Ladies and gentlemen, good day, and welcome to Varun Beverages Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q3 and nine months CY 2021 earnings conference call. We have with us Mr. Ravi Jaipuria, Chairman of the company, Mr. Varun Jaipuria, Wholetime Director, Mr. Raj Gandhi, Group CFO and Wholetime Director, Mr. Kapil Agarwal, CEO and Wholetime Director, and Mr. Rajesh Chawla, CFO of the company. We will initiate the call with opening remarks from the management, following which we'll have the forum open for a question and answer session. Before we begin, I would like to state that some statements made in today's call may be forward-looking in nature, and a detailed statement in this regard is available in the results presentation shared with you earlier. I will now request Mr. Ravi Jaipuria to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on our earnings conference call. Trust you and your families are keeping safe and healthy. I hope all of you had the opportunity to go through our results presentation. This provides details of the operational and financial performance for the third quarter and nine months ended 30th September 2021. We are delighted to share that we have reported a robust performance during the quarter with a top line growth of 33% and a PAT growth of 60% year-on-year. The results were supported by strong volume growth of 28%, driven by uptick in demand across markets. Even on a two-year ago basis, the organic volumes were higher by 11%. Wide vaccination coverage in the country, along with the resumption in day-to-day activities, supported demand momentum in the domestic markets.
On the profitability front, we were able to maintain a healthy EBITDA margin of 21% during the quarter, backed by higher operational leverage despite an increase in raw material prices. While the industry practice is that any input cost increases is passed on, we have also worked on our cost efficiencies. For example, we are undertaking measures to lightweight PET forms. This will not only assist us in reducing costs in the near term, but the benefit would be structural in nature. We are continuously monitoring the input prices to sustain our margins that will enable us to further strengthen our position in the beverage industry. In addition, we continue to reduce our debt as well as rates of interest, which helps us in improving our net profit margins during the quarter.
Following easing of lockdown restrictions and improving macro trends, we witnessed enhanced transaction in the domestic demand environment and exceeded pre-pandemic levels. Out-of-home consumption registered an uptick driven by increase in travel and resumption in offices. On the whole, we remain optimistic on the demand environment, given improving macro, onset of festive season and a growing sense of normalcy across domestic and international markets. I would now invite Mr. Gandhi to provide highlights of the operational and financial performance. Thank you.
Thank you, Mr. Chairman. Good evening and warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the third quarter and nine months ended 30 September 2021. Revenue from operations adjusted for excise GST grew by 33% year-on-year in Q3 2021 to a level of INR 23,981.6 million. Consolidated net sales volume registered a solid growth of 28.4% to 153.3 million as compared to 119 million cases in Q3 2020, primarily on account of strong uptick in consumption and demand. CSD constituted 90%, juice 5%, packaged drinking water 25% of total sales volume in Q3 calendar year 2021.
Realization per case improved by 3.6% to INR 156.4 per case in Q3 calendar year 2021, driven by higher realization in international territories, despite increase in share of water in all the overall mix. While gross margins declined by 278 basis points year-over-year in Q3 calendar year 2021, primarily because of increase in PET prices, the company was able to maintain a healthy EBITDA margin of 20.6% in Q3 2021 as higher volumes assisted in the company achieve better operating leverages. This resulted in increase in EBITDA by 29.9% to INR 4,946.6 million in Q3, calendar year 2021, from the level of INR 3,807.9 million in Q3 of the calendar year 2020.
Depreciation increased by 2.9% to INR 1,384.9 million, as compared to INR 1,345.9 million in Q3 of calendar year 2020. Finance costs declined by 26.4% to the level of INR 426.9 million, from the level of INR 579.9 million in Q3 of 2020. The company continues to focus on reducing its debt and lowering its average cost of borrowing. Backed by strong volume growth, higher operating leverage and reduction in finance costs that increased by 59.7% to the level of INR 2,579 million in Q3 2021, from the level of INR 1,614.7 million in Q3 2020.
During the quarter, an amount of about 200 million from the total foreign currency provisions was reversed to other income due to corresponding reduction in the total foreign currency liability in Zimbabwe. On the whole, the company's financial position remains strong. We have a healthy month-on-month trend in sales and consumption, and the outlook remains positive for all our products categories over the medium to long term. Overall, the focus remains on generating strong free cash flows over the ensuing quarters and coming years. On that note, I come to an end 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.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi. Good evening. Can you hear me?
Yes. Yes, Vivek.
Hi. Good evening. A few questions. First, on the gross margins outlook, you know, this quarter, obviously gross margins, I think contracted to almost 6 or a 7 quarter low. What is your outlook on gross margins in the context of, let's say, oil prices still moving up? And thoughts on or, you know, views on taking a product price hike to manage this kind of input price inflation. That's first one.
I think what is happening, Vivek, as we said, first of all, because of oil prices, the PET prices are going up. One immediate effect we have done with consultation with PepsiCo is we have light-weighted our bottles, which is going to save us quite a reasonable amount of money, which will help in mitigating the cost increase. Secondly, as we have said that we normally pass on the increase to the consumer, which when need be, we will pass it on, but I don't think it is going to affect our margins.
Mr. Jaipuria, that comment is at a gross margin level you are saying, or at an EBITDA margin. You have managed your EBITDA margin well in this quarter. Gross margins you think that, you know, this quarter seasonally adjusted reflects the bottom or there is still more pain given that, you know, Brent still is moving up?
That's on an EBITDA margin level. I think as long as we can maintain our EBITDA at the level we are, as we have said, we are still one of the highest EBITDA margin companies in the beverage industry. If we can maintain this and grow our top line, there's nothing better than that.
Yes, Vivek. This explanation is for gross margin. Otherwise, as far as EBITDA is concerned, you know, you might have noticed, on, you know, by going through our accounts, EBITDA margin, you know, we have already improved and performed much better as it is. That has, you know, as if there is no change in the gross margin. EBITDA in any case is on its journey to growth.
Got it. Second question on the, you know, can you elaborate on the rationale on, you know, putting this Bihar unit, what is the capacity utilization levels and, you know, in the, let's say, adjacent plant and what was the thought process?
If you know, when we bought over the Bihar territory, we bought the territory without the plant. This is one of the large states where we don't have a plant. We have been supplying into Bihar from our neighboring territories and incurring a huge amount of freight. Our market share when we took over from the previous bottlers was so low. As the market share was going up, we got hit with two years of COVID. To grow our market share to our level, which we are all across the country, we needed to have a plant which was in the state. Otherwise bringing goods from different parts of the other neighboring states, it was not being practical. We were always running out of products, and we were not able to service the market properly.
By putting up this plant, we expect very good growth there, and it is a 110 million population state which we couldn't afford to leave alone.
Moreover, you know, this is under-penetrated state, where per cap is hardly 8, 9 as against 24 in the country. Putting up a plant will help growing the market, then our share. For your information, these four, you know, under-penetrated states of MP, Orissa, Bihar, Jharkhand, and Chhattisgarh, in these nine months of the current calendar, growth had been to the tune of about 60+%. Precisely 63%.
I see. Okay. Interesting. Mr. Gandhi, what is the CapEx and the timeline that you are looking at?
Uh.
For Bihar.
For Bihar, CapEx is around INR 270 crores.
285.
INR 285 crores. Yeah. We want to make it up and running next.
For next year's season, we are targeting to get this plant ready for our next season.
Next season means 6 months from now?
That's right. Less than six months.
Okay. All these INR 285 crores get spent in next 6 months. That's what you mean?
Part of it is already spent, and the balance will be spent before, in the next six months.
Got it. Two, you know, small bookkeeping questions. First is this GST impact of INR 40 crore, where is it accounted in the P&L?
You see GST, you know, the revenue always is captured net of GST. The GST
No, I'm talking about this INR 40 crore adjustment, Mr. Raj Gandhi.
The same practice is adopted for this also. There is no change, so it's adjusted out of our top line.
Okay, got it. The other bit is what is the debt as of 30th September? If you can help me with the debt at Varun Beverages level as well as at RJ Corp level.
Our debt as on date is approximately INR 2,400 crore, which is a figure INR 600 crore lower than the corresponding figure of last year. That much debt has been reduced. At the group level, outside Varun, including all the operating, non-operating, holdco, subsidiaries, India, overseas, global, should be in the vicinity of about INR 200 crore, which again is represented by, you know, investment in other listed securities, you know, of which you are aware, RJ Corp has investment in, you know, few companies.
Fundamentally, apart from Varun Beverages, the debt level is very low and less than INR 100 crores in all our entities.
Sorry. Just a follow-up to that, at the peak of the pandemic, if I recall correctly, you had called out about INR 1,200 crore-INR 1,300 crore debt at RJ Corp level, if I recall correctly. You are saying now what is left is about INR 200 crores.
INR 200 crores.
Yes.
About INR 1,000 crore has been paid off.
Okay. Interesting. Okay. Thank you and wishing you all the best.
Thank you.
Thank you. A request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Chirag Shah from CLSA. Please go ahead.
Thank you. Thank you for taking my question. Unfortunately, we've not had a normal season since we acquired South and West territories, but now that things are normalizing, can you just give us a context of the growth differential that we had between South and West, and how do we our level of preparedness to gain market share in these territories?
You see the actual working, what we had started doing for the south and west, we never really got the opportunity to fructify it. Still, our organic growth in south and west is reasonably high, and we are growing at about 37%. I think once we get a normal year, our growth will be much higher and we expect to rationalize and hopefully get to the level of share which we should be.
Just on that, I mean, can you just give us a context of, you know, from where you started to now, what has been the change in terms of, the distribution infrastructure that you have put on ground?
What has happened is actually when we took over the territory, the distribution system was quite weak. As we started adding more vehicles, more routes, more people, unfortunately for us, we could not even face one real season. We took over the territories in May 2019. Both 2020 and 2021, both the years, our peak season, which is April, May, June, got spoiled because of pandemic. Still, as we had added our go-to-market and added our vehicles and our distributors, we are still growing at about 36%-37%, which is a huge growth. We feel if we would have had one season under our belt, we could have shown more confidence to the distributors, and we could have progressed much faster than this.
Sure. That's very helpful. My second question is just continuing on the gross margins front. Now last quarter, we mentioned that we have covered a lot of the PET for the full season, right? So far as Q3 is concerned, did we have the full impact of higher PET prices flowing through the P&L, or was there any low-cost inventory cover that was still left from Q2? And correct me if I'm wrong, but we normally have higher stock of PET inventory going towards the end of the year. What is the impact from that on the raw material price volatility going forward?
Well, there is an increase in the PET price, which we all know, but, I mean, this quarter, the higher PET price is already in, taken into account. Unless until, of course, in the next 60 days or 90 days further it goes up, which of course has not been taken into account. But we always take in a large quantity of stocks during the off-seasons, which is when the best pricing of raw material is available to us. And that's why our inventory levels go high during our ending December, which is our calendar year.
Yeah. Mr. Jaipuria, since we have you, can you just also give us some feedback on the dairy portfolio launch that you have done in North India?
No, dairy is doing extremely well. The only, again, the same problem we had as we launched the products. We could not really spread it properly because the peak season we lost it and,
Sure. Business growth.
The growth is still at about 40% of what you know the growth has been. The dairy beverage growth overall has been about 57%. Our Tropicana growth has been close to 40%, whereas dairy beverage has grown at 57%. We expect if 2022 is normal, we should have a very healthy year for the dairy business. We have launched 2 new flavors, which will further add to the growth of the dairy business.
I know it is early days, but are there any learnings that we have, and do we have to go back to the drawing board in terms of the dairy portfolio that you have launched?
The only learning, unfortunately, was the pandemic, which, you know, affected the overall distribution. Whenever you are launching new products and, you know, you can't distribute properly, it affects it. Since the pandemic, you know, when it started, market has started opening, it is showing huge traction, and 57% growth is a huge growth. We expect it to get much better than this going forward.
Right. Mr. Gandhi, I mean, we have a large exposure to the Sri Lankan market as well. I mean, given the fact that the country is facing a lot of forex issues, is there any risk that we have to our business?
Well, Sri Lanka is very small within our total portfolio. You know, luckily what we did is our learning two years back was we have you know made these companies absolutely debt-free. Whatever is already invested you know and capitalized properly, some is taken at the foreign currency translation comes in. That effect is not going to be large because our investment in that country is one of the lowest.
Okay, got it. One last question, if I may slip in. Can you guys just give us a sense of where we see the promotion activities today, and is there a big bounce back that we are seeing on the promotion activity side?
I didn't get the question properly. Can you speak little slowly? You're not coming through properly.
The promotion activity, Mr. Jaipuria, on
Obviously, the promotion activities have been reduced slightly, and discounting will be reduced slightly as in, as the conditions prevail, so that we can be competitive also, but at the same time not over competitive. We have to be careful on the margins, and we are being quite careful. It's, you know, the cost escalation is to everybody. Everybody is being conscious now.
Got it. I'll just get back into the queue. Thank you very much for this, and all the best for the dairy business launch as well. Thank you.
Thank you, Chirag Shah.
Thank you. A request to all the participants. Please restrict to two questions per participant. The next question is from the line of Nihal Jham, from Edelweiss. Please go ahead.
Yes. Thank you so much, and congratulations to the management.
Thank you.
Sir, two questions from my side. On the volume growth side, recently obviously we used to break the business in terms of out of home and now in home has transferred specifically during COVID. Given the strong organic volume growth that we've seen, is it right to say that out of home is basically back to the pre-COVID level and the in-home has sustained, and that is what has led to this 11% CAGR? If that's the right way to break it up, if you could just give some more color around it.
No, no, absolutely. You know, we used to have major portion in out-of-home, on-the-go, and home consumption used to be much less before the pandemic. As the home consumption has gone up, that has stayed. Whereas out-of-home, on-the-go market has again come back. That's why we are seeing such a robust growth that both in-home has grown and is sustaining and out-of-home, on-the-go is again coming back to normalcy.
That's helpful, Mr. Jaipuria. A related question to that is that for this 11% number, is it that the exit number in September was much higher or this was more or less similar through the quarter?
What is the 11%? I didn't get.
The organic volume, two-year organic volume growth that we achieved overall.
Oh, that is compared to 2019, what we are talking, when there was no pandemic.
This is CAGR over 2019 because many of you are interested in knowing it. There was no pandemic. This growth instead of-
What we are actually showing is even after we went through the pandemic in the peak season, we have still grown over a non-pandemic year.
Absolutely. What I was trying to understand is that was it that by September this number was much higher, or was it more or less similar for all the three months in this quarter?
In fact all the three months helped us in, like, growing the,
No, what he's asking, in this quarter was it higher?
Actually.
Am I right, Pritesh?
Yeah, just asking that, was it that, say, the number must have been, say, 78% for the months of July, August, and specifically September would have seen a growth of 14% to 15%. We see the numbers
That's what I'd say.
July, August, September, all three were pretty good for us, and they've all grown at a reasonable pace, what we are showing, at still about 11%, give or take 0.5%, 1% up or down.
Understood. That makes it clear. The other question, Jaipruria ji, was that, again, looking at the volume growth category-wise, are there any specific brands or categories which have done much better? We see that a lot of the growth has come in the CSD segment. Is it that, as we've discussed about Sting specifically in the past, is it the one that is adding a lot of incremental growth over, say, two year back or anything around that that can add new color to this?
Yes. Our energy drink, Sting, has really outperformed the market and our own portfolio. We are growing close to 700%, which is 672% we are growing in Sting. That has really outperformed what we expect. This is when the on-the-go was not quite rapid in the peak season. Because this is all small bottles, this is not large bottles which is not had at home. We expect this growth to continue because we will have the peak season hopefully next year. The other product which grew well for us was Tropicana. We grew at about 40%. Gatorade was the other product and, which grew at about 53% for us. Dairy beverages which grew at 57%.
All our new portfolios have grown tremendously well, including our core portfolio, which has grown healthily.
That's helpful. Just one last question from my side, that considering the new plant CapEx that we've announced, how to look at CapEx for the coming two years?
Well, it partly will depend on the growth also. If the growth is so well accelerated, then there will be some more CapEx, but which is a very positive sign. Otherwise the guidance which we have given is close to the depreciation value, is what we are looking at CapEx. Unless and until, of course, we go to a new country or a new product, you know. Like dairy expands hugely or Tropicana expands hugely, then we have limited capabilities and we'll have to expand on a greenfield plant.
The guidance says that in the long run, if you are to see the figure is going to be, for the longer period, going to be equal to the depreciation figure.
Sure. This CapEx also fall in that, say, the depreciation figure.
In the longer run, yes.
Sure.
In the year by year it may not be, but in the longer average, yes.
Thank you. Thank you so much and wish you all the best. I'll come back and meet you again. Thank you.
Thank you.
Thank you.
Thank you. The next question is from the line of Dhruv from Monarch AIF. Please go ahead.
Good afternoon, sir, and congratulations on a good performance. Sir, if you can tell us what would be the capacity at the Bihar greenfield plant?
We can firstly tell you the lines which we'll be putting up. A CSD PET line, 720 BPM.
Our CSD line will be with a capacity of 720 bottles a minute. Our juice line would be 300 bottles a minute. Our water line will be 300 bottles a minute. Our glass line will be 600 bottles a minute. These are the four lines we are putting there, which will be able to service the complete Bihar territory and maybe the outskirts of West Bengal.
Okay, that's clear. Any projections on at peak capacity and in a normalized year, what this revenue contribution could be from this plant?
See, this is going to expand like anything because the penetration in that state is very low. Normally our plants in the full capacity basis, CapEx and the revenue ratio is about 2.5 times when they get matured, which of course it will take few years, but ultimately it will 185 into 2.5.
285.
285 into 2.5.
285 into 2.5x.
We've been in a place like Bihar. It might be much faster than the normal few years it takes because it is very low penetration, and we believe once we have the plant there, our growth will be much faster than we have anticipated.
Okay. That's correct, sir. Sir, also I wanted to know about this Kathua facility that you are putting up for the plastic preforms and closures. What would be your CapEx over there and the timelines for commissioning this plant? Also I assume this will be close to your Pathankot plant, so there would be some savings in your logistics cost as well.
Absolutely. This would be approximately about INR 190 crores.
Okay.
We expect this to be operational by next year. The biggest advantage we'll have is all the new acquisitions we had done, we did not have a backward integration which was acquired from PepsiCo. This will take care of the backward integration for our the new plants which we have acquired also with.
Sir, commissioning by next year, any particular month, first half, second half, if you could say?
For the season. It will be before the season. We are looking at by March.
Okay. Again, less than six months' time.
Yeah.
Okay. Sir, in the first half, in the first six months, I remember, in the last call, you had said that, debt was reduced by INR 625 crore. In these three months, any debt repayment that you have done?
It was INR 2,400, and it stays at INR 2,400. In this period, some of the CapEx, so capital work in progress has happened, dividend payment has happened, and some tax payments has happened. Debt, that way, is not reduced.
Because part of this expansion, what you're seeing in Bihar and Kathua.
Right.
This has been already paid out from this quarter without increasing our debt.
Correct. Got it. Sir, just lastly, on the average cost of debt, what would it be currently versus, say, December ending in 2020?
Today maybe around 5.5% average cost. Last year, maybe 6.5%.
Okay, 6.5. Almost 100 basis points cut there.
That's right.
Okay. Just one
The debt which you are borrowing is to the tune of something 4.2%, right?
Okay, this is the borrowing cost currently.
This margin at which we are borrowing for a-
Our average borrowing cost is about 5%-5.5%.
Right.
Marginal cost, if temporarily we are borrowing, it's at 4.2%.
Okay. Sir, this 40 point-
Sorry to interrupt you. May I request you to come back in the question queue for a follow-up question? Thank you. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead.
Yes, hi. Thanks for the opportunity and congratulations on a great set of numbers. Sir, we have seen a 10% increase in international realizations so far in nine months. Firstly, what has led to improvement in realizations in these markets despite higher share of water?
See, Morocco has started performing. Morocco was one of the territories where we were struggling. From last year, Morocco has started performing well, and this year it has performed extremely well for us. We've had huge growth there. Partly the growth is because of water. It, that is one part. Then exchange rate has
Okay. In fact, per case realization, if you're asking, if your question is specifically for that, it's because of the currency transition. The currency in Zambia is improved and realization per case in Morocco, with the reduction in the discounts, has gone up.
Sir, can we assume that these levels are sustainable, as in, what is the viewpoint that you guys are having as of now?
Of course, you know.
We hope to even make it better because our lines in Morocco, the expansion lines only came into production in end of June. They should be much better actually next year.
Sure. That's encouraging. Secondly, we book about INR 90 crore-INR 100 crore of other operating revenues in the top line as rebates from state government. What is the run rate that we should assume for this going ahead?
Whatever rebate is getting captured, that's a long term. Still maybe 6, 7, 8 years left. There are few selected couple of plants where these are entitled to this or there is no such thing as assumption.
Okay. Lastly, sir, our business shall generate a lot of cash going ahead. After debt reduction over the next 3-4 years, can you suggest as in how you plan to utilize this cash generated in the business post these 3-4 years?
We are hoping so for some additional territories. We are working with PepsiCo, and as and when we get some new territories signed up with PepsiCo, we will inform you. We are going slow because most in India, we have already got everything, so the territories which are left for us is mostly Africa, and we want our exposure to be very limited. As Indian business keeps expanding, we will keep on adding maybe one country by one country in Africa.
Sure. Sir, I have one last question. Can I go ahead?
Sure.
Carbonates category grew faster than water and juice category. If you look at this 11% CAGR number, carbonates have grown at 12%, and water and juice have, on a two-year basis, grown at 7% to 9%. Generally, in terms of trends, if we see focus on hygiene and health, should lead to higher growth in juice and water. Can you help us understand how do you see growth trends in these two segments going ahead?
Well, water, juice and dairy, they will all grow at substantial. It is basically this year is not the right year to judge anything. As the go-to-market had reduced in the peak season, so obviously as people were not going out, they were not drinking mineral water. Our population don't drink mineral water sitting at home. That is one of the reasons. As I said, the energy drink or the smaller packs were even the smaller dairy packs, what we call our flavored milks and other dairy products. They were all slow, partly although fast enough, but slower than what we had anticipated. I think you will see huge growth in the non-carbonated products also next year with the go-to-market increasing.
Thank you, sir. That's it from me.
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.
Yeah, sir. This time in your opening comments, you mentioned that the two-year volume organic growth was 11%. Now, it's been about a couple of years before which we did the acquisition, and two years were, you know, fairly difficult. Considering that this year also we missed the season, is it fair to assume that incrementally considering the white spaces that you have in South, plus, you know, the normal growth, we should register a fairly significant double-digit organic volume growth on our total portfolio in India? My first question. My second question is, until, you know, a couple of quarters back, you were mentioning that we did not require CapEx, and a lot of the CapEx would be maintenance.
Just wanted to understand this Bihar CapEx, is it that we never had a plant or were not servicing that region and we are putting it or, any other reason for coming up with a INR 300 crore CapEx? Lastly, on the operating-
Let me answer this because I'll forget your other question.
Okay. Okay. Yeah.
First, I'll answer the Bihar part of what you asked me. See, Bihar. We never had a plant, and Bihar is a large territory, although very low penetration. We have plants in other states, and we were servicing it out of UP. Unfortunately, you can never connect to servicing properly when you are bringing product from other states, especially for a large state like Bihar. Our market share was so low in Bihar that we feel the growth opportunity in Bihar is going to be so large. Unless and until we put our own plant there within the state, it will be impossible to garner there. Being a 100 million-plus population state, we don't want to let it be lying.
That is one of the key reasons why we are putting up a large greenfield plant, which we would have otherwise maybe not put.
Okay. On the volume growth outlook, do we see a case where?
Well, if you look at the volume growth post-pandemic, if you look at the last quarter also, it's clearly showing what the growth are looking like, and we hope we can maintain this. I can't say that it will be as robust as this, but we feel the market is ready and there is enough demand in the market, and I hope we should do extremely well next year.
Okay. The question on operating leverage, this EBITDA per case, we were always of the opinion that, you know, considering the fact that we have spare capacities everywhere, this INR 30, 31, 32 EBITDA per case should move higher. Is there any change in the thought process there, or how, what are we doing to improve the profitability of the business?
See, we have already always said that 21% EBITDA margin is one of the highest. We can always keep trying to do better than that. To really say that or assume that we will do much higher than 21% is going to be very tough because every year there is some new challenge or some, like this year, the PET prices are higher. We are taking corrections as and when whatever is happening to at least making sure to maintain our 21% margin. This year we have taken the initiative of reducing the weight. Now, this weight reduction is going to be permanent. It's not going to be for the year when the petroleum prices are higher. So as the petroleum prices rationalize, this will definitely add to our margins.
We never want to say that we will do better than 21% because as it is, 21% is a huge and very high margin. If we can keep increasing our top line with the growth what we are seeing, I think that 21% margin will be very, very reasonable.
Okay. Sir, last, I wanted to check a bookkeeping question. I was searching the presentation, I couldn't get what is the nine-month India volume growth and what is the nine-month international volume growth?
India, last nine months is 36.4% volume growth and international 29.7%.
Okay. Thank you very much. Wish you a happy Diwali and a happy New Year, Mr. Jaipuria and Mr. Gandhi. Thank you.
Thank you.
Thank you. Thank you.
Happy Diwali.
Happy Diwali. Thank you. The next question is from the line of Bharat Shah from ASK Investment Managers. Please go ahead.
Yeah, Ravi Jaipuria ji, Namaskar. Raj Gandhi, Namaskar.
Raj Gandhi sir kehte hain.
[Foreign language]. Thank you, sir. Just one issue. I mean, Varun Beverages has been a phenomenal execution machinery. We have put out different products. We have diversified into categories. We have bought territories, and now we are putting up plants at locations which will help us, which were not penetrated well. All of these things have been at the back of the execution machinery that this business demands and that Varun has provided all along. Now, if you look at in 2019 calendar year, the peak season turnover was INR 2,500 crore. That is April to June. 2020, clearly because of the challenge, it slumped to INR 1,400. 2021, again, unfortunately, the same challenge, but we still did better at about INR 2,000 crore.
A very hypothetical question I want to ask. Given our preparedness, given our strength, of the manufacturing, distribution, product portfolio, diversity of the category, territory acquisition and everything, if supposing in the current calendar year, these wave two were not to occur, that INR 2,500 crore in 2019, would it have looked like INR 3,500-INR 4,000 crore? What it would have? I'm really hypothetically just trying to understand your mind.
Well, technically, yes. I mean, if we can grow at 25% to 30% during the quarter after the pandemic in July-September, and what we have done in 2019, there is no reason why we should not have grown in the quarter when the pandemic happened. Theoretically, yes, what you're saying can happen and should happen. I don't want to say it will happen because that's-
Inside that, it should not be taken as a forward-looking statement.
Yeah.
What I can draw, you know, if I extrapolate the Q3 of this year, which is 11% CAGR, and the same if on 2,200 if we apply 11% CAGR next year, that meaning about 35 to 36%. Automatically we reach to the level which, you know, is expected. You rightly pointed out that, you know, our execution is one of the best, our margins are one of the best. I think we can definitely reach that and meet your expectations. Ravi ji, let me take that hypothetical conjecture a little further. To repeat, 2,500 in 2019, 1,400 in 2020, 2,000 in 2021.
If you look at the other periods, once we leave out the challenge of calendar 2020, but given the way we are doing it in 2021, if 2022 season is normal, would it be fair to say that a 20% compounded growth from 2019 till 2020 should take us actually closer to INR 4,000-odd crore in the April to June season of 2022. Is that a possibility or it's a wild guess on my part?
It's a possibility, but a wild possibility. I'm sure if we have a decent season and we don't have any pandemic, there is no reason why we can't, and especially after increasing and expanding our go-to-market in south and west and in east, and with our plants coming up in Bihar, which was one territory which was being under service and a decent-sized territory, there's no reason why we should not be able to expand in a very healthy way. The exact numbers, obviously, I can't tell you. If we can grow in the other months, there's no reason why we should not grow in the peak season. We have enough capacity.
No. I'm just taking the same kind of a growth rate that we are now clocking when we still don't have a full normalcy, but our growth rates are reflecting very healthy robustness. If I'm saying even if we do supposing from 2019, a 12% to 13% kind of a compounded growth in the 3-year period, that should take us to INR 3,500 crore. If we are talking of something like 16 odd % compounding in these 3 years, it should take us to INR 4,000 crore. I'm saying about 12% to 13% to 16% compounding as if pandemic were not to intervene in 2022. In your opinion, it's not a wild conjecture. It is a possibility.
Absolutely.
Okay. Thank you, and I wish you a great Diwali, Ravi ji.
[Non-English content] you can take me to a nice place for dinner.
Of course, I will definitely take you. Next time when I'm in Delhi, we'll certainly do that. Wish you great Diwali. Hi, wish you great Diwali, Raj sir and Jaipuria sir. Thank you.
Thank you very much. I request all the participants, please restrict to two questions per participant. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah, sir, thanks for the opportunity. Just one question. We are having a pretty strong revenue growth, and it's likely to continue in coming quarters too. How do we see the investment in distribution expansion? Because CapEx we are doing, how do we see the distribution? Because the retail touch points has remained at around 2 million for almost couple of years. I agree, COVID may not have allowed the opportunity to expand the distribution, but what is the plan on that? Is the company working with any distribution expansion plan? Lastly, is the 2 million count in a way sufficient to drive the growth in coming quarters?
See, we are expanding our distribution, but unfortunately, because of COVID, a large number of stores shut down. Going forward, definitely, if next year is a clear year, there will be expansion of number of outlets, because without expansion it can't work. We are targeting to increase between 10% to 15% number of outlets. Which would be close to about 300,000 outlets.
Okay. These would be in any particular region you are looking at or it would be-
It will be in the regions where we are very weak, obviously, where we have less penetration. As I said to you, the new, newly acquired territories and the markets where we have been weak, which is east, west and south, we will have to expand our outlet base much faster. We have already started expanding, but obviously couldn't do justice because of the two bad years in the peak season. That is why you are actually seeing the growth coming even after the peak season is over.
Right, sir. Lastly, what will be our e-commerce plus modern trade contribution and how it would have changed YOY?
Just one question. It's 5.6% for the organized restaurants and the modern trade together.
5.6% for. Sorry, sir.
For the modern trade as well as the organized restaurants, both together.
See, a lot of the restaurants shut down this year. You know, there was a lot of reduction in the number of outlets in restaurants. I mean, almost half of them have still not even applied for licenses. If you read in the newspapers, a lot of the individual restaurants, people could not even apply for re-licensing. There has been a big jolt in this category. It's basically the fast food which are really growing fast, which are, you know, large and big brands. The small restaurants, a lot of them, have shut down.
Okay. Sir, e-com number, if you can share. E-commerce.
It's part of the modern trade.
Okay. Sorry, sir.
Volumes of this traditional trade is where more of the major volumes are coming. e-com and modern trade is still very low.
Okay. Okay, sir. Understood. Okay. Thank you, sir.
Thank you. Next question is from the line of Vicky Punjabi from JM Financial Services. Please go ahead.
Hi, sir. Thanks for taking my question. Firstly, just trying to understand the capacity utilization here. You know, when the IPO happened, there was a thought process that the capacities were underutilized. We've seen CapEx over the years, and you know, there is always a tussle between you know, optimizing freight cost and you know, expanding capacities or you know, increasing utilization. You know, if we were to understand you know, these limitations, what's the kind of optimal capacity utilization that you know, the company can target and you know, versus that, where are we currently?
If you look at it, the expansion you are seeing is either in the back end, which we did not have when we acquired Fresiko plants, because they didn't have any back-end capacities. The other second expansion you are seeing is basically in a territory where we bought without the plant. Bihar was the only territory we bought, we did not buy with the plant, so we did not pay for it. Our CapEx was very low in Bihar to acquire the territory. To make sure that going forward, that is why you are seeing a greenfield. Both the things are not related to our existing capacities, but to the additional territory which we had bought or the back end which we want to make sure that.
Because if we don't have that next year, a lot of people are going to have trouble getting the back end support. As it is, logistics are becoming a nightmare. We want to foolproof ourselves and make sure that we are not lacking in anything.
Sure. Yes, my question is a little on the side of, you know, what do you think would be the optimal capacity utilization and where are you currently? You know, once possibly that optimal capacity utilization is reached, will that, CapEx guidance of, you know, being equal to depreciation actually go higher?
Oh, it could. You know, if we can achieve that, our profitability and bottom line will go up simultaneously. Because as the turnover will go up, as the beta will go up, and if we are growing faster than a certain pace, then we'll have to keep building new capacities. It doesn't have to be greenfields, they can be brownfields.
Right.
You know, if the margin and the volume grows faster than what our anticipation is, then of course our CapEx will also go up.
Sure. No, I was just thinking from the perspective of, you know, the cash utilization in the business. I just wanted to understand, you know, where you know reaching an optimal capacity utilization.
See, Vicky, here it is that, as you know, the, a guidance, elevated guidance is given, one is when we are reaching to the new territory or if we buy the territory without plant or, you know, we are the company which have the maximum margin because we 100% backward integrate. Also added to this one more thing you can also see that when we go to the territories like south and west, where the seasonality is lower, so lesser CapEx is needed than where north and east where higher investment is needed, CapEx is needed because of the seasonality. Now there is new angle, which is the juice or the, dairy. The, the special kind of equipments are needed and like 57% in this quarter we have grown and in a pandemic year.
If that opens up and if we continue growth like strong 100%+ for another couple of years, we will have to repeat these plants in you know, south and west also. I mean, it becomes very difficult to project at this moment. However, quarterly basis as and when there is any demand comes with giving the better utilization. You know, we keep on evolving and giving our CapEx plan. So the guidance is that as you know, in last few sentences which is given applies all over. One more thing is that earlier, 100% of the mix used to be glass which came down gradually. Today glass is about 15%. The capacity at the time of IPO, which was mentioned on overall basis, now you have to dissect that for glass which cannot be interchanged with PET.
PET is growing like anything. Glass for last five years has not grown at all. So that capacity cannot. It's not fungible to PET. Same way the capacity for dairy or for Tropicana is not fungible with carbonated juice. So these plus minuses are to be seen. Maybe some CapEx in advance or some maybe later. However, whatever is invested, sooner or later in a vast country gets utilized. You know, we have to be broadly on track, I can only say that. Therefore is the omnibus guidance that, you know, what we perceive today is that the CapEx is going to be around depreciation figure for modeling purposes and things, which if we see for last five, seven, 10 years, the analysis will come true. Yeah.
Sure. Okay, sir. Just one more question I wanted to understand. You know, while south and west territories have been impacted during the peak season, in the non-peak season, I mean, in this quarter, you've done something like a 37% growth. Would you have any idea on how these territories have grown and was there any kind of market share gains here?
Talk about the market share, but as the chairman had initially said that South and West has grown some 36.9 or 37% in current year.
Yeah. The market growth is any clues on that? How has the market been?
We don't have the exact figure.
At the end of the year.
On a quarterly basis, we don't get that figure.
Okay. Sure, sir. Okay, thanks a lot. Thanks a lot for taking my questions.
Thank you.
Thank you very much. I now hand the conference over to management for closing comments.
Thank you. Thank you everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would you like to know more about the company, please feel free to contact our investor relations. Please. Thank you once again for your interest and support and for taking the time to join us on this call. We look forward to interacting with you soon. Thank you very much and wish you happy Diwali.
Thank you very much. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.