Academic Research Report – Not a Recommendation

Equity Research Report Project

Varun Beverages Ltd
Capex completed, ready for growth.
Recommendation : XXX
About the Company CMP : INR 1,043
Varun Beverages Limited (VBL) is a significant player in the beverage industry Target Price : XXX
and one of PepsiCo's largest global franchisees, except in the USA. Their 25-
year partnership with PepsiCo has led to expanded territories, a diverse range Stock Data (as on October 10, 2023)
of PepsiCo beverages, and a broader distribution network. VBL produces and NIFTY 19,731.80
distributes carbonated and non-carbonated drinks, including PepsiCo's
branded packaged drinking water. 52 Weeks H/L (INR) 1,043/ 482.55
The company operates in 27 Indian states and 7 Union Territories, and it's also Market Cap (INR Crs) 1,35,558
active in 5 other countries, including Nepal, Sri Lanka, Morocco, Zambia, and
Outstanding Shares (Crs) 129.91
Zimbabwe. They manage 37 manufacturing facilities (31 in India and 6
internationally), own over 2,500 vehicles, work with 2,000 primary Dividend Yield (%) 0.14%
distributors, and have more than 100 depot NSE Code VBL
The company operates in six countries: three in the Indian Subcontinent Stock Performance – 1Yr
(India, Sri Lanka, and Nepal) accounting for approximately 85% of their net
revenues, and three in Africa (Morocco, Zambia, Zimbabwe) contributing to
approximately 15% of net revenues in the year 2022.
Nifty VBL
Overall View
• Considering the expanded operating capacity and shifts in the
product mix, I except VBL is well-positioned to achieve volume
growth of approximately 12% in CY23 and 10% in CY24,
accompanied by a projected increase in realization of around 9%
and 5%, respectively
• I expect VBL to maintain its earnings momentum, aided by 1)
increased penetration in newly acquired territories in South and
West India, 2) higher acceptance of newly launched products, 3)
continued expansion in capacity and distribution reach, 4) growing
refrigeration in rural and semi-rural areas, and 5) a scale-up in Absolute Returns
international operations..
• I except a Compound Annual Growth Rate (CAGR) of 17% in 1 Years 75.58%
revenue, 19% in EBITDA, and 26% in PAT over CY22 to CY25. 3 Years 526.76%
5 Years 725.11%
Key Highlights
• VBL’s revenue grew 22% YoY to INR38.7b (est. INR38.2b), driven by Shareholding Pattern(as on June30, 2023)
healthy volume growth (up 15.4% YoY to 220m cases) and higher
realization (up ~5% YoY to INR176/case). Volume growth was driven Promoter 63.90%
by both India (14.8% YoY) and international markets (17.5% YoY), FIIs 26.00%
while realization growth was mainly driven by the international DIIs 3.67%
market. Public 6.41%
• EBITDA margin expanded 80bp YoY to 22.8% (est. 22.9%), primarily
driven by improvements in gross margins (up 160bp YoY to 55.3%, Financial Summary
due to softening of PET chip prices). EBITDA grew 26% YoY to
INR8.8b (est. INR8.8b). Adj. PAT increased by 32% YoY to INR5b (est. In INR Crs FY22 FY23E FY24E
INR4.8b), driven by higher sales growth and improvement in Net Revenue 13,173 16,191 19,134
margins. YOY Growth % 49% 23% 18%
• CSD/water volumes grew 19%/8% YoY to 159m/50m unit cases, EBITDA 2,863 3,649 4336
while Juices volumes remained flat YoY at 11m unit cases EBITDA Margins (%) 22% 27% 19%
Highlights from the Management Commentary PAT 1,921 2,110 2480.6
YOY Growth % 108% 10% 25%
• International Business: VBL is setting up a greenfield plant in ROE 32.76% 32.00% 29.65%
Democratic Republic of Congo with an annual capacity of ~35-40m
EPS (in INR) 14.8 16.00 19.1
cases. The plant will be ready for production by Apr-May'24. It has also
formed a subsidiary in Mozambique for beverage distribution. EV/EBITDA 39.70 x 30.00 x 25.02 x
• Capex: The company has incurred a total capex of ~INR24b in 9MCY23, P/BV 16.84 16.84 10.55
of which INR8b was spent for capacities (both greenfield and
brownfield), which was commissioned in 9MCY23, and the balance
INR16b was for capacities coming up by Mar’24.
Prepared By – Pavan B Kandagal
Guided By – Parth Verma 1
 Academic Research Report – Not a Recommendation

Varun Beverages Ltd

p
Global Economy Global GDP Projections (%)

The global economy faced significant challenges in recent years. 0.50% 5.50% 10.50%
After the initial shock of COVID-19, many countries experienced a
strong recovery, but in CY 2022, there were difficulties like high
inflation, increased living costs, and energy price spikes.
World
Additionally, geopolitical tensions between Russia and Ukraine
disrupted trade and supply chains, and central banks worldwide Advanced Economies
raised interest rates to combat inflation. The conflict between Israel
and Gaza also posed challenges for energy costs and supply chains. Emerging Economies

Due to these issues, developed economies grew at a slower pace of Euro Area
2.7% compared to 5.0% in CY 2021, while emerging and developing
economies saw growth at 4.5% as opposed to 6.5% in CY 2022. In US
the Euro region, where the company has a significant international
presence, growth was at 3.5% instead of 5.2% in CY 2022. The Japan
overall global economy expanded by 3.4% in CY 2022 compared to
UK
5.0% in the previous year.
China
Global growth is projected to fall from an estimated 3.5 % in 2022
to 3.0 %in both 2023 and 2024. While the forecast for 2023 is India
modestly higher than predicted earlier, it remains weak by
historical standards. The rise in central bank policy rates to fight
inflation continues to weigh on economic activity. Global headline
2022A 2023P 2024P
inflation is expected to fall from 8.7% in CY 22 to 6.8 % in CY 23 and
5.2 % in 2024.
Source: IMF WEO, Company Analysis Source: IMF WEO
India vs Global GDP Growth (%) Indian Economy
6.80% 7.20%
6.50% 6.30% 6.30% FY23 was a year of significant achievement for India . Were
3.90% it surpassed the UK to become 5th largest economy. India
has posted growth of 7.2% in FY23 which was above the
global average of 3.5%

Despite the global economic challenges viz post COVID

2018 2019 2020 2021 2022 2023P 2024P impact supply chain disruption. Increased inflation and
interest rate hikes, Indian economy was resilient towards
growth which was fueled by government initiatives on
-5.80% multiple fronts such as PLI scheme, National Logistic
reforms, increased infrastructure spending, robust local
demand, fast paced digitization.
India Global

Source: IMF, World bank

India will become the third largest economy by FY28, two
years earlier than projected, said SBI Research economists in
a note. SBI economists said India will likely grow 8.1% in the
Indian GDP Quaterly Growth - Actual Vs Projected first quarter of FY24, pushing the overall growth rate to
6.5%. India recorded a 13.5% growth in the first quarter of
FY23. The forecast aligns with RBI projections of 6.5%
growth in FY24 but is more optimistic than the International
Monetary Fund’s revised forecast of 6.1%. Earlier this week,
the IMF revised its growth forecast upwards by 0.2
percentage points on the back of strong domestic
investment.
15.5%
13.50%

On the demand front, urban consumption is flat while rural

8.40%
8.5%

demand is showing signs of revival. Investment activity is

7.80%
8.5%
6.30%

6.10%
6.5%
6.5%
5.40%

benefitting from public sector capex. Strong growth is seen

4.40%
5.5%

5.5%
4.10%
4.5%

in imports and production of capital goods. Further,

Inflation is expected to be soften and within the targeted
range soon. Indian economy is robustly progressing over
Actual Projected becoming 3rd largest economy with $5th GDP.
2
Source: Investing.com Source: IMF WEO, RBI, SBI Research, company analysis
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

p
Global Beverage Industry

The global FMCG market size was valued at $11,490.9 billion in

2021 and is projected to reach $18,939.4 billion by 2031, registering Global FMCG Market Size Forecast (In Billions)
600.0
a CAGR of 5.1% from 2022 to 2031. Total revenue of FMCG market
is expected to grow at a CAGR of 27.9% through 2021 to 2027,
reaching nearly US$ 615.87 billion. 500.0 481.5

In the 21st century, the convenience of online access is well-known

to customers. Whether you're in a big city or a smaller town, many 400.0 376.5
people prefer buying things online. In the FMCG industry, shopping
through apps has become a popular choice,. In the next decade, 294.4
consumers will continue to gain more power through new 300.0
communication technologies. India, for instance, gained 260 million 230.1
new internet users in 2015 and is expected to have 900 million by 179.9
200.0
2025. It's predicted that by 2020, 75-90 million customers will buy 140.7
FMCG products online, with 55-60 million digitally engaging with 110.0
the FMCG sector, and 12-20 million making purchases 100.0 68.4 83.3

The FMCG market has grown significantly due to developed

markets such as the U.S., China, and others. These are expected to 0.0
account for over 70% of the global increase in consumer

2018A

2019A

2020A

2021A

2022A

2023E

2024E

2025E

2026E
expenditure. According to projections from the World Bank, India
would have surpassed Japan and Germany to become the world's
third-largest market in terms of total consumer expenditure by
2030
Source: IBEF, Allied Market Research Report Source: Statista
Indian Beverage Industry
Retail Sales of Non-Alcoholic Beverage (In Billions)
1472.3
1343.2

1600.0 The FMCG (Fast-Moving Consumer Goods) market in India

1225.4

reached a value of US$ 56.8 billion by December 2022, and

1117.9

1400.0
1019.9

FMCG companies experienced a 7.4% sales increase in 2022,

1200.0
930.4

primarily driven by price adjustments. This sector is a

848.8

significant employer, offering livelihoods to approximately 3

774.4

1000.0
706.5
671.2

644.5

million people, constituting about 5% of India's total factory

588.0

800.0 employment. Projections indicated that FMCG sales in the

600.0 country were poised for revenue growth of 7-9% in the year
2022-23.
400.0
200.0 Total revenue of FMCG market is expected to grow at a
CAGR of 27.9% through 2021 to 2027, reaching nearly US$
0.0
615.87 billion

Indian food processing market size reached US$307.2

billion in 2022 and is expected to reach US $ 547.3 billion by
Source: amchamindia.com 2028 , exhibiting a growth rate (CAGR) of 9.5 % during 2023
- 2028 .
FDI Inflow % From 2000-Current
Digital advertising will grow at 14.75 % CAGR to reach
4.77% 7.53% Rs 35 ,809 crore (US $ 4.3 billion) by 2023 , with the FMCG
industry being the biggest contributor at 42 % share of the
7.53%
total digital spend .

10.57% 50.75% The urban segment accounts for 55% of the overall revenue
generated by the FMCG sector. On the other hand, the rural
segment contributes 45% and is growing at a faster pace
18.85% compared to the urban segment. Demand for quality goods
and services has been going up in rural areas, on the back of
Food Processing Retail Trading improved distribution channels of FMCG companies.
Soap Cosmetic Paper Pulp
Vegetable Oil Others
3
Source: IBEF Source: IBEF , Annual Reports
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Indian Beverage Industry

Capex

In recent developments, PepsiCo India invested INR 186 crore (US$23.84 million) in expanding its Lay's potato chips manufacturing plant
in Uttar Pradesh. ITC is set to acquire 100% of Sprout life Foods, including the 'Yoga Bar' brand, over three to four years. Additionally, ITC
has opened a 59-acre food processing facility in Telangana, focusing on biscuits, chips, noodles, and atta products. Hindustan Unilever and
UNDP launched an "Inclusive Circular Economy" project to manage plastic waste effectively. BCS Global entered the Indian energy drink
market with its brand "Wox" in 2023, and Keomi Beauty introduced Japanese-inspired beauty and skincare products in India.

Road Ahead

Rural consumption in India is on the rise due to increasing incomes and elevated aspirations, leading to a greater demand for branded
FMCG products. With the share of unorganized FMCG markets decreasing, the organized sector is expected to grow, driven by a stronger
brand consciousness and the growth of modern retail. The growing youth population, especially in urban areas, contributes to the
demand for food services as time-constrained individuals seek convenient options. Online platforms are becoming instrumental for
reaching India's hinterlands, with the internet's widespread reach. The implementation of GST and demonetization is anticipated to boost
demand, foster economic growth, and enhance the performance of FMCG companies in both urban and rural areas.

Import

Over the past six years, import values have demonstrated fluctuations and growth in a dynamic pattern. Beginning in 2018 at a value of
601.5 million, imports steadily increased by 10% in 2019, reaching 667.6 million. However, the subsequent year, 2020, saw a modest
decrease of -2%, amounting to 656.06 million. A more significant drop of -17% occurred in 2021, with import values at 543.73 million.
Nevertheless, 2022 witnessed a positive resurgence, with an 8% increase in imports to 587.45 million. The most substantial leap was
recorded in 2023, marking a 36% increase, resulting in an import value of 797.64 million.

Import Value of Non Alcholic Beverages In India (In Imports Volume of Non Alcoholic beverage In
Millions) India(In 1000 Metrics Tons)
1000 40% 800 60%
797.64 645.8
800 667.6 656.06 563.7 587.9 572.8 40%
601.5 600
543.73 587.45 20% 451.5 472.1
600 20%
400 303.4 330.7
400 0%
0%
200 200 -20%
0 -20% 0 -40%
2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 2022 2023

Imports Value Import Value %Changes Imports Volume Import Volume% Changes
Source: Statista Source: Statista

Export

The data presents a trajectory of export values spanning an eight-year period. Commencing in 2016 at 310.31 million, these values underwent
fluctuations, with a significant decline to 231 million in 2020. However, a subsequent rebound in 2021 saw values ascend to 322 million, and
in 2023, export values stabilized at 316 million, The majority of the beverages were exported to the United Arab Emirates.

Export Value of Non Alcholic Beverage In India (In Export Volume of Non Alcoholic Beverage In
Millions) India (In 1000 Metrics Tons)
300 239 231 241 232 247 100.0%
400 310 327 322 316 0.60 231
299 302 278 198
300 231 0.40 200 50.0%
0.20 139
200
0.00 100 0.0%
100 -0.20
0 -0.40 0 -50.0%
2016 2017 2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 2022 2023
Exports Value Export Value % Changes Exports Volume Export Volume %Changes
4
Academic Research Report – Not a Recommendation
Varun Beverages Ltd
Concall Analysis- Q2FY24 and Q1FY24
 Financial Results:
• Net revenue from operations grew by 37.7% year-on-
year in Q1 CY23, driven by robust volume growth and
an increase in net realization.
• The company's EBITDA per case has increased due to
operating leverage and economies of scale, with the
realization going up due to a change in mix and higher
revenue from smaller packs.
• ROCE has been growing, and guidance is 100 to 125 bps
increase going forward.
• Realization for juices, sports drinks, and dairy is even
higher than CSD
 New Products:
• The company is focusing on new performers like value-
added dairy, sports drink, and juice segments to sustain
growth momentum.
• The company is increasing distribution for energy drinks
and adding more visi-coolers.
• The company has ramped up capacity for value-added
dairy, sports drinks, and juices for CY24.
• Gatorade is one of the strongest brands in the world in
the sports drink category, and the company plans to
expand its market substantially next year.
• Gatorade will be mass marketed and made available at
more outlets from early next year.
• Sting energy drink has sustainable growth and market
share of 9.6% for the year and 16% for the last quarter
 Expansion:
• The company commissioned a Greenfield production
facility in Rajasthan and a brownfield expansion of 6
facilities, with an additional Greenfield plant in Madhya
Pradesh expected to be operational soon.
• The construction of a new production facility in DRC has
already started.
• The company is putting up two plants in Maharashtra
and UP to increase capability for next year
 Capex:
• The company has a capex of Rs. 1,500 crore for organic
growth expectations of 24%.
• The capex is all cash outgo.
 Sustainability:
• The company is investing in PET recycling and
implementing measures to improve energy and water
efficiency to promote sustainability in its operations.
• Recycling process is under process and targeting
production by 2025.
Source: Company Report Analysis
 Dividend and Share Split:
 The company announced a final dividend of Re.
1 per share, taking the total dividend payout for
the year to the level of Rs. 3.5 per share.
 The company recommended the split of existing
equity shares of the Company from one equity
share having face value of Rs. 10 each into two
equity shares having face value of Rs. 5 each.
 Competition:
• The company faces competition from Campa
and Reliance, but there is still room for growth
in the Indian market.
• The emerging competitive landscape, especially
with Campa looking to tie up with bottlers and
packaging partners, was not addressed in detail.
• The competition launching an energy drink
under the Thumbs Up brand has not affected
Sting's performance significantly.
 Guidance
• The company is constrained by the production
capacities of Tropicana juices and value-added
dairy.
• The company locks in enough raw material
inventory for six months and tries to maintain
inventory levels to take advantage of lower
pricing in the off-season.
• Weather plays an important role in the
business, but disruptions can only make a
difference of certain percentage points up or
down.
• The company's growth in urban and rural areas
is just about the same, with rural growth slightly
ahead of urban.
• Dairy product volume contribution is small, but
availability of milk is not a problem.
• No major impact on procurement or gross
margin due to sugar availability
• PepsiCo's aggressive marketing this season with
celebrity endorsements is not dilutive to the
company's margins.
• The company plans to add 70,000-80,000 visi-
coolers, with the majority added before the
season itself.
• Distribution reach expected to increase 10%-
12% every year.
• The dairy business is profitable and has margins
as good as the soft drink business.
5
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Management Analysis
Leadership

S.No Name Designation Qualification Comments

Varun completed higher secondary
education from Delhi Public School, Mathura
Road, New Delhi. He has an established
reputation as an entrepreneur and business It is evident that he possesses the potential to
1 Ravi Kant Promoter & leader and is the only Indian Company’s effectively serve as both the promoter and chairman
Jaipuria Chairman promoter to receive PepsiCo’s award for of the company, bringing valuable leadership and
International Bottler of the Year, awarded in strategic vision to the organization.
1997. He was also awarded the
‘Distinguished Entrepreneurship Award’ at
the PHD Chamber Annual Awards for
Excellence 2018.

Varun is the Promoter, Whole-time Director

& Executive Vice Chairman of the Company.
He has been actively working with the
Company since 2009 and has been It reflects his dedication to continued growth and
Promoter, instrumental in comprehensive. excellence. Considering his extensive experience and
2 Varun Jaipuria Executive Vice development of Company’s business accomplishments, he exhibits significant potential to
Chairman and including acquisitions and integration of assume the role of Chairman, bringing valuable
whole-time acquired territories. Under his leadership, leadership and vision to the company.
director Varun Beverages was awarded PepsiCo’s
Best Bottler in AMESA (Africa, Middle East
and South Asia) sector in 2021

Raj is a qualified Chartered Accountant of

1980 batch. He also did management
program with Harvard Business School. Out
of his total 42 years of experience, 30 years
of experience is with the RJ Corp Group
3 Raj Gandhi Whole-time itself. He is instrumental in formulating
director company’s strategy, diversification,
expansion, mergers and acquisitions, capex
planning and capital/fund raising. He enjoys
longstanding relationship with institutional
investors and lenders.
Raj possesses a deep understanding of the
organization's intricacies. lenders reflect his ability to
navigate the financial landscape, making him a viable
candidate for the roles of promoter and chairman,
offering valuable leadership and strategic direction to
the company.

Rajinder holds a master’s degree in

mechanical engineering from the Indian
Institute of Technology, Kanpur. He has been
associated with the Company since 1996 and
is currently heading technical operations Rajinder has extensive technical knowledge, tenure,
4 Rajinder Jeet Whole-time since 2003. He has an experience of 26 years and proven track record, he exhibits potential to
Singh Bagga director with the Company in managing technical contribute significantly to the company's leadership,
operations and execution of projects. Prior potentially serving as both promoter and chairman,
to this, he was associated with Eveready offering valuable technical and strategic insights.
Industries India Limited for approximately 10
years and was last working in the capacity as
their production manager.

Source: Company Report Analysis

6
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Management Analysis
Independent Directors
S.No Name Designation Qualification Comments
Dr.Naresh holds a bachelor’s degree in Medicine and
Surgery from the University of Lucknow and has been
certified as a renowned Cardiothoracic Surgeon by the Dr.Naresh demonstrates his significant
American Board of Thoracic Surgery. He has trained and contributions to the field. With such a
1 Dr. Naresh Independent practiced at New York University Medical Center at distinguished and accomplished
Trehan Director Manhattan USA from July 1, 1971, to June 30, 1975, and background, he possesses the potential to
is an honorary fellow at the Royal Australasian College serve as an independent director, bringing
of Surgeons. He has received many prestigious awards, valuable insights and expertise to the
including the Padma Bhushan Award, presented by the company's board.
Government of India.

Pradeep holds a bachelor’s degree in mechanical

engineering from the Indian Institute of Technology,
Delhi. He has 52 years of experience (41 years in service
2 Pradeep Independent and 11 years in consultancy). He is presently the CEO of
Sardana Director PM Consulting, a consultancy firm in the field of food,
beverages, FMCG and other industries. Previously
worked at senior management level with renowned
companies including Polyplex Hydro Group, PepsiCo,
Hindustan Lever Limited and Union Carbide and has
successfully handled diverse assignments.
Pradeep has proven ability to handle
diverse assignments makes him a strong
candidate for the role of an independent
director within the company, where his
extensive industry insights and leadership
experience could bring valuable
perspectives and guidance to the
organization.

Dr. Ravi Gupta holds a bachelor's degree and a master's

degree in commerce from the University of Delhi. He
also holds a Bachelor's degree in law from the University Dr. Ravi Gupta showcases a strong
of Delhi, a diploma in labor law from the Indian Law potential to serve as an independent
3 Dr. Ravi Independent Institute, a Master's degree in business administration director for the company. His broad-ranging
Gupta Director from the Faculty of Management Studies, University of qualifications and government involvement
Delhi and a doctorate in philosophy for his thesis on reflect his ability to provide valuable
'Country Risk Analysis in Investment Financing Decision insights and guidance in a directorial
Making' from the University of Delhi. He was employed capacity.
as an Associate Professor in the commerce department
of Shri Ram College of Commerce, University of Delhi.

Sita Khosla holds Bachelor's of Arts degree from St.

4 Sita Khosla Independent
Director
Stephen's College and LLB from the Faculty of Law,
University of Delhi and is enrolled with the Bar Council Sita Khosla her role as India legal advisor to
of Delhi. She practices in the areas of corporate, contract major players in the civil aviation sector
and commercial laws since 1992. She has been involved underscores her ability to provide valuable
in providing advice on a wide range of issues from insights into regulatory and legal matters,
company formation, corporate governance and making her a strong candidate for the role
regulatory compliance to mergers and acquisitions, of an independent director in the company.
corporate restructuring, joint ventures, foreign
investments, exchange control regulations and
securities laws.

Rashmi Dhariwal holds a bachelor’s degree in Arts from

the University of Delhi and is a practicing advocate at Given her legal acumen and dedication to
the Calcutta High Court since 1978. She is also the social initiatives, she exhibits the potential
5 Rashmi Independent trustee of a non-profit organization called Prayatn which to serve as an independent director,
Dhariwal Director provides education to underprivileged children. She has contributing valuable legal and
also worked in several leading firms in India including philanthropic perspectives to the
Khaitan & Co, Calcutta and Delhi, company's board.
7
Source: Company Report Analysis
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Commentary

The company has strong management with vast experience and technical expertise. Further, the independent directors come from
diversified industries and include dignified profession such as Ex-Cardiothoracic Surgeon ,CEO, Ex-Senior management, Advocates etc.
Basic our screening of publically available data, we don't find any prominent political connection of Leadership and independent
directors. With national and regional political parties. Further, we do not find any conflict of interest of independent directors with
the company, as reported

The current company promoter, vice chairman, & whole-time director Varun Jaipuria has been actively working with the Company
since 2009 and has been instrumental in comprehensive. development of Company’s business including acquisitions and integration
of acquired territories. Under his leadership, Varun Beverages was awarded PepsiCo’s Best Bottler in AMESA (Africa, Middle East and
South Asia) sector in 2021 in recognition of Company’s operational excellence, governance practices and sustainability initiatives.
Since his joining the top and bottom line of the company has grown 00x and 00x respectively from 2009 to current . The other
members of management were hired and promoted as per their competencies and technical expertise

Shareholding Pattern

The company's shareholding structure primarily comprises institutional and public investors, amounting to 36.08% of the total shares
as of September 30, 2023. As of December 31, 2021, the promoters had pledged 0.40% of their holdings, a figure that remained
unchanged through the quarter ending September 30, 2023. During this period, the promoter's shareholding decreased from 73.66%
in March 2017 to 63.09% in the quarter ending September 2023. This reduction in promoter holding was due to the sale of a stake by
the promoter of VBL, valued at Rs 850 crores, through a block deal, with shares likely to be offered at a discount of 5-7%. It's
important to note that this decrease in promoter holding, while notable, does not necessarily signify a strategic exit from the
management of the business.

Yearly & Quarterly Shareholding Pattern of the company is as under :

Exhibit 1 :
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Sep-23
Promoters 73.66% 73.57% 73.56% 68.04% 66.40% 64.89% 63.90% 63.09%
FIIs 10.55% 13.41% 13.51% 19.82% 20.28% 21.03% 26.00% 27.55%
DIIs 1.07% 4.91% 6.42% 6.30% 5.90% 7.21% 3.67% 3.36%
Public 14.72% 8.11% 6.51% 5.84% 7.42% 6.87% 6.41% 6.01%

Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23

Promoters 66.40% 66.40% 65.82% 64.89% 64.89% 64.89% 63.90% 63.90% 63.9% 63.90% 63.61% 63.09%

FIIs 20.46% 20.28% 20.73% 21.72% 21.23% 21.03% 23.93% 25.01% 26.5% 26.00% 26.71% 27.55%

DIIs 5.86% 5.90% 5.83% 6.77% 7.06% 7.21% 5.31% 4.45% 3.4% 3.67% 3.16% 3.36%

Public 7.28% 7.42% 7.62% 6.62% 6.82% 6.87% 6.86% 6.62% 6.2% 6.41% 6.52% 6.01%

Promoter's Holding vs Pledge Quarterly FII Holdings

26.7%
26.5%
26.0%
25.0%
23.9%

30.0%
21.7%
21.2%
21.0%
20.7%
20.5%
20.3%

25.0%
60.01%
20.0%
40.01%
15.0%
20.01% 10.0%
5.0%
0.01%
Jun-22

Jun-23
Sep-21

Dec-21

Sep-22

Dec-22

Sep-23
Mar-22

Mar-23

0.0%
Mar-…

Mar-…

Mar-…
Dec-…

Dec-…

Dec-…
Jun-21
Sep-21

Jun-22
Sep-22

Jun-23

Promoter % of Promoter Holding Pledged

Source: Company Report Analysis 8

Source: Company Report Analysis
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Commentary
Management Remuneration
During the FY23, the company has incurred managerial remuneration of INR 426.6 million as against INR 264.1 million in FY21 (53.5%
increase in YoY basis). The details are as under :
Exhibit 2:

Ratio of Remuneration on Sales Growth NET Profit

Designations with median employee FY22 FY21 Growth Yoy% Growth YoY
Varun Jaipuria Executive Vice Chairman 138.26 54.69 48.39 13% 49.3% 107.8%
Mr Raj Pal Whole-time director 152.97 56.6 63.49 -11% 49.3% 107.8%
Mr. Kapil Agarwal CEO & Whole-time director 224.57 237.21 78.35 203% 49.3% 107.8%
CFO (w.e.f 2nd August
9.61 3.4 183% 49.3% 107.8%
Mr. Rajesh Chawla 2021) NA
Chief Risk Officer & Group
13.3 10.99 21% 49.3% 107.8%
Mr. Ravi Batra CS 31.4
Mr. Rajinder Jeet Singh Bagga Whole-time director 141.76 52.45 38.8 35% 49.3% 107.8%
CS of the parent, namely RJ
2.74 2.21 24% 49.3% 107.8%
Mr. Mahavir Prasad Garg Corp Limited NA
Mr. Vikas Bhatia CFO (Till 2nd August 2021) NA - 18.49 18.49 49.3% 107.8%
Total 371.91 264.12 41% 49.32% 107.8%
Median ratio of KMP remuneration with median employee salary is 141.76 whereas median of the same for the peers stood at 52.45
We have observed variation in revenue growth of the company and growth in KMP remuneration. The revenue grew at 29% CAGAR
over the last 5 years and 38% CAGR over the last 3 years the KMP remuneration has grew by 26% CAGAR over last 5 years and
increased by 34% CAGR over the last 3 years .
Revenue Growth, KPM Remuneration Growth, & Net profit
150% Growth

100%

50%

0%
FY18 FY19 FY20 FY21 FY22
-50%

Revenue Growth Growth In Remuneration

Net profit Growth
Source: Company Report Analysis
Board Efficiency
Basic is our research, Board of Directors (BOD) has adequate representation of independent directors, industry experts, finance and
legal experts as required by the statue.
The efficiency of BOD can be gauged with their contribution in various important meetings held in FY22. The details are as under
Exhibit 3 :
No. of Board Meetings Attendance of
last AGM
Name Designation Held Attended
Mr Ravi Jaipuria Promoter Non-executive chairman 6 Yes Yes
Promoter Executive Vice Chairman, Whole-Time
Mr Varun Jaipuria Director 6 Yes Yes
Mr Raj Pal Whole-time Director (Executive Director) 6 Yes Yes
Mr. Kapil Agarwal Whole-time Director (Executive Director) 6 Yes Yes
Mr. Rajinder Jeet Singh Bagga Whole-time Director (Executive Director) 6 Yes Yes
Dr. Naresh Trehan Non-executive & Independent Director 6 Yes Yes
Dr. Ravi Gupta Non-executive & Independent Director 6 Yes Yes
Mr. Pradeep Sardana Non-executive & Independent Director 6 Yes Yes
Ms. Rashmi Dharial Non-executive & Independent Director 6 Yes Yes
Ms. Sita Khosla Non-executive & Independent Director 6 Yes Yes

During FY23 the company has been supervised by the BOD efficiently as the majority of members of the board have attended all the
board meetings which shows good participation by the board in key matter discussed during the year and helped the company in 9
taking effective decisions Source: Company Report Analysis
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Quarterly Snapshot
Exhibit 4 :
Particulars (INR Crores) FY23Q1 FY23Q2 FY23Q3 FY23Q4 FY24Q1 FY24Q2 FY24Q3 FY24Q4
Net revenues 2,827 4,955 3,177 2,214 3,893 5,611 3,870 2,591
Total Expenditure 2,297 3,704 2,478 1,907 3,095 4,101 2,988 2,204
EBITDA 531 1,251 699 307 798 1,511 882 388
EBITDA Margin (%) 19% 25% 22% 14% 20% 27% 23% 15%
Depreciation 131 153 153 180 172 172 170 180
Interest 47 46 45 47 63 69 62 60
Other Income 85 10 11 9 10 42 18 10
Profit before EO 361 1,062 511 90 573 1,311 667 158
Profit before tax 361 1,062 511 90 573 1,311 667 158
Tax 25% 24% 23% 9% 24% 23% 22.9% 22%
Net Profit 271 787 381 74.8 429 993.8 501.5 118.1
Net Profit Margin (%) 10% 16% 12% 4% 11% 18% 13% 5%
Source: Company Report Analysis

Annual Snapshot
Exhibit 5 :
Particulars FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Sales 5,105 7,130 6,450 8,823 13,173 15,814 18,329 20,926
YoY% Change 27.5% 39.7% -9.5% 36.8% 49.3% 20.0% 15.9% 14.2%
Material Cost 2,244 3,219 2,763 4,035 6,261 7,311 8,596 9,814
Employee Cost 583 810 889 1,007 1,216 1,401 1,539 1,715
Other Cost 1,271 1,651 1,594 2,126 2,907 3,552 4,124 4,708
Total Expenses 4,098 5,682 5,248 7,168 10,385 12,265 14,259 16,238
Total Expenses % Sales 80.27% 79.69% 81.36% 81.24% 78.84% 77.56% 77.79% 77.60%
EBITDA 1,006 1,447 12,019 1,654 2,788 3,548.0 4,069.0 4,687.0
EBITDA% 20% 20% 186% 19% 21% 22% 22% 22%
Depreciation 385 489 528 531 617 702.0 772.0 849.0
EBIT 621 959 673 1,123 2,170 2,846 3,296 3,837
Other income normal 21 42 37 67 38 74 99 126
Interest 212 309 281 184 186 257.0 190.0 103.0
Profit before tax 430 692 429 1,006 2,023 2,663 3,205 3,860
Tax % 31% 32% 1.4% 25.9% 23% 23% 23% 23%
Share of profit from Associates 3 4 0 0 0 0 0 0
Minority Interest 7 3 28 52 52 45 50 55
Net Profit - 292 469 329 694 1,497 2,051 2,468 2,972
Net Profit Margin 6% 7% 5% 8% 11% 13% 13% 14%
Source: Company Report Analysis

10
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Key performance indicators

Exhibit 6 :

Y/E Dec 1QCY21 2QCY21 3QCY21 4QCY21 1QCY22 2QCY22 3QCY22 4QCY23 1QCY23 2QCY23 3QCY23E
Segment Volume Gr.
CSD 40 33 22 24 18 85 23 25 27 6 19
NCB 38 38 33 50 18 139 38 17 23 -13 0
Water 13 188 54 36 21 140 24 5 17 7 8
Cost Break-up
RM Cost (% of Sales) 44 46 47 45 48 49 46 44 48 48 45
Employee Cost (% of
Sales) 11 10 11 15 10 6 10 14 9 6 10
Other Cost (% of Sales) 28 20 21 28 23 19 22 28 23 19 23
Gross Margins (%) 56 54 53 55 52 51 54 56 52 53 55
EBITDA Margins (%) 17 23 21 12 19 25 22 14 20 27 23
EBIT Margins (%) 11 18 15 5 14 22 17 6 16 24 18

Source: Company Report Analysis

Financials & Valuations

Exhibit 7 :

CY17 CY18 CY19 CY20 CY21 CY22 CY23E CY24E CY25E

Basic (INR)
EPS 1.6 2.3 3.6 2.5 5.3 11.5 15.7 19 23.2
DPS 0.4 0.4 0.5 0.6 0.8 1.7 1.8 2 2
Valuation (x)
Price/Book Value 69.4 61.4 36.9 34.8 30.1 24.1 17.7 13.5 10.3
EV/Sales 31.2 24.6 17.7 19.5 14.3 9.6 7.9 6.8 5.8
EV/EBITDA 17.28 16.45 16.21 24.26 24.51 31.26 35.30 30.20 25.60
Divident Yield (%) 0 0 0.1 0.1 0.1 0.2 0.2 0.2 0.2
FCF Per Share 0.8 1.5 4.4 5.5 2.8 3.4 3.5 11.6 19.8
Return Ratio (%)
ROE 12% 15% 14% 10% 18% 30% 34% 30.80% 28.70%
ROCE 9.2 10 11.8 10.4 12.5 20.9 23.5 24 25.7
ROIC 9.1 10.1 11.5 9.8 12.1 21.6 24.5 24.4 25.6
Working Capital Ratio
Fixed Asset Turnover (x) 0.7 0.8 0.8 0.7 0.9 1.2 1.3 1.2 1.3
Asset Turnover (x) 0.9 1 1 0.9 1.1 1.4 1.4 1.5 1.6
Inventory (Days) 40 41 45 53 60 55 54 54 54
Debtor (Days) 14 9 9 14 9 8 9 9 9
Creditor (Days) 17 23 24 29 29 23 23 23 22
Leverage Ratio (x)
Interest Coverage Ratio 2.3 2.9 3.1 2.4 6.1 11.7 11.5 14.5 33.5
Debt/Equity 1.50 1.40 1.03 0.91 0.83 0.76 0.70 0.50 0.30
Debt/Assets 0.50 0.47 0.41 0.38 0.35 0.33 0.33 0.25 0.20

Source: Company Report Analysis

11
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Commentary

Revenue Exhibit 8:

In the most recent quarterly results, the company's revenue from

Sales vs Sales Growth
operations increased by 13.3% compared to the same period last 25,000 60.0%
year, reaching Rs. 56,114 million in Q2 CY2023. This growth was
50.0%
mainly driven by an increase in sales volume, which went up by 20,000
4.6% to 314 million cases in Q2 CY2023, compared to 300 million 40.0%
cases in Q2 CY2022. The growth in sales volume was primarily due 15,000 30.0%
to international markets, as sales in India were impacted by 20.0%
unseasonal rains during the quarter. The company's net revenue 10,000
has been steadily increasing at a rate of 26.7% over the past five 10.0%
years, reflecting their success in expanding their customer base 0.0%
5,000
and distribution reach. Additionally, the company is planning to -10.0%
invest in expansion projects, including Rs. 8,500 million for six
0 -20.0%
existing facilities in India, Rs. 3,000 million for expansion in
international markets, and Rs. 100 million for land purchase in FY20 FY21 FY22 FY23E FY24E FY25E
future capital expenditures.
Sales Sales Growth
Source: Company Report Analysis

Gross Margin Exhibit 9:

During this quarter, the company's gross margins improved, rising EBITDA & Margin Growth
from 50.5% to 52.5%, mainly due to the decrease in PET chip prices. 1400 30.0%
This resulted in a 20.8% increase in EBITDA to Rs. 15,110 million,
1200 25.0%
with an EBITDA margin of 26.9% in Q2 CY2023. The company's
EBITDA margin guidance remains in the range of 21%-22%. 1000
20.0%
Moreover, the softening of PET chip prices contributed to a 200-
800
basis points year-on-year improvement in gross margins 15.0%
.EBITDA/unit case improved 15% YoY to INR48.12, supported by 600
favourable operating leverage. The company has displayed 10.0%
400
significant growth, with EBITDA growing at a 5-year Compound
Annual Growth Rate (CAGR) of 35.1%. When there is a change in 200 5.0%
the product mix, it leads to an increase in profit margins due to
0 0.0%
higher realization and revenue from smaller packs. Consequently,
an increase in the product mix significantly contributes to profit FY23Q1 FY23Q2 FY23Q3 FY23Q4 FY24Q1
margins. Furthermore, the company's debt to EBITDA ratio stands
at 0.48x, indicating a healthy financial position EBITDA EBITDA Margin

Source: Company Report Analysis

Inventory Exhibit 10 :

While companies' revenue growth and growth in inventory is Inventory

almost aligned, there is a marginal decline witnessed in inventory
days during FY22 (116 Days vs 131 Days in FY22) . The Median 14,000 140
Inventory days of peers stands at 68 Days (Highest 403 & lowest 21 12,000 120
days) Considering the size and scale operation, inventory days
seems to be normal. The primary cause of the inventory increase in 10,000 100
2021 was the slight delay in the arrival of company equipment. To 8,000 80
mitigate the risk of running out of stock, the company proactively
increased its inventory well in advance. This included prebuilding in 6,000 60
December to ensure product availability. Additionally, the company 4,000 40
took advantage of lower resin prices in November and December to
stock up, which also served as a safeguard against potential price 2,000 20
increases. This approach contributed to cost savings in 2021. As per 0 0
our research , there is no major challenges seems in inventory FY2019 FY2020 FY2021 FY2022
levels.
Sales Inventory Inventory Days
Source: Company Report Analysis
12
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Commentary
Trade Receivable Exhibit 11:
The company sales has grown faster than trade receivables, t is 60.00% Sales vs Receivable Growth 50.00%
evident that, in most years, receivables (debtors) have grown
40.00%
at a slower pace compared to sales. This indicates that,
40.00%
generally, sales have been increasing at a faster rate than the 30.00%

growth in receivables, suggesting that the company has been 20.00%

20.00%
efficient in managing its receivables relative to its sales growth. 10.00%
However, it's important to note that there were a few years
0.00%
with negative debtor growth, where receivables decreased, 0.00%
FY2019 FY2020 FY2021 FY2022
indicating company efficient in collection of payments. -10.00%

-20.00% -20.00%
Sales Growth Recievable Growth
Looking at the overall picture, the company's sales have
consistently grown at a faster rate than its trade receivables,
with a 5-year Compound Annual Growth Rate (CAGR) of 10.6% 400 Receivable vs O/s Days 15days
and 11.6%. This reaffirms the company's adept management
of receivables in relation to its sales expansion. The median 300
receivables days of peers lies at 16 days . 10days
200
Based our research on quality of receivable we noted that 5days

299
221
242
majority of due receivables were collected before 6 months it 100
173
indicates healthy sign .
0 0days
Source: Company Report Analysis FY2019 FY2020 FY2021 FY2022
Recievable Recievable days

CFO/EBITDA Exhibit 11:

In the case of Varun Beverages Ltd, the CFO/EBITDA ratio has CFO/ EBITDA vs CFO/EBITDA Growth
been gradually decreasing over the years, indicating a declining
1.20 40%
trend in the efficiency of converting earnings before interest,
taxes, depreciation, and amortization into cash flow from 1.00 30%
operations. The declining CFO/EBITDA ratio may suggest 0.80 20%
changes in the company's financial performance and 0.60 10%
operational efficiency over this period. The median
0.40 0%
CFO/EBITDA ratio for Varun Beverages is 0.73 ,In comparison,
the peer group's median CFO/EBITDA ratio is slightly lower at 0.20 -10%
0.69 it indicates company has slightly higher in efficiency in 0.00 -20%
converting its EBITDA into cash flow from operation when FY2018 FY2019 FY2020 FY2021 FY2022
compared to peers
CFO/EBITDA CFO/EBITDA Growth
Source: Company Report Analysis

Cash Interest Coverage Exhibit 12:

Cash Interest Coverage

The Cash Interest Coverage ratio measures a company's ability 14.00 100%
to meet its interest obligations with its operating cash flow. In 12.00 80%
FY2013, the ratio was 2.71, indicating that the company 10.00 60%
generated 2.71 times the cash needed to cover its interest 40%
8.00
expenses. The ratio steadily increased over the subsequent 20%
years, reaching 12.1 in FY2022, signalling a robust 6.00
0%
improvement in the company's ability to cover interest costs. 4.00 -20%
This positive trend suggests enhanced financial health and 2.00 -40%
stability, reflecting the company's capacity to manage its debt 0.00 -60%
obligations effectively, making it an encouraging indicator for
FY2014

FY2015

FY2016

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022

stakeholders and investors alike

Source: Company Report Analysis Cash Interest Coverage Interest CoverageGrowth

13
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Unlocking Financial Potential
Exhibit 13: CSD Sales Volume Trend (In Billions) Exhibit 14: NCB Sales Volume Trend (Mn/Unit/Case)

CSD Sales Volume vs Growth

250 90% NCB Volume vs Growth
80% 30 150%
200 70%
25
60% 100%
150 20
50%
40% 15 50%
100
30% 10
0%
50 20% 5
10% 0 -50%
0 0%

2QCY21

3QCY21

4QCY21

1QCY22

2QCY22

3QCY22

4QCY22

1QCY23

2QCY23
2QCY21

3QCY21

4QCY21

1QCY22

2QCY22

3QCY22

4QCY22

1QCY23

2QCY23

Series1 Series2
CSD Volumes Growth YoY

Exhibit 15: Trends in Blended Realization (Unit/Case) Exhibit 16: Trends In EBITDA/Case (Unit/Case)

EBITDA/Case vs Growth
Blended Realization Vs Growth 60 30%
185 12% 25%
50
180
10% 20%
175 40
170 8% 15%
165 30 10%
6%
160
155 4% 5%
20
150 0%
2%
145 10
-5%
140 0%
0 -10%
2QCY21

3QCY21

4QCY21

1QCY22

2QCY22

3QCY22

4QCY22

1QCY23

2QCY23

2QCY21

3QCY21

4QCY21

1QCY22

2QCY22

3QCY22

4QCY22

1QCY23

2QCY23

Blended Realization(Unit/Case) Growth YoY EBITDA/case (Unit-Case) Growth YoY

Exhibit 17: Consolidated Adj. PAT (In Billions) Exhibit 18: Total Volume Growth Trend (In Billions)

Adj. PAT Vs Growth

Total Volume vs Growth
12000 400%
350 120%
10000 350%
300 100%
300%
8000 250
250% 80%
200
6000 200% 60%
150
4000 150% 40%
100
100%
2000 50 20%
50%
0 0%
0 0%

Adj.Pat (INRm) Growth YoY

Total Volume (mn-units case GrowthYoY
14
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Exhibit 19 : Dupont Analysis : Return on Equity & Return on Assets (1/2)

Financial Summary

Revenue(In Crs) Net Profit(In Crs) Average Total Assets(In Crs)

1,497
13,173
10,599
9,013
8,411
8,823 7,187
7,130 694
6,450
469
329

2019 2020 2021 2022 2019 2020 2021 2022 2019 2020 2021 2022

Return on Equity(In %) Return on Asset(In %) Finance Leverage

33.14 14.13% 2.7x

%

17.61 18.26 2.5x

% % 7.70%
6.53% 2.4x 2.3x
9.75% 3.91%

2019 2020 2021 2022 2019 2020 2021 2022 2019 2020 2021 2022

Return on Equity (ROE)

Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22
Net Profit 42.38 210.15 292.84 468.98 329 694.05 1497.43
Average of Shareholder Equity 958.9 1,707.2 1,883.8 2,663.4 3,373.2 3,802.0 4,519.0
Return on Equity 4.42% 12.31% 15.54% 17.61% 9.75% 18.26% 33.14%

ROE- Duo point Equation

Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22
Net Profit 42.4 210.2 292.8 469.0 329.0 694.1 1,497.4
Revenue 3,861.2 4,003.5 5,105.3 7,129.6 6,450.1 8,823.2 13,173.1
Net Profit Margin (A) 1.10% 5.25% 5.74% 6.58% 5.10% 7.87% 11.37%

Revenue 3,861.2 4,003.5 5,105.3 7,129.6 6,450.1 8,823.2 13,173.1

Average Total Asset 4,627.8 5,050.0 5,636.8 7,186.8 8,411.5 9,013.4 10,598.9
Asset Turnover Ratio (B) 0.8x 0.8x 0.9x 1.0x 0.8x 1.0x 1.2x

Average Total Asset 4,627.8 5,050.0 5,636.8 7,186.8 8,411.5 9,013.4 10,598.9
Average of Shareholder Equity 958.9 1,707.2 1,883.8 2,663.4 3,373.2 3,802.0 4,519.0
Equity Multiplier(C) 4.8x 3.0x 3.0x 2.7x 2.5x 2.4x 2.3x

Return on Equity (A*B*C) 4.42% 12.31% 15.54% 17.61% 9.75% 18.26% 33.14%
15
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Dupont Analysis : Return on Equity & Return on Assets (2/2)

Return on Assets
Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22
Net Profit 42.4 210.2 292.8 469.0 329.0 694.1 1,497.4
Average Total Asset 4,627.8 5,050.0 5,636.8 7,186.8 8,411.5 9,013.4 10,598.9
Return on Assets 0.92% 4.16% 5.20% 6.53% 3.91% 7.70% 14.13%

ROA- Duopont Equation

Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22
Net Profit 42.4 210.2 292.8 469.0 329.0 694.1 1,497.4
Revenue 3,861.2 4,003.5 5,105.3 7,129.6 6,450.1 8,823.2 13,173.1
Net Profit Margin (A) 1.10% 5.25% 5.74% 6.58% 5.10% 7.87% 11.37%

Revenue 3,861.2 4,003.5 5,105.3 7,129.6 6,450.1 8,823.2 13,173.1

Average Total Asset 4,627.8 5,050.0 5,636.8 7,186.8 8,411.5 9,013.4 10,598.9
Asset Turnover Ratio (B) 0.8x 0.8x 0.9x 1.0x 0.8x 1.0x 1.2x

Return on Asset (A*B) 0.92% 4.16% 5.20% 6.53% 3.91% 7.70% 14.13%
Source: Screener
Dupont Summary

• ROE of Varun Beverages .Ltd has increased from 4.42% during FY2016 to 33.14% and made a high of 33.14% in FY2022
• ROE has been increased in past 7 years from 7.37%to 33.14%. While the company's Asset efficiency increased from
0.8x to 1.2x, the reason for increase in ROE is the Profit Margins of the company which increased from 1.10% to
11.37% and due to increase in financial leverage of the company
• Although increasing profit margins are a positive indicator, the simultaneous increase in financial leverage is primarily
due to the company's significant investments in both brownfield and greenfield projects. This higher borrowing level
was necessitated by the substantial capital expenditures.

Exhibit 20: Return On Invested Capital (ROIC) Profiling of Varun Beverages .Ltd

Net Income vs Capital Employed

12,000

10,000

8,000

6,000

4,000

2,000

0
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22
-2,000

Net Income Capital Employed

16
Source: Screener
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Valuation: Market Approach (1/1)

Exhibit 21 : Comparable Company Valuation (Peer Group Comparison)

Market Data Financial Valuation

Enterprise
Equity Net
Value
Company Share Price Shares O/s Value Net Debt Revenue EBITDA Income EV/Revenue V/EBITDA P/EBITDA
Varun Beverages 945.7 129.91 1,22,856 3,441 1,26,297 14,895 3,315 1,921 8.5X 38.1X 64.0X
Hatsun Agro 1,147.1 22.27 25,545 1,751 27,296 7,383 761 194 3.7X 35.9X 131.7X
Bikaji Foods 485.0 25.00 12,124 42 12,166 12,167 236 155 1.0X 51.5X 78.4X
Zydus Wellness 1,567.5 6.36 9,969 259 10,228 10,233 306 284 1.0X 33.5X 35.1X
Mrbectors 1,042.7 5.88 6,131 52 6,184 6,185 202 112 1.0X 30.7X 54.6X

High 8.48X 51.50X 131.67X

75th Percentile 3.70X 38.10X 78.44X
Average 3.04X 37.92X 72.77X
Median 1.00X 35.86X 63.95X
25th Percentile 1.00X 33.47X 54.65X
Low 1.00X 30.66X 35.14X

Varun Beverage Comparable

Valuation EV/Revenue EV/EBITDA P/E

Implied Enterprise Value 14,894 1,18,885 1,26,297

Net Debt 3,441 3,441 3,441
Implied Market Value 11,453 1,15,445 1,22,856
Shares Outstandings 129.91 129.91 129.91

Implied Value per Share 88.2 888.7 945.7

Source: Screener

Exhibit 22:Football Field Analysis Valuation Summary

Football Field Anyalsis Valuation Summary

1,200.0

999(High)
1,000.0 CMP

800.0

600.0

400.0 472 (Low)

200.0

0.0 88.2
31.1 36.03 43.4
Comps DCF bear DCF Base DCF Bull 52W H/L

Source: Screener 17
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

PEER COMPARISION
Exhibit 23: Peers Financial Performance
Peer Stock Performance (1Y) Indexed

Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23

VBL Hatsun Bikaji Zydus Wellnes Bector Foods KRBL Parag Milk
Source: Yahoo Finance

Exhibit 24: Peers Financial Performance

8 Name CMP Rs. Mkt Cap PEG P/E Debt Int.Covg CFO/EBITDA % CMP / BV ROCE % ROE %

1 Varun Beverages 1043.4 1,35,558.3 1.3 64.5 3,726.4 11.9 0.7 19.9 27% 34%

2 Hatsun Agro 1104.5 24,603.6 8.8 109.6 1,973.5 3.3 0.8 17.1 11% 13%

3 Bikaji Foods 539.4 13,484.6 4.0 75.4 180.0 30.2 0.4 12.4 18% 14%

4 Zydus Wellness 1547.0 9,848.6 1.7 32.4 352.0 14.0 0.7 1.9 6% 6%

5 KRBL 347.5 8,219.4 1.2 12.5 250.0 69.8 0.9 1.9 21% 16%

6 Mrs Bectors 1327.4 7,807.3 3.6 61.21 150.89 17.15 0.69 12.8 20.9% 17%

7 L T Foods 202.60 7035.4 0.56 13.6 979.70 8.84 0.87 2.3 17% 16%
Source: Screener

18
Academic Research Report – Not a Recommendation

Varun Beverages Ltd

Analyst Coverage Universe

Exhibit 20: Peers Financial Performance

# Date Research House Rating Price at Reco Target

1 07-Nov-23 Axis Direct Buy 991.2 1050
2 06-Nov-23 Motilal Oswal Buy 945.65 1090
3 07-Aug-23 Bonanza Buy 824.1 929
4 04-Aug-23 Axis Direct Buy 825.3 920
5 03-Aug-23 Keynote Capitals Ltd Buy 822.6 962
6 03-Aug-23 ICICI Securities Limited Hold 822.6 825
7 04-May-23 Bonanza Buy 721.3 1662
8 03-May-23 ICICI Securities Limited Hold 1430.2 1400
9 03-May-23 Axis Direct Buy 1430.2 1600
10 03-May-23 ICICI Direct Hold 1430.2 1470
11 02-May-23 Motilal Oswal Buy 1415.1 1690
12 02-May-23 Keynote Capitals Ltd Buy 1415.1 1626
13 16-Mar-23 ICICI Securities Limited Hold 1306.15 1290
14 09-Mar-23 Motilal Oswal Buy 1345.75 1620
15 24-Feb-23 Axis Direct Buy 1291.55 1500
16 08-Feb-23 Bonanza Buy 1304.1 1520
17 07-Feb-23 Keynote Capitals Ltd Buy 1304.1 1461
18 07-Feb-23 ICICI Direct Hold 1304.1 1340
19 07-Feb-23 Axis Direct Buy 1304.1 1450
20 07-Feb-23 ICICI Securities Limited Hold 1221.85 1225

Disclaimer : This is an academic project and isn't meant for commercial usage

This information/document does not constitute an offer to sell or solicitation for the purchase or sale of any financial instrument or as
an official confirmation of any transaction. The information combined herein is obtained from publicly available data or other sources
believed to be reliable and the Author has not independently verified the accuracy and completeness od the said data and hence it
should not be relied upon as such

The author is not SEBI registered research analyst. This document is prepared as part of academic project. Investments in the securities
markets are subject to market risks, read all the related documents carefully before investing. The securities quoted are for illustration
only and are not recommendatory. It is requested you that please consult with a SEBI registered analyst before making any investment
decision based on this report and the author of this report shall not be responsible for any gain or losses arising from investment in the
company-based report

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