Varun Beverages

INITIATING COVERAGE
Category tailwinds and execution excellence to
continue growth trajectory
BUY

Varun Beverages (VBL) is a key player in the beverages industry and stands as one of
the largest global franchisees of Pepsico. The company witnessed a remarkable
10 November 2023 volume growth of 15% in Q3, driven by robust growth in the energy drinks and
carbonated beverages segments both in India and international markets. Sustained
BSE Sensex: 64832
organic volume growth beyond 15% over the last four years (CAGR) is propelled by
Sector: FMCG the introduction of new products (primarily energy drink Sting), distribution expansion
and increase in mobility in the post-Covid era. We anticipate that the company will
continue experiencing growth in the future, fuelled by the ongoing introduction of
new products in juices, energy drinks and milk beverages. We estimate an 11%
volume CAGR for CY22-25E despite a high base and ~100 bps margin expansion on
Stock data account of operating leverage and stable commodity prices. We initiate coverage on
the stock with a BUY rating and a target price of Rs 1120/share.
CMP (Rs) 1,002
Forging a new product mix: Energy drink brand ‘Sting’ has witnessed an exponential
Mkt Cap (Rs bn/USD m) 1,301.8 /15,630 growth over the last two years, attributed to distribution expansion, attractive pricing
Target Price (Rs) 1,120
and increased mobility (post-Covid era). VBL has expanded its product portfolio in
juices, sports drinks and milk-based beverages. It is setting up new facilities in milk
Change in TP (%) NA beverage and juices category to cater to the high demand during summer season. We
believe newer products would continue to grow at a fast pace with continued
Potential from CMP (%) 11.8 distribution expansion into smaller towns and rural areas.
Earnings change (%) Expanding through massive capex: VBL has massively expanded its capacity in few
FY24E 
years to capture the strong demand for beverages. It is further expanding capacity in
India and Congo with capex of Rs25 bn, which would increase its peak capacity by
FY25E  45%. It is well poised to cater to the increasing demand for new beverage categories
and higher traction from regions with low consumption rates.
Bloomberg code VBL IN
Distribution expansion driving volumes: VBL has expanded its distribution reach from
1-yr high/low (Rs) 1,025/538 2 mn retail outlets in 2018 to 3.5 mn retail outlets in 2023. Further, with the
considerable increase in electrification in rural regions, it has managed to install
6-mth avg. daily volumes (m) 2.3
higher number of visi-coolers, increasing from 0.55 mn in 2018 to an expected 1 mn
6-mth avg. daily traded value in 2023. We believe the substantial growth in volume can be largely attributed to
distribution expansion and the widespread installation of visi-coolers. The company
(Rsm/USDm) 1,987.6/23.9 would continue to drive growth through distribution expansion.
Shares outstanding (m) 1,299.2 Valuation & view: With the massive Rs25 bn capex, the company is well positioned to
tap into the growing beverage demand in smaller cities and rural regions. We are
Free float (%) 36.9
positive on VBL’s long-term growth prospects and margin expansion possibility. We
Promoter holding (%) 63.1 value the stock on DCF methodology with WACC assumption of 9.5% and terminal
growth of 5% to arrive at the target price of Rs1120/share. We initiate coverage on
the company with a Buy rating.
Price performance – relative & absolute
Varun Beverages Sensex
500 Key valuation metrics
400 Year to 31 Dec CY21 CY22 CY23E CY24E CY25E
300
Net sales (Rs m) 88,232 1,31,731 1,57,636 1,76,215 1,95,191

200
EBITDA (Rs m) 16,546 27,881 35,122 38,992 42,842
Adj. net profit (Rs m) 7,461 15,501 20,243 22,431 25,031
100
Adj. EPS (Rs) 17.2 23.9 15.6 17.3 19.3
0
Nov-20 Aug-21 May-22 Feb-23 Nov-23
% change 74.1 38.5 (34.7) 10.8 11.6
(%) 3-mth 6-mth 1-yr PE (x) 17.7 19.7 44.5 58.4 52.4
VBL IN 21.7 33.1 74.6 Price/ Book (x) 3.1 5.9 13.7 16.1 14.0
EV/ EBITDA (x) 9.3 12.2 26.5 34.0 30.7
BSE Sensex (1.8) 5.0 6.2
RoE (%) 19.2 32.9 34.4 30.5 28.6
RoCE (%) 16.1 25.8 27.7 28.4 30.2
Source: Company, DAM Capital Research

Sanjay Manyal
[email protected]
+912242022583

For Private Circulation only “Important disclosures appear at the back of this report”
 Varun Beverages

Exhibit 1: Quarterly result analysis

(Rs m) Q2CY22 Q3CY22 Q4CY22 Q1CY23 Q2CY23 Q3CY23 Comments
Total Revenue 50,176 32,483 22,572 39,526 56,997 39,378 Strong 15% volume growth continues
YoY (%) 102.1 33.1 27.9 37.8 13.6 21.2
COGS 24,518 14,713 9,678 18,517 26,665 17,297
Gross Profit 25,657 17,770 12,894 21,009 30,332 22,081
GPM (%) 51.1 54.7 57.1 53.2 53.2 56.1
Overhead spends 9,419 6,951 6,190 9,041 10,692 8,871
EBITDA 12,506 6,990 3,075 7,980 15,111 8,821
Margin up due to softening of PET chip
EBITDAM (%) 25.2 22.0 13.9 20.5 26.9 22.8
prices
YoY (%) 119.1 41.3 48.1 50.3 20.8 26.2
Depreciation 1,531 1,531 1,797 1,722 1,719 1,708
Other Income 105 106 92 101 416 185
Financial Expenses 464 453 475 626 694 625
Exceptional Items 0 0 0 0 0 0
PBT 10,616 5,112 896 5,734 13,114 6,673
Tax Expenses 2,596 1,157 81 1,348 3,057 1,529
PAT 8020 3955 815 4386 10055 5142
APAT 8020 3955 815 4386 10055 5142
YoY (%) 151.6 53.3 150.2 61.8 25.4 30.0
Source: Company, DAM Capital Research

Exhibit 2: Quarterly Snapshot:

(m cases ) Q3CY22 Q2CY23 Q3CY23 YoY (%) QoQ (%)
CSD 133 232 159 19.5 -31.5
Juices 11 23 11 0.0 -52.2
Water 46 59 50 8.7 -15.3

Total 190 314 220 15.4 -30.1

Source: Company, DAM Capital Research

 Quarterly result analysis and conference call takeaways

 VBL witnessed a strong sales growth of 21.8%, led by 15.4% volume growth and 5.6% realisation growth. India
volume growth was 14.8% and international business volume growth was 17.5% during the quarter. Carbonated
soft drinks’ (CSD) growth recouped after a muted growth in Q2CY22 due to unseasonal rains.
 The company sold 220 mn cases at an average realisation of Rs176.3/case. The CSD segment saw a 19.5%
volume growth to 159 mn cases, largely led by the strong growth in international business. Energy drink Sting
continues to grow at a faster pace. The CSD segment contributes 72% to the total volumes.
 The juice category saw flat volumes at 11 mn cases and this segment is contributing 5% to the total volumes. The
water segment saw an 8.6% volume growth to 50 mn cases with contribution of 23% to the total volumes.
 Gross margin expanded by 163 bps with decline in PET chip prices over the last few quarters. Operating profit
grew by 26% to Rs8.8 bn, with operating margin expansion of 79 bps to 22.8%. Employee spends were down by
20 bps (% to sales), whereas overhead spends were up 104 bps (% to sales). Net profit grew by 30% to Rs 5.14
bn.
 The company is undertaking a massive capex of Rs25 bn for Indian and overseas markets. It will leverage this
capex to expand CSD, juice and milk-based beverage capacities in India and set up greenfield facility in Congo.
The opportunity for growth in Congo is significantly high. The company would be serving 60% of the geography with
its first plant. The total capacity for Congo would be close to 35 mn cases.
 The company has already spent Rs16.0 bn on greenfield plants in UP, Maharashtra and Odisha. The remaining
capex of Rs9.0 bn is slated for utilisation before the upcoming summer season starting in March 2024. With this
capex, the company would increase its peak bottling capacity by 45%.
 The two key commodities for the company are PET chips and sugar. Inflation in one of these commodities can be
seen periodically. However, the company would be able to manage operating margins ~ 21% in future as well.

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 Varun Beverages

 The strong growth can be attributed to aggressive expansion of ‘go to market’ (GTM) strategy, improved
electrification in rural regions and faster installation of visi-coolers. The company has distribution reach of 3.5 mn
retail outlets out of a total of 12 mn outlets in India. Hence, there is ample scope to expand coverage further. The
company is adding 0.2-0.3 mn retail outlets every year.
 Juices has seen a flat volume in Q3 due to spillover impact of Q2. Given June quarter was impacted by unseasonal
rains, trade channels did not stock much inventory in Q3 as well. Despite muted volumes, some of the brands
such as Nimbooz grew by 100% and GATORATE grew by ~75%.
 The increase in realisation of international markets is prominent due to change in mix. GTM strategy is also
improving, given VBL’s share in these markets is significantly low. With growing contribution of south and west
regions, seasonality is likely to come down and Q1 and Q3 would contribute more to volumes.
 The traction in new products is extremely well, with strong growth in brands namely Sting, GATORATE and
Nimbooz. The company has launched ‘Sting Blue’ and plans to introduce additional new products in the future,
including the launch of another energy drink brand from PepsiCo’s product portfolio.

 Valuation and outlook

VBL has seen robust organic volume growth over the last two years on the back of strong growth in energy drink
brand ‘Sting’, consistent distribution expansion and higher mobility in the post-Covid era. Further, international
business is also growing at a faster pace with better GTM strategy. Though it would be difficult for the company to
repeat similar growth numbers on such a high base, we believe it would be able to grow volumes through new
products, specifically milk-based beverages, juices, and energy and sports drinks categories. Moreover, with the
massive Rs25 bn capex, the company is well positioned to tap into the growing beverage demand in smaller cities
and rural regions. We estimate an 11% volume CAGR during CY22-25. Further, stable commodity prices (PET chip
softening but sugar moving up) is likely to result in 110 bps margin improvement to 22.3% in CY23, which is likely to
sustain over the next two years. We are positive on VBL’s long-term growth prospects.

We value the stock on DCF methodology with WACC assumption of 9.5% and terminal growth of 5% to arrive at the
target price of Rs1120/share. The implied CY25 PE on the target price is 58x. We initiate coverage on the company
with a Buy rating.

Exhibit 3: PE valuation trend Exhibit 4: Price to sales valuation trend

1yr Fwd PE +1 SD Avg -1 SD 1yr Fwd PS +1 SD Avg -1 SD

75 8

60
6
45
4
30

15 2

0 0
Nov-16

Nov-17

Nov-18

Nov-19

Nov-20

Nov-21

Nov-22

Nov-23

Nov-16

Nov-17

Nov-18

Nov-19

Nov-20

Nov-21

Nov-22

Nov-23

Source: Company, DAM Capital Research, Bloomberg Source: Company, DAM Capital Research, Bloomberg

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 Varun Beverages

Story in Charts
Exhibit 5: Consolidate sales and sales growth trend Exhibit 6: PAT and PAT growth trend

Revenue (Rs bn) % growth PAT (Rs bn) Growth (%)

240 60.0 30.0 160%

Hundreds
180 40.0 24.0 120%

18.0 80%
120 20.0
12.0 40%
60 0.0
6.0 0%
0 -20.0 0.0 -40%
CY18

CY19

CY20

CY21

CY22

CY25E
CY23E

CY24E

CY18

CY19

CY20

CY21

CY22

CY23E

CY24E

CY25E
Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 7: Gross margins (%) Exhibit 8: EBITDA and EBITDA growth (% to sales)

Gross margin (%) EBITDA (Rs bn) % growth

4,800 90.0
70.0

3,600 60.0
60.0

50.0 2,400 30.0

40.0 1,200 0.0

30.0 0 -30.0
CY18

CY19

CY20

CY21

CY22

CY23E

CY24E

CY25E
CY18

CY19

CY20

CY21

CY22

CY25E
CY23E

CY24E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 9: Consolidate volumes and volumes growth (%) Exhibit 10: CSD volumes and volume growth (%)

Consolidate volumes (m cases) % growth CSD (m cases) % growth

1200 60% 800 45.0%
1000 45%
600 30.0%
800 30%
600 15% 400 15.0%
400 0%
200 0.0%
200 -15%
0 -30% 0 -15.0%
CY18

CY19

CY20

CY21

CY22

CY23E

CY18

CY19

CY20

CY21

CY22
CY24E

CY25E

CY23E

CY24E

CY25E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

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 Varun Beverages

Exhibit 11: Juices volumes and volume growth Exhibit 12: Water sales volumes and volume growth (%)

Juices volumes (m cases) % growth Water volume (m cases) % growth

80 90.0% 320 90.0%

60 60.0% 240 60.0%

40 30.0% 160 30.0%

20 0.0% 80 0.0%

0 -30.0% 0 -30.0%

CY18

CY19

CY20

CY21

CY22

CY23E

CY24E

CY25E
CY19
CY18

CY20

CY21

CY22

CY23E

CY24E

CY25E
Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 13: India & International business volumes Exhibit 14: Composition of volumes (India and International)

India volumes (m cases) International volumes (m cases) India volume (% of total) International volumes (% of total)
900
100%
750
80%
600
60%
450
40%
300
20%
150

0 0%
CY18 CY19 CY20 CY21 CY22 CY23E CY24E CY25E CY18 CY19 CY20 CY21 CY22 CY23E CY24E CY25E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 15: VBL’s share in PepsiCo India volumes (%) Exhibit 16: Manufacturing units in India & international business

VBL's share in PepsiCo India volume India manufacturing units International manufacturing units
100%
40

75%
30

50% 20

25% 10

0% 0
CY18 CY19 CY20 CY21 CY22 CY23E CY18 CY19 CY20 CY21 CY22 CY23E
Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 17: Dividend pay-out (%) Exhibit 18: Return ratios (%)
ROE ROCE
Dividend Payout
60.0% 40.0

30.0
40.0%
20.0
20.0%
10.0

0.0% 0.0
CY18

CY19

CY20

CY21

CY22

CY23E

CY24E

CY25E
CY22
CY18

CY19

CY20

CY21

CY23E

CY24E

CY25E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

5 | DAM CAPITAL 10 November 2023

 Varun Beverages

Investment Rationale
 PepsiCo’s second largest franchise outside the US
VBL currently Varun beverages (VBL) stands as the second largest franchisee of PepsiCo outside the United
contributes 90% to States. The company possesses the right to manufacture, distribute, and sell carbonated
PepsiCo India’s drinks, packaged drinking water and fruit juice-based drinks. With acquisition of PepsiCo’s
volumes, compared south and west India operations in 2019, along with distribution expansion and setting up of
to 51% in 2018. manufacturing plants in states with lower consumption rates, VBL currently contributes 90%
to PepsiCo India’s volumes, compared to 51% in 2018. It has presence in 27 states and 7
UTs (except for Andhra Pradesh, J&K and Ladakh). Apart from India, the company also has
presence in five other countries with six manufacturing units, i.e., two in Nepal and one each in Sri Lanka, Morocco,
Zambia and Zimbabwe. India business contributes ~81% to VBL’s total volumes, whereas international business
accounts for ~19%. The company is steadily expanding into African geographies, with distribution expansion in
Mozambique (through excess capacity in Zimbabwe) as part of this expansion strategy.
It is setting up a greenfield plant in Congo to seize a substantial business opportunity within the vast geographical
area. The company has been able to grow the volumes at an exponential rate with a significant increase in mobility
following the pandemic. Moreover, it has been able to grow its newer brands (energy drink, sports drink) with
distribution expansion over the last few years. We believe VBL would continue to focus on distribution expansion for
new beverage categories (sports, energy, milk-based beverages and juices). We expect revenue growth of 14% during
CY22-25, with volume growth of 11%.

Exhibit 19: VBL’s product portfolio

Source: Company, DAM Capital Research

 Distribution expansion driving volumes

Over the last five years, VBL has significantly increased its distribution network from 1100 distributors in 2018 to
more than 2500 distributors currently. This expanded its distribution reach from 2 mn retail outlets in 2018 to 3.5
mn retail outlets in 2023. Further, with the considerable increase in electrification in rural regions, the company has
managed to install higher number of visi-coolers, increasing from 0.55 mn in 2018 to an expected 1 mn in 2023. We
believe the substantial growth in volume can be largely attributed to distribution expansion and the widespread
installation of visi-coolers, apart from the company’s foray into newer beverage categories. In our view, the company
has ample scope to expand its distribution network in states with lower consumption rates, including Bihar, MP,
Chhattisgarh, Rajasthan and Odisha. The company has been setting up manufacturing plants in these states (Bihar,
Rajasthan, MP) since the past few years to mainly capture the opportunity of growing beverage consumption in these
geographies.

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 Varun Beverages

Exhibit 20: Distribution network (m outlets) Exhibit 21: Visi-Coolers Installation (number in m)

Retail reach (m outlets) VisiCoolers (m)

4.0
1.05
0.90
3.0
0.75
2.0 0.60
0.45
1.0 0.30
0.15
0.0
0.00
2018 2019 2020 2021 2022 2023E
CY18 CY19 CY20 CY21 CY22 CY23E
Source: Company, DAM Capital Research Source: Company, DAM Capital Research

 Developing new product portfolio

The company would The most significant growth driver for VBL has been the company’s foray into the energy drink
be launching one market in 2017 with the brand called ‘Sting’. The brand has witnessed an exponential growth
more brand in the over the last two years with distribution expansion, branding activity and increase in mobility
energy drink category (post-Covid period). One of the important factors for the growth of this brand was affordable
in 2024 from pricing of ‘Sting’ in comparison to other leading brands (it is available at Rs35 compared to
PepsiCo’s global Rs110 for Red Bull). Sting currently contributes 16% to the company’s overall volumes.
portfolio. Further, the company has expanded its product portfolio with distribution expansion of juices
under ‘Tropicana’ and ‘Nimbooz’, sports drink products under ‘Gatorade’ and milk-based
beverages under ‘Cream Bell’ brand. These newly introduced products are growing at a robust
pace. The company is setting up new facilities in milk-beverage and juices category to cater to the high demand
during summer season. The company would be launching one more brand in the energy drink category in 2024 from
PepsiCo’s global portfolio. We believe newer products would continue to grow at a fast pace with continued
distribution expansion into smaller towns and rural regions.
VBL also entered into an agreement to distribute and sell Lays, Doritos, Cheetos for PepsiCo in the territory of
Morocco. It commenced commercial production of Kurkure Puffcorn at the manufacturing plant in Kosi, Uttar
Pradesh, for PepsiCo., but the company would be able to improve its overall margin through premiumisation .

Exhibit 22: VBL’s presence in beverage sub-categories

Source: Company, DAM Capital Research

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 Varun Beverages

 Expanding through massive capex

The company is
further expanding VBL has massively expanded its capacity over the last few years, largely driven by its ability to
capacity in India capture strong demand for beverages due to increased mobility following the pandemic. The
and Congo with the company has commissioned new plants in Bihar, Rajasthan and MP, and has also expanded
capex of Rs25bn… capacities in its existing six plants between 2021 and 2023. It incurred Rs12.5 bn capex in
2022 for these greenfield and brownfield expansions. The company is further expanding
capacity in India and Congo with the capex of Rs25 bn, which is likely to be completed before
the 2024 season. In India, it is expanding its capacities for juices and milk-based beverages. We estimate 2023 and
2024 capex to the tune of Rs13.5 bn and Rs12.5 bn, respectively. The 2024 capex would increase its peak capacity
by 45%. We believe the company is well poised to cater to the increasing demand for newer beverage categories and
higher traction from regions with low consumption rates.

Exhibit 23: Aggressive capex (Rs bn) Exhibit 24: Asset turnover (x)
Asset turnover (x)
Capex (Rs bn) 2.0
25.0
20.0 1.6

15.0 1.2

10.0 0.8

5.0 0.4
0.0 0.0

CY18

CY19

CY20

CY21

CY22

CY25E
CY23E

CY24E
CY18

CY19

CY20

CY21

CY22

CY23E

CY24E

CY25E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

 Sailed through commodity inflation

The company was able to successfully navigate through the period of high inflation during 2022-23. The two major
commodities for the beverage business are PET chips (crude derivatives) and sugar. VBL was able to procure PET
chips for the full season in 2022 and 2023 in advance, which helped it to safeguard from the sharp increase in crude
prices during the high inflation period. In fact, strong volume growth and operating leverage resulted in the expansion
of operating margin by 280 bps, despite 180 bps contraction in gross margins in CY22. With a sharp decline in crude
prices over the last one year, we expect the company to see a further operating margin expansion of 110 bps to
22.3% in CY23. However, sugar price has started inching up (~12% up) over the last six months and we believe it
would continue to be at elevated levels for the next one year. In our view, VBL would maintain its operating margin at
~22% in CY24 and CY25, and sugar price inflation is likely to restrict its margin expansion in medium term.

Exhibit 25: Crude Prices (US$ per barrel) Exhibit 26: Sugar prices (Rs /quintal)
44.0
140

105 40.0

70 36.0

35 32.0

0 28.0
Apr-20

Apr-21

Apr-22

Apr-23
Jan-20

Jul-20

Jan-21

Jul-21

Jan-22

Jul-22

Jan-23

Jul-23
Oct-20

Oct-21

Oct-22

Oct-23
Apr-20

Apr-21

Apr-22

Apr-23
Jul-21
Jan-20

Jan-21

Jan-22

Jan-23
Jul-20

Jul-22

Jul-23
Oct-20

Oct-21

Oct-22

Oct-23

Source: DAM Capital Research, Company Source: DAM Capital Research, Company

 Key Risks
 Lower sugar production in the country could lead to requirement for import. Given sugar is key commodity for VBL,
higher imported sugar prices could disrupt margins.
 Demand condition for beverage categories could turn dismal from high consumption in post covid period.
 Challenges in new African geographies like Congo are enormous. Delay or lack of success in new geographies
could result in sunk investment.

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 Varun Beverages

Income statement Key ratios

Year to 31 Dec (Rs m) CY21 CY22 CY23E CY24E CY25E Year to 31 Dec CY21 CY22 CY23E CY24E CY25E
Net sales 88,232 1,31,731 1,57,636 1,76,215 1,95,191 EBITDA margin (%) 18.8 21.2 22.3 22.1 21.9
% growth 36.8 49.3 19.7 11.8 10.8 EBIT margin (%) 12.7 16.5 17.7 17.2 17.1
Operating expenses 71,686 1,03,850 1,22,514 1,37,223 1,52,349 PAT margin (%) 8.5 11.8 12.8 12.7 12.8
EBITDA 16,546 27,881 35,122 38,992 42,842 RoE (%) 19.2 32.9 34.4 30.5 28.6
% change 37.7 68.5 26.0 11.0 9.9 RoCE (%) 16.1 25.8 27.7 28.4 30.2
Other income 679 388 777 785 793 Gearing (x) 0.5 0.7 0.5 0.2 0.1
Net interest cost 1,847 1,861 2,454 2,393 2,118 Net debt/ EBITDA (x) 1.3 1.2 0.9 0.4 0.2
Depreciation 5,313 6,172 7,155 8,626 9,426 FCF yield (%) 1.0 0.1 1.1 1.9 1.7
Pre-tax profit 10,066 20,236 26,289 28,758 32,091 Dividend yield (%) 0.2 0.6 0.4 0.5 1.0
Deferred tax 0 0 0 0 0
Current tax 2,606 4,735 6,047 6,327 7,060
Profit after tax 7,461 15,501 20,243 22,431 25,031
Valuations
Preference dividend 0 0 0 0 0
Year to 31 Dec CY21 CY22 CY23E CY24E CY25E
Minorities 0 0 0 0 0 Reported EPS (Rs) 17.2 23.9 15.6 17.3 19.3
Adjusted net profit 7,461 15,501 20,243 22,431 25,031 Adj. EPS (Rs) 17.2 23.9 15.6 17.3 19.3
Non-recurring items 0 0 0 0 0 PE (x) 17.7 19.7 44.5 58.4 52.4
Reported net profit 7,461 15,501 20,243 22,431 25,031 Price/ Book (x) 3.1 5.9 13.7 16.1 14.0
% change 106.1 107.8 30.6 10.8 11.6 EV/ Net sales (x) 1.7 2.6 5.9 7.5 6.7
EV/ EBITDA (x) 9.3 12.2 26.5 34.0 30.7
EV/ CE (x) 2.1 3.5 8.8 12.2 11.7
Balance sheet
As on 31 Dec (Rs m) CY21 CY22 CY23E CY24E CY25E
Paid-up capital 4,330 6,495 6,495 6,495 6,495
Shareholding pattern
Preference capital 0 0 0 0 0
Reserves & surplus 36,469 44,529 59,104 74,805 87,321
Shareholders' equity 41,967 52,155 65,599 81,301 93,816
Total current liabilities 23,918 19,774 23,207 31,327 34,701
Total debt 24,418 37,184 34,184 21,184 12,484
Deferred tax liabilities 3,111 3,368 3,537 3,714 3,899
Other non-current
2,405 3,701 2,149 2,257 2,370
liabilities
Total liabilities 53,852 64,028 63,078 58,482 53,454
Total equity & liabilities 95,819 1,16,182 1,28,677 1,39,783 1,47,270
Net fixed assets 62,246 69,637 76,982 80,856 83,931
Investments 1,839 6,267 6,267 6,267 6,267
Cash 3,366 1,543 1,967 5,630 4,412
Other current assets 22,095 32,497 37,434 40,713 46,041
Deferred tax assets 24 0 0 0 0
Other non-current
6,249 6,238 6,027 6,316 6,620
assets
Net working capital 1,544 14,266 16,194 15,016 15,752
Total assets 95,819 1,16,182 1,28,677 1,39,783 1,47,270
As of Sep-23
Cash flow
Year to 31 Dec (Rs m) CY21 CY22 CY23E CY24E CY25E
Pre-tax profit 10,066 20,236 26,289 28,758 32,091
Depreciation 5,313 6,172 7,155 8,626 9,426
Chg in Working capital (2,687) (5,852) (1,504) 4,841 (1,954)
Total tax paid (1,242) (3,733) (6,047) (6,327) (7,060)
Net Interest 1,847 1,861 2,454 2,393 2,118
Others (985) (436) 0 0 0
Operating cash flow 12,314 17,900 28,349 38,291 34,621
Capital expenditure (8,154) (17,499) (14,289) (12,789) (12,804)
Free cash flow (a+b) 4,160 401 14,060 25,501 21,817
Chg in investments 0 0 0 0 0
Debt raised/(repaid) 1,097 3,396 (3,000) (13,000) (8,700)
Net interest (1,791) (1,717) (2,454) (2,393) (2,118)
Capital raised/(repaid) 0 0 0 0 0
Dividend (incl. tax) (1,083) (1,624) (5,668) (6,729) (12,515)
Other items 1,035 (2,498) 0 0 0
Net chg in cash 1,466 (1,823) 424 3,663 (1,218)

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Disclaimer
This document has been prepared by DAM Capital Advisors Limited [the company/DAM Capital]. DAM Capital is a full-service, integrated investment
banking, and institutional broking company. DAM Capital is registered with SEBI as Research Analyst having SEBI Registration number as INH000000131.

Disclaimer/Disclosures:
The following disclosures are being made in Compliance with the SEBI Research Analyst Regulations 2014 (hereinafter referred to as Regulations)
1. DAM Capital the Research Entity (RE) is also engaged in the business of Investment Banking and Stock Broking and is registered with SEBI for the same.
2. There are no material disciplinary actions taken against DAM Capital as on the date of publication of this report.
3. DAM Capital and associates may from time to time solicit from or perform investment banking or other services for companies covered in its research
report. Hence, the recipient of this report shall be aware that DAM Capital may have a conflict of interest that may affect the objectivity of this report.
Investors should not consider this report as the only factor in making their investment decision.
4. The RE and/or its associate and/or the Research Analyst(s) may have financial interest or any other material conflict of interest in the company(ies)/
entities covered in this report. Please read this in conjunction with other disclosures herein.
5. The RE and/or its associate and/or the Research Analyst or relatives or family members of the Research Analyst may have actual/beneficial ownership
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 Received any compensation for merchant banking, investment banking, stock broking or any other services from the Company covered by this
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iii. The information contained in this document has no regard to the specific investment objectives, financial situation or particular needs of any specific
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viii. The information contained herein is from publicly available data or made by thorough analysis done by DAM Capital team. The views expressed are
those of analyst and the Company may or may not subscribe to all the views expressed therein.
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Copyright of this document vests exclusively with DAM Capital Advisors Limited
Contd…

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 Varun Beverages

Disclaimer
Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or the price of, or income derived
from, the investment. In addition, investors in securities, the values of which are influenced by foreign currencies effectively assume currency risk.
Associates of DAM Capital may have issued other reports that are inconsistent with and reach different conclusions from, the information presented in this report.
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jurisdictions or to a certain category of investors. Persons in whose possession this document may come are required to inform themselves of, and to observe,
such applicable restrictions.
Reports based on technical analysis centres on studying charts of a stock's price movement and trading volume, as opposed to focusing on a company's
fundamentals and, as such, may not match with a report on a company's fundamentals.
Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. DAM Capital will not treat recipients as
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The analyst certifies that all of the views expressed in this research report accurately reflect his/her personal views about any and all of the subject issuer(s)
or securities. The analyst certifies that no part of his / her compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
and/or views expressed in this report.

Research Disclaimer - Notice to US Investors

This report was prepared, approved, published and distributed by DAM Capital Advisors Limited, a company located outside of the United States (a “non-US
Company”).This report is distributed in the US by DAM Capital (Parent of DAM Capital (USA) Inc.) only to major U.S institutional investors (as defined in Rule
15a-6 under the U.S Securities Exchange Act of 1934 (the “Exchange Act”)) pursuant to the exemption 15a-(2) of the Rule and any transaction effected by a
U.S customer in the securities described in this report must be effected through DAM Capital USA as defined in the Rule.

Neither the report nor any analyst who prepared or approved the report is subject to U.S legal requirements or Financial Industry Regulatory Authority, Inc.
(“FINRA”) or other regulatory requirements pertaining to research reports or research analysts. The non-US Company is neither registered as a broker-dealer
under the Exchange Act, nor is a member of FINRA, Inc. or any other U.S. self-regulatory organization. The non-US Company is the employer of the research
analyst(s) responsible for this research report. The research analysts preparing this report are residents outside the United States and are not associated
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the regulatory licensing requirements of FINRA or required to otherwise comply with US rules or regulations regarding, among other things, communications
with a subject company, public appearances and trading securities held by a research analyst account.

It is distributed in the United States of America by DAM Capital under 15a-6(a)(2) and elsewhere in the world by DAM Capital or any authorised associate of
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ANALYST DISCLOSURES
1. The analyst(s) declares that neither he/she or his/her relatives have a Beneficial or Actual ownership of > 1% of equity of Subject Company/ companies;
2. The analyst(s) declares that he/she has no material conflict of interest with the Subject Company/ companies of this report;
3. The research analyst (or analysts) certifies that the views expressed in the research report accurately reflect such research analyst's personal views about
the subject securities and issuers; and
4. The research analyst (or analysts) certifies that no part of his or her compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in the research report.
5. The research analyst declares that he has not served as an officer, director or employee of the subject company.

Investments in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or
provide any assurance of returns to investors.
Details of Compliance and Grievance officer
Name: Rajesh Tekadiwala Tel No. 022 -4202 2584 Email Id - [email protected]

Rating System

Investment Ratings Expected returns (over 12-month)

Buy > =10%
Sell < -5%
Neutral <-5% to 10%

SEBI Registration Nos. of DAM Capital Advisors Limited - CIN- U99999MH1993PCL071865

Research Analyst INH 000000 131
Stock Broker
NSE Capital Markets / NSE Futures & Options
INZ000207137
BSE Capital Markets / BSE Futures & Options
Merchant Banker INM000011336

Copyright in this document vests exclusively with DAM Capital Advisors Limited.

11 | DAM CAPITAL 10 November 2023

 Varun Beverages

www.damcapital.in

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CAPITAL 10 November 2023