of trying to get into a geography which we had earlier thought it is better to get out of? That's my first question, sir.

See, I think what we are doing in Mozambique is the markets have changed in the last 6, 7 years, and the markets have substantially grown in some of these African region territories. We have some surplus capacity in Zambia, and this is bordering Zambia. And there is no duty -- the borders are open. There's no duty between them. So what we are going to do is part of Mozambique, which falls near the borders of Zambia, we are going to open only a distribution system, which is what we are starting and use the capacity of -- the additional capacity of Zambia, which we have. So -- and we have some canned capacity access in Zimbabwe. So we are going to combine both of them and use this and get advantage of the volumes basically.

Understood, sir. Understood. My second question is on juices. So are 3 drivers for growth, which you had sort of articulated 1 or 2 quarters back going ahead would be retrograde, juices and dairy beverages. So if I look at juices, which is an important pillar in your future growth strategy, the volume here on a Y-o-Y basis are flat. So what is the reason for that performance right now? Is it something macro? Or -- and how do you think that this situation will improve and you will drive better growth going ahead?

This situation has already started improving in the last quarter. But our biggest issue with juice, the second quarter, which is April to June is a very big category. Unfortunately, we had unseasonal rains and that whole quarter was a washout for us. And that affects the juice category comparatively. And if you see Nimbooz, we have grown practically at 100%, even though we had a bad season this year and retrograde is also growing at 70%, 80%. So if you look at our category, dairy, we didn't have excess capacity. So we couldn't grow. And hopefully, in January, when we'll have our other 2 plants ready, that's when the dairy real growth will start coming.

Sir, for juices, the question -- my question was pertaining to this quarter alone, not April to June. I understand there was a seasonality there, and therefore, the growth did not come. But this quarter, you have done very well in carbonated soft drinks, but not so in juices. So I just wanted to understand the reason for the difference in performance.

The major sales of juices come in March to June, actually. That's the biggest portion of the percentage of sales is not skewed throughout the year equal. So the [indiscernible] in those 4 months, which 4 months was a real washout for us. in this year. And we did...

No, I was just saying to answer your question. This is Varun. I think juices has been [ a top ] growth quarter-on-quarter if I hear the question, right? Q3 on Q3 is your question, not Q2 and what happened before. So my [indiscernible] that juices has been softer at industry level also at the retail level also, where sales are growing much faster. Now why that happened as a phenomenon, I'm not very sure. But I think it could be an event where [ we will ] start creating juices much more in Q2 and [ the long ] to drink in Q3. It could be sort of a trend line. And since Q2, we did not have any [indiscernible], out of the retailer's mind, the people's mind, everybody's mind, so Q2 is the mango season. Once Q2 becomes [ bid ], the retailers are stocking up as well as we go forward. They're never stock at this time only because [indiscernible] Q3 according to me.

We have a next question from the line of Nihal Mahesh Jham from Nuvama.

Congratulations to the management. My first question was that in the international operations, we're seeing an improvement in realizations whereas domestic, I think, because maybe the share of [ Sting ] is flat is maybe not since. So what is driving the improvement in the realization in the international business? Is there a product mix change that is happening there also?

So there is slight product mix change. But basically, our go-to-market is improving. And a lot of these markets, which we have entered were very low share markets. And as we are capturing these markets with our go-to-market, -- it is all helping out and such with our share improving our -- our realization is also improving and the mix is slightly improving in some of the categories.

Got that. Look, the second question was that we had obviously given a guidance on the CapEx, part of it is the second half of the year, our cash CapEx will be around INR 500 crores for the remaining part of CY'23. Just wanted to confirm that, is that where the expected outlook is or there is a dividend in that?

No. There is no additional CapEx. It was around 100 or less than 100 is a part of the year. However, for the year 2024 we have expedited implementation of our projects. Out of INR 2,500 crores CapEx projected for 2024, out of that, we have already spent INR 1,600 crores during this year to be ready ahead of time because now it's not a seasonality from [ April ] to June, we had to be prepared with [ Southern West ] coming to us and the product mix changing and with bigger therapy to be remaining prepared throughout the year, we had to start ahead of time. Therefore, we are just expediting that. Otherwise, for the year '23, the guidance [indiscernible].

Raj, just had one question, if I could take it that, while you mentioned about depreciation being higher on a Y-o-Y level, despite us capitalizing CapEx in Q2, I see that the depreciation on a Q-o-Q basis has not changed. So any certain assets which was written off and not adding to the depreciation? Just to clarify.

The CapEx, it's marginally up, yes. And there was one plant of [indiscernible] which was implemented in the -- I mean, part of the last quarter. So that's why it's exactly from last quarter, it's a slightly higher label marginally. But if you compare it with 2022 from 110 to 127. So with the 2 more plants implemented, it's absolutely in line.

We have our next question from the line of Aditya Soman from CLSA.

So just one question on seasonality. We've seen a very pronounced seasonality in the business with 2Q is very strong and the other quarters being somewhat lower. And now I understand 2Q this summer is likely to remain as like the most important quarter. But do we expect a meaningful pickup in the other quarters as we see South India become more relevant? And can you just tell us the time frame of that will play out over the next few years?

You see the number, your Q3 and Q1 is becoming more significant than just being Q2, where it used to be only north, so that is why even this year when it was very bad rains and very bad rainy season in the summer, which in the north, which is our peak territories or big territory, was still not negative. So the seasonality curve has already started showing. And if you see Quarter 3, it's coming further to Quarter 2 seasonality, even though we had a bad season Quarter 2. So going forward, even Quarter 4 now, if you see, the percentage of every quarter is going to keep changing as South and West become more and more important to us.

Understand. So is it fair for us to then model that the other 3 quarters continue to grow sequentially much faster than the second quarter? Just mathematically, as you sort of gain on it.

Mathematically, yes. Mathematically, yes, but next year might be different because we were ahead summer this year.

[indiscernible] this year. Yes, I understand for next year but over the medium term, that would be a fair amount.

Yes, absolutely.

Mr. Soman?

Yes, no, that was all, just one question.

We have our next question from the line of Sumant Kumar from Motilal Oswal.

Can you talk about the new product launches, growth contribution in this quarter?

Sumant your voice is very low.

Can you use your handset more, please, Mr. Kumar?

So can you talk about how is the growth momentum of new product launches in Part 1 year? And how is the contribution in the quarter?

No. I mean, our new launches thing is reasonably new. Our [ tapered ] is new where I said we are growing at 70%, 80%. Our Nimbooz is – we have only started pushing it from this year, and we are doing quite well. So dairy, as I said, they were -- capacity was constrained, so we couldn't grow faster than what we should have grown as the demand is there. So -- but you will see a major change coming in the dairy business next year. So I think all our new innovations we launched the Sting Blue, which has done phenomenally well for us. So all the new innovations have done well.

And... a lot of innovation in the pipeline which is not in the portfolio. That has done extremely well for us because Pepsi was obviously to move towards more [ healthier ] portfolio. So pushing a lot of products in [ midcare ], pushing a lot of products with no sugar, no sugar portfolio as well has really outperformed for us in the last 3 to 6 months also.

How is the performance of Sting?

Sting has been extremely good. We are growing at a very healthy pace. And even the new Sting has done extremely well, so which has added to the growth.

We have our next question from the line of Jay Doshi from Kotak.

I just want to clarify one data point that you shared in the opening remarks. Did I hear it correctly that you were going to expand India capacity by about 45% versus CY '22 and by next year?

That is right.

This will be up and commissioned by -- before the summer of CY '24 or during the course of the...

Before the commissioning of CY '24, I mean before the season of '24…

That's why we have [ presence ] this year in '23.

Understood. And could you share a similar number for international business as well, especially the expansion you're doing in Congo. How does...

It's a new plant. So there's a greenfield plant. It will be ready only for next April, May production. So it's the first plant we are putting in Congo, it's a greenfield plant. So there's no expansion or anything. There is no Pepsi in Congo.

Correct. No, I meant to ask what would be your capacity in CY '24 for international business versus CY '22 [ and ] some...

So we have expanded wherever we needed capacity, we have expanded enough. So we will not be short of capacity for CY '24. And we have done enough expansion in Morocco as well as Zimbabwe. And Zambia, we have enough capacity, [ Japan ] or we have enough capacity, we expanded this year already and Sri Lanka, we have enough capacity.

Right. Just one final. Could you give us some color on the opportunity that you see in Congo, how does it compare versus let's say Zimbabwe where you've seen phenomenal success in INR 1,000 crores as top line last year. How big is the market opportunity in terms of the current capacity you are setting up? And I'm assuming Pepsi's market share in the market would be negligible today. So what are the dynamics in terms of market share?

I think it's too early. And Congo is a very -- geographically very different country. It's like 3 countries into 1. You can only service with one plant, one part of the country, which is about 55%, 60% of Congo. The other 2 parts are completely cut off, which is about 2,500 kilometers away from that. So about 60% of Congo is what we are going to be serving in the first part of our -- first greenfield plant. If we want to sell the other part of Congo, we'll have to put up another plant. And it's a large market. It's more than 100 million population. Zimbabwe is only 16 million people. So it's a much more warmer climate, it's near the equator. So I think the market is much larger and much, much larger than Zimbabwe but in Zimbabwe it's been 7 years. This is the first year, so we have to see -- test our water. We are not there to see. We've not been there in that market [ alone ].

One final one, if I may. And if you can share, could you let us know the capacity that greenfield plant capacity that you're setting up in Congo, how big in terms of million cases.

So it can do about between 35 to 40 million cases.

We have our next question from the line of Omkar Ghangurde from Shri Investments.

My question was regarding the volume growth. If you look at the Q3 '21 growth to Q3 '22 growth, it was around 24%. And in this year, the Q3 '22 to '23 is around 15%. So is it largely because of the base effect or the markets haven't recovered fully because of the unseasonal rates?

So you see in Q3, July was reasonably that wash out for us because July, the rain started much earlier, actually, then it normally starts and it was much heavier rain than normally is. So it never recouped from quarter 2 July. So it was only in August and September that the real recoupment started and we were able to come back to a 15% growth. Also, we were lapping over high growth in '22. We had a much larger growth in '22. So I think both the things put together. But I think if we had a decent July, we would have had a much better and a much more healthier growth.

So that is a combination of both your...

Both the things, yes.

Sorry, you were saying something?

No, no. That's why it's a combination of both, whether in July as well as lapping over a high-growth quarter [indiscernible].

Okay. The second question is on the production Earlier, you just mentioned that before season, you will be ready. So if you look at all the plants which you are setting up currently, may I know when they will be commencing the production?

So we said before next year, which our season is actually March. So we expect all our plants to be in production before March.

So whatever CapEx we are doing for those particular plants, all the plants will be ready before [indiscernible]. That's what you are saying, right?

That's what we are hoping and expecting, yes.

Okay. Just a small question. What is the current penetration level, if you can see or tell in your -- all 3 categories? I know it is very small as compared to other FMCG kind of products, but if you can give a number to that?

I'm not getting your question. penetration for what?

Penetration for juices or penetration for sports drink or dairy products that what I'm asking?

I don't have the exact number with me right now, but you...

I think as Ravi mentioned, reach today's million, 3.5 million dealers out of the base of 12 million and also to increase the penetration every year, we are increasing the [ BC ] base that is starting going to reach to the outlet and make them able to sell our product are we got a book big runway after the Sting and 400,000 then distributors were added, dealers were added, and they are not -- they were never purchasing the goods from us earlier and now not only the carry Sting, they have also started carrying or other products. And this number is increasing 20,000, 300,000 year after year, and this is helping us in increasing our share and a long way to go, but the efforts are continuing. We have already reached, if you have seen our presentation, [ 935,000 reasons ] placed already, and we are doubling our [indiscernible] in coming years.

Okay, one clarification, which I made in that last time you mentioned that if you are doing around INR 2,900 crores of CapEx, then we will be doing around 1.8 to 1.9x effect ton that will be. So that's what we are expecting, right?

2,500 and once the plant is fully matured and their capacity, they do a turn of 1.8, 1.9 to have the total capacity utilization debt right.

So that will be only possible in summer of 2023, right?

I request you to join back the queue, please, as we have other participants waiting. We have a next question from the line of Sanjaya Satapathy from Ampersand Capital Investment Advisors LLP.

Sir, 2 questions. One is that even though you were pushing this [indiscernible], there is not much of improvement in your ASP after several quarters on a year-on-year basis. What could be the reason? Is it because your mix is no longer changing?

Can you repeat... I just want to get your question.

Is that your India business, the average selling price has not really grown like the way it used to go up...

I'll explain you why that's happening is because over the last 3 months, like I was basing earlier, we have dropped a lot of pricing and the pricing that we've dropped a lot of our major tax in terms of net revenue has translated into a huge growth number. That's where our revenue growth that you are seeing is in a high double digit. The revenue per case hasn't gone up, but the growth has on up at an overall basis, which has made a profitable takeout. So we've done a lot of pricing correction in quarter 3 with a lot of major packs. Therefore, you're not seeing a huge growth in the net realization per case compared to what it was last year.

Understood. And is it something which is just a tactical and we will go back to a different pricing once big season improves?

See the market is very competitive, right? So hopefully, we believe...

Keep on changing depending on the...

The competition is growing right now. So it is a very agile and very fast-moving market. We hope, obviously, this will improve going forward, and we will correct our pricing, but our main focus is how much growth can we drive in the market at a profitable level. And that's what we need to do in quarter 3, and as long as we are able to deliver [indiscernible] growth and profitability will be pretty happy, I think.

Understood. And sir, last question is that getting -- I mean, you're expanding this dairy and other business in a big way for next season. So will that have a positive bearing on your margin and [indiscernible].

Well, as we have said earlier, our dairy and juice margins are similar to our CSD margins. So we -- it will expand our total portfolio and expand our growth. And the margins are not going to change, but the margins are not going to come down either.

[ ASP ] will that improve or?

Sorry?

Average Selling Price, would that improve because of change in mix towards dairy?

Dairy itself is still too small to make a complete change in the overall category. I mean dairy will be still very small category for us. But growth-wise, it will be huge, but overall category will be much smaller. So it won't affect the overall.

Understood. Sir, if I can just ask the last thing, is there any progress [indiscernible] if you can just give us some update.

Well, we are always looking forward to new territory, but we are hoping we have tried to put a company there. Let's see what happens in the future.

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

Sir, you have seen the hard capacity also sort of not in the first year itself, and you have talked about this 45% growth in capacity ahead of next year summer season. So I wanted to check, what is your expectation on full utilization of this capacity? As in can it be like this should be running out of this capacity in CY '25?

I wish I could really answer you properly. It depends on our rain gods partly because our peak season rain gods play quite an important role for us. So we want to be prepared for the right season. And of course, some effect happens because of the rain episode. If we get a normal season, we should be utilizing a reasonable portion of our capacity.

Got it, sir. And sir, for India business, gross margins have improved quite significantly. So I wanted to check, is it entirely due to lower PET prices or there is some component of mix change in this also because juice, et cetera, the mix is lower in this quarter. So is there a benefit coming from that front as well?

There is a slight difference, but mainly partly Sting has gone up. So Sting is a little more profitable for us. And in...

Yes, can I take the question?

Go ahead.

Yes. So Sting is obviously a good contributor, growing very well, but I think our push is always towards more profitable product portfolio. So we're pushing [ CAE ] much more in the market. And apart from that, I think we've done a better job of managing the discounts in the market as well. [ With ] that discount control has come in much better, is obviously we will give us a better profitability. And there has been enough initiatives we've taken over the last 3 months to reduce or improve efficiencies at plant level, which has given us some results of work. So I think the calculation of all [indiscernible] is resulting the PET prices as well, which has given us better margins.

Great Varun, that's really encouraging, actually, it really seems more structural then. Also on the international front, the margin performance, the revenue growth has been quite impressive but from margin perspective things have been a bit on the volatile side. So I wanted to check the reason for this and also, what are the steps that we are taking for a sustainable margin performance in international operations as well?

Actually, the margin contraction or what we have seen is basically Zambia because of the currency devaluation. Otherwise, other places we have done well all the other places we have done well, it's basically one country where the currency is [indiscernible] we are seeing a big gap. So this is part of the Africa region, it keeps happening, unfortunately, and that's why you go slow in Africa. But overall, the demand is -- that's where the growth segment is coming up for India.

So till when this is expected to continue, sir? As in do you have some idea on this?

I wish I can tell you...

Sure. That's it from my end.

We have our next question from the line of Deepak Singh from Hexaware. Mr. Deepak Singh?

I want to know like -- you had acquisition [indiscernible] Technology. So it is basically into [indiscernible] so what is the purpose of acquiring that company?

No, that company is making [ cap ] for us. It's the backward integration where we already held 55% share. And one of the shareholders we've been able to acquire to go at 5% equity. So our equity has become 60% now. It's a backward integration to our own system.

We have a next question from the line of [ Chintan Gadane, an Individual Investor. ]

Sir. My only question is, please help me understand the trend of impact on your business from the likes of new entrants like [ Reliance's ] carbonated drinks, be it [ Coca-Cola ] or any other soft drink that we are introducing. How do you see the trend of the impact?

Well, I think every new person coming in has a chance to grow the market to [indiscernible] is a formidable competition. We believe they will take some share, but the market is growing at a pace which is so high that there is enough room for all the players to come in and they will put more investments, more [indiscernible] coolers. I think overall, the market will grow and so they will get their share and we will grow at our pace. And they have to set up their backward -- they don't have the backward equipment yet. So it will take time but I'm sure being Reliance they will do a good job. And -- but I -- we are not so concerned because I think the market is so large in India and market will be growing at a -- more investments will make the market grow much faster.

We have a follow-up question from the line of Omkar Ghangurde from Shri Investments.

Yes. Can you help me out with the growth in the market, the number which you just mentioned, industry growth?

The industry growth, we are not saying [ renewable ] is losing share or gaining share. So we are doing at a healthy double-digit sell the market. I'm sure it's growing at a similar percentage. The percentage I don't have.

Mr. Ghangurde? Thank you. We have a next question from the line of [indiscernible] from [indiscernible] LLP.

Just when it comes to [indiscernible] energy drinks, do you have any plans of launching any new products like [ Roxor ] any new variants of Sting?

Yes, there is a possibility. We are working with Pepsi and maybe next year, we will launch another energy drink. I'm not sure it'd be Roxor or what, but we are looking to launch one more energy drink next year.

And these products will [indiscernible] in higher [indiscernible] or will it be the [indiscernible] similar to the Sting?

I am sorry, I can't disclose that at the moment, but as I said, we will be launching another energy drink.

All the best for the coming quarters.

Thank you.

Thank you. We have our next question from the line of [ Sumit Joshi, an individual investor. ]

I have just one follow-on question. Like we see Pepsi is growing very [indiscernible] from the energy drink in the sector of [indiscernible]. So do we have any plans going forward to launch a similar [indiscernible] in India and other markets?

I couldn't get the question. It's not clear what you're...

Just trying to ask that, that since [indiscernible] become very big for us in other markets, African market, are we planning to launch energy as well as a category or not if I [indiscernible]

Raj, can you answer it? I didn't get the question properly.

No, energy is going to be a big play for us in our portfolio.

Are you talking about other markets outside India?

Yes.

We have already launched it, actually. We have already in most of the countries with our energy drink, and it's doing well.

Yes. Actually, sir, what I was trying to ask you is like Pepsi is working with [indiscernible] brand like that is in U.S. energy drink market right, and they are doing very well there. So do we have any plans going forward to launch in India and other markets also?

I'm not getting the question from...

We have a lot of energy brands across the world side, where they've acquired or created them. So I think Mr. Jaipuria and the earlier question, which was asked was, are you going to be launching more brands of Pepsi under energy, we do have plans to launch. Which brands we will launch, at what price we will launch? We are not sure we've been working through it, but we will be launching in India and other markets also.

We have a next question from the line of Jenish Karia from Antique Stock Broking.

One clarification. You mentioned that out of the INR 2,500 crores CapEx for the infill expansion in next year, INR 1,600 crores is already spent in CY '23. So we expect that around INR 900 crores will herein fourth quarter CY '23? Or how should we look at that CapEx outlook for next year? That is my first question.

It might be spread between quarter 4 and first quarter of next year.

Okay. Sir, second question is with regards to energy drink. So we launched our energy drink at a competitive price point. Now we hear the Tata Consumer Products is launching at a 50% discount to our MRP. So do we see any competition or market share loss in terms of volumes for the energy drink?

Well, we don't see volume loss, but I can't say exactly what Tatas are going to do and how the product is going to be, it's very difficult to say until we see the product and what it does in the market.

Okay. And sir, lastly, [indiscernible] recycled Pepsi going forward. So will that affect any of our gross margin? Will it be gross margin accretive -- any color on that?

Still reasonably small. So I don't see it. And we are ourselves getting into recycle PET. So by the time the reasonable portion of recycled PET will be going in, we'll be manufacturing it ourselves. We have a joint venture signed with Indorama, which is going to be in production by '25.

Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.

Thank you. I hope we have been able to answer all your portions 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 to join us on this call. Look forward to interacting with you all soon. Thank you.

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