Ladies and gentlemen, good day and welcome to the Varun Beverages Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star then zero on your touch-tone 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 Q2 CY 2026 earnings conference call. We have with us Mr. Ravi Jaipuria, Chairman of the company, Mr. Varun Jaipuria, Executive Vice Chairman and Whole- Time Director, and Mr. Raj Gandhi, President and Whole- Time Director of the company. We will initiate the call with opening remarks from the management, following which we'll have the forum open for a question and answer session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier.
I would now request Mr. Ravi Jaipuria to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on our earning conference call. I hope you have had a chance to review our results presentation for the second quarter and a half yearly ended June 30th, 2026. We are pleased to report a strong performance during this quarter. Across our markets, consolidated sales volume grew by 19.8%, and together with improved realizations translated into 20.4% increase in net revenue from operations. EBITDA increased by 17.2% to INR 23,430.4 million in quarter two 2026. In India, we saw healthy volume growth in 20s since the onset of the season, that is from March onwards, except for the month of April, which was about flat, resulting in overall volume growth for the quarter of 14.4%. Our expanded manufacturing footprint, extensive distribution network, and continued investments in chilling infrastructure continue to drive growth.
We also extended our exclusive bottling and trademark license agreement with PepsiCo in India until April 2049. This removed the earlier restrictions requiring VBL to operate solely as the SPV for PepsiCo business, strengthening our long-term partnership and creating greater operational flexibility to pursue opportunities that can deliver scale and synergies. We also entered a strategic alliance with Asahi Group Holdings to introduce the iconic CALPIS brand in India, marking our entry into the value-added fermented dairy beverage category. The international business maintained strong momentum. Twizza in South Africa helped overcoming capacity constraints while strengthening our manufacturing footprint and route to market capabilities in South Africa. We also entered into an agreement to acquire the business of Devyani Food Industries (Kenya) Limited, which will provide us with the ready GTM in Kenya for expansion into carbonated soft drinks and energy drinks.
In accordance with our dividend policy, the Board of Directors has approved an interim dividend of 25% of face value, that is INR 0.50 per share, resulting in total cash outflow of approximately INR 1,691 million. Looking ahead, we remain confident in the long-term growth potential across our markets, supported by favorable demography, rising disposable incomes, and increasing consumption of packaged beverages. With adequate capacities, growing and diversified portfolio, strong partnerships, and an extensive distribution network, we are all well-positioned to deliver sustained and profitable growth and creating long-term value for all our stakeholders.
I would now like to invite Mr. Gandhi to share the key highlights of our operational and financial performance. Thank you.
Thank you, Mr. Chairman. Good afternoon and a warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the second quarter and half year ended 30th June 2026. Revenue from operations net of excise and GST stood at INR 84,512 million in Q2 of 2026, up 20.4% year-on-year. For H1 2026, revenue increased by 19.4% to INR 150,254 million. Growth during the quarter was primarily supported by a 19.8% increase in consolidated sales volume to the level of 466.7 million cases. As mentioned by Chairman, in India, we saw healthy volume growth in 2026 since the onset of the season, with the exception, of course, of April. International markets also delivered a healthy growth, with volumes increasing by 38.4%, including the contribution of 11.8 million cases from Twizza in South Africa.
Net realization per case, beverages at the consolidated level improved by 1.2%, supported by better realizations in international territories. Gross margin improved by 44 basis points year-on-year to 50%, supported by a higher mix of international business. In India, early stocking of key raw materials and savings in sugar consumption, driven by a higher mix of low-sugar, no-sugar products helped maintain gross margins despite the inflationary raw material environment affected by West Asian crisis. EBITDA stood at INR 23,430 million, registering growth of 17.2% year-on-year, with the EBITDA margin at 27.7% in Q2 of 2026. EBITDA margin declined by 76 basis points year-on-year, primarily due to consolidation of Twizza business, which currently operates at lower margins.
In India, the EBITDA margins improved by 38 basis points, driven by operational efficiencies arising from healthy volume growth, partially offset by higher other expenses, primarily transportation and distribution costs. PAT grew by 15.1% to the level of INR 15,253 million, supported by strong volume growth across India and international territories. Depreciation increased by 33.6% due to the commissioning of new plants in India last year, which were not part of the base quarter, and the acquisition of Twizza in South Africa. Finance costs increased by 55.8%, primarily on account of Twizza acquisition. For H1 2026, EBITDA increased by 18.7% to the level of INR 38,719 million, while PAT grew by 16.9% to the level of INR 24,040 million. Low-sugar, no-sugar products contributed approximately 73% of the consolidated volume during the period. VBL India remained net debt-free, with surplus cash of INR 14,941 million.
At the consolidated level, net debt stood at INR 3,713 million as of June 30, 2026. This was primarily on account of acquisition of Twizza in South Africa. Company's long-term rating for its bank loan facilities has been reaffirmed by CRISIL at AAA/Stable. During H1 2026, net capitalized CapEx amounted to INR 9,500 million. This included INR 2,000 million towards brownfield expansion in India, including value-added dairy beverages line at Supa, and INR 1,000 million towards a snack manufacturing plant in Zimbabwe, and INR 4,000 million towards market infrastructure including DC coolers, glass bottles, pallets and vehicles, et cetera. The balance was attributable to foreign exchange fluctuations. As of June 30, 2026, capital work in progress stood at the level of INR 4,900 million, primarily relating to expansion in South Africa and a CSD line in Kenya.
In addition, inorganic CapEx of INR 11,314 million was incurred towards the acquisition of Twizza Limited in South Africa. Looking ahead, we remain focused on sustaining our growth trajectory by leveraging our expanded capacities, diversified portfolio, and extensive distribution network. In India, favorable demand trends, increasing beverage penetration, and continued investments in market infrastructure provide a strong foundation for future growth. While the ongoing expansion of our international operations, they broaden our opportunity base across markets. We believe our strong execution capabilities will enable us to deliver consistent performance going forward.
On that note, I have come to an end of 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 questions 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Abneesh Roy, from Nuvama. Please go ahead.
Thank you. My first question is on the demand side in India. If you could tell us on INR 10 price point, is there any further scale-up for your business and outlook on that? Second is, when I see the quarter number, clearly April was challenging for the category. If I see Campa Cola's numbers, they claim to have achieved 50% of FY 2026 sales in same quarter. If you could tell us if the rain impact was more in your geographies, because that could be the reason. That's my first question. Thank you.
Let me answer that. Hello?
Yeah. Go ahead, Varun.
Yeah. Let me answer that. We have not scaled up INR 10 significantly. If you see our growth, which is March onwards, we are growing a healthy 20%+ . Even post-June, we're looking at a 20%+ growth, at least minimum. The INR 10 is a non-profitable category for us, and as long as we're delivering 20%+ growth in most of our markets, we are pretty happy with those growths. Long-term sustainability is not there. Yes, certain markets, we are obviously pushing INR 10, but it's not a very big mix for us as yet in our portfolio. That's the first thing. Sorry, what was your second question?
That Campa is growing in?
Campa is growing. I think, yeah, the positioning what we've always taken is that Campa at that price point will grow because there's a certain population which is not able to access or have access to the price points, in terms of consumption. Campa is growing, the INR 10 is growing. Maybe they're eating our local brands as well at the same time, but in our markets at least, we are seeing that we are growing at the same time as well with our price points. I'm sure a lot of new people are getting recruited in the category as well at INR 10, hence they could be getting a lot of volume from there. They could be eating a lot of B brands as well, which is significant in a lot of our markets, as an industry base.
We are seeing good growth in terms of where we are, apart from April, where the El Niño effect was there heavily.
I think Campa is expanding their territory, I think it's very difficult to analyze the growth is coming from the same territory or for expanding territory.
Sure. Thanks. One follow-up here, essentially. If I see, because of Campa, the entire industry is offering more grammage at the same SKU. Even for your SKU at INR 20, there is more grammage.
Yeah. That's right.
If I marry the volume growth of, say, 14% or 13%, and this kind of a grammage growth, could you comment on how much is the pack difference versus earlier? Because that will give us one metric of the consumption, because if you add grammage, your volume growth will be benefiting because of that. If you could comment on pack growth.
Yeah. That, I think, we keep on changing our pack sizes, so we always look at and announce our details are based on 8 oz , and which is what we base it on. All our territories are all somewhere we downsize, somewhere we upsize. These will continue in the whole business. Overall, we are growing in pack size as well as overall 8 oz .
Abneesh, as Chairman mentioned, everything is tracked in 8 oz basis. If my realization has not come down per 8 oz case, my EBITDA or the gross margin has not come down. That's immaterial. Basically, the idea is to give the benefit to the ultimate consumer instead of giving to the trade or otherwise, and utilize the newcomers giving the product at cheaper price. That's why we are continuing from the onset of this, with the exception of April, growing with the 20%+ from the beginning. That's the biggest indicator.
Thank you. My second and last question is on The Economic Times article which came four days back. I wanted more clarity on that article and focus of the group and company on alcobev in India. That article says that the group has hired from Diageo, a very senior person to head the group's beverage footprint. I wanted to understand, is Varun also going to participate in this? Because clearly you have expanded your agreement with Pepsi to go beyond soft drinks. This article also says on bidding for Bira. If you could address this alcobev entry in India, what are the long-term plans for the company specifically?
Well, at the moment, we are still looking at what are the categories we would expand. We are hiring some people to look at new ventures, new possibilities, but it's too early. We have just got the clearance with Pepsi, we are not looking at Bira.
Prathmesh is for group or for company?
It's for the group. He will be helping us in lot of other things. It's not alcohol only.
Sure. Thank you. That's all from my side.
Yeah.
Thank you. The next question is from Aditya Soman from CLSA. Please go ahead.
Yeah. Hi. Good afternoon. Two questions. Firstly, can you give us a sense of growth by category, especially some of the new categories that you've launched, like Nimbooz or milk-based beverages, how the growth has sort of evolved, and is there any meaningful difference between those categories and carbonated beverages? Second, we've seen that during the GST changes end of last year, we saw a meaningful change in some of the beverage categories where the GST has come down, but in carbonated beverages, not so much. Is that leading to any sort of differences in category-level growth? Those are my two questions.
[crosstalk] Yeah, I can answer that. I think our focus has been very strong to kind of build a differentiated portfolio as well over the last three to four years. It did not just start now. If you look at our other categories, which is Tropicana, it could be value-added dairy. We have expanded the range, added a lot of new products at different price points. We have got Nimbooz, which is a hydration category. If you look at hydration and dairy particularly, and juice, these have been high growth and focused categories for us. In terms of growth, but I cannot give you the specifics here, but at least we are seeing 3x, 4x growth compared to our overall business, and we are heavily focusing on driving these categories. Hello?
Yeah, no, that is very clear. Maybe if you can just answer on the GST effect, any sort of meaningful positive effect on the other businesses?
I can also give you some numbers for your comfort, that VAD is growing at over 40% for us, and Nimbooz is growing at more than 30% for us.
Very clear. Thank you.
Yeah.
Thank you.
Yeah. What was the other question? Any other question?
No, just in terms of the GST impact, right.
GST impact was very minimal with certain products, which was like dairy and Nimbooz.
Water and soda.
Water and soda. We are seeing growth because of the geopolitical issues, the pricing, some of these categories would have had to be taken up. Because of this, it has helped, and we are now sustaining the prices and continuing to be able to sell at the old prices, which is helping us grow the business.
Very clear. Since you've talked about sort of the geopolitical issues, just to follow up here. In terms of raw materials, last quarter you had indicated that obviously you had sufficient supplies of input materials to run through sort of 2Q. From here, how do you see that play out?
We keep buying, we don't dry ourselves just because. We have now made sure that we have enough material for quarter three, but obviously there is an impact of cost, which has got mixed with the We average our cost price, and we have taken part of it in the second quarter also, and the balance would come in the third quarter. Our pricing would remain the same, and overall effect would not be large because we have averaged out the pricing.
Understood. That's very clear. Some of the effect has already come in 2Q.
Yes. A reasonable portion, because we've averaged it and we have got enough stock for quarter three. We acquired more goods at a higher price. We averaged out the price in the second quarter.
Aditya, basically, the COGS and the inventory valuation is not on FIFO, it's on average costing. The purchases which were earlier opening stock, which was sufficient to cover for the quarter, although consumption might have happened of that, but the pricing to the P&L goes based upon the average. In the last quarter also, we purchased and kept sufficiently the inventory for ongoing quarter also. As Varun mentioned, we are continuing to grow, at the same percentage from the onset of the season, we are growing with the exception of March, with healthy twenties. This inventory is going to be really useful and handy, and at average price, which may be actually lower than the today's price. It's average price because part of this is booked in the P&L of last quarter, is going to be helpful. There won't be any surprises on that account.
No, very clear. Thank you.
Thank you. The next question is from Anand Shah, from Axis Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. Just two questions. Firstly, any sense you can share on the industry growth, how it has been this time? I mean, general broader view as to how industry would have grown in volumes. Second, also on international part, you've seen quite a strong growth. Even if I take out Twizza, it's more than 25% growth YoY. Are all geographies firing there or South Africa, Congo are growing much faster, and it seems even Morocco, Zimbabwe may have grown well there. Just wanted some color on international and broader industry growth this quarter.
Internationally, all our countries except Zambia is slightly slower, but all other countries are, and which is a very small market for us. All our countries are growing at a reasonably fast pace, and there is a huge opportunity in Africa. Last year, we had some issue with Zimbabwe, which has also started firing now because of sugar tax and all that. Now all the countries in the African region are firing for us. Our international market, rather. We see good potential going forward, and we are expanding in the African continent.
Got it, sir. Anything on the industry growth in India? I mean, this quarter, any sense they would be in line with the industry growth or?
Well, can't give you the exact, but if we are growing at 15%, if you see at the first half Campa, you are saying it growing at 50% or doubling. I'm sure Coke is also growing. There's no reason, that means the industry has to be growing more than 20%.
Okay.
I don't know the real numbers.
In fact, here you also have to see, Anand, the cannibalization of B brands in local in that category.
Those exact numbers are not there. I think all the three main players are all growing, so there's enough growth which is happening in the industry.
Yeah.
Got it. Lastly [crosstalk].
Anand, I think we are looking for.
Sorry, go ahead.
Pardon, I couldn't. Yeah.
Anand, go ahead, please.
Yeah. Just last question was on the food distribution and manufacturing in Africa. How is that scaling up? You had shared some numbers in INR 0.26. What are the targets?
That is also growing well for us. That is growing well for us. What's the numbers, Gandhi? INR 146 against INR 99. [crosstalk].
INR 146 against INR 99 .
About 50%. That is growing at about 50%.
Okay. Thank you a lot, sir. Thank you.
Thank you.
Thank you. The next question is from Siddhesh Deshmukh from IIFL Capital. Please go ahead.
Hi, sir. This is Percy Panthaki here. Sir, just wanted to understand, in the past, we have said that we should grow the India business at kind of a low double-digit kind of a number. At that time, basically, the competitive dynamic was different. Campa was not there or had just entered. Coca-Cola also was probably losing share at that point of time. Even if we assume that the industry grows at, let's say, a low double-digit number, would that still mean that we as a company can achieve that kind of a growth?
I don't see any reason. If you see in the first half, we have grown at close to 15%, 14.4%. Now, as we said, the peak season after March, we are growing at 20%+ , and July seems to be continuing at the same trend. I don't see any reason why we should not be growing in double digits.
Sir, while our growth has been very good.
I think, Percy. Go ahead, Percy.
I'm saying while our growth has been very good, one must also be cognizant that it has come on a very favorable base. If I look at the two-year CAGR, the quarter for India has seen a 3% kind of a growth. Even if I look at a three-year CAGR, our growth is in single digit this quarter. The question is just in reference to context of current performance.
We can't look at quarters. We can't look at a quarter. This quarter can always be the rains, can be little. July is looking very good now. Maybe because the other part was little heavier rains. It keeps changing little bit up and down. Very difficult to base it on quarter. You have to look at a yearly basis.
I'll add one thing, Percy. What's happening with the whole El Niño effect as well. If I tell you 2024 and before, May used to contribute almost 15% of our business. If you see 2025, 2026 this year as well, because of El Niño effect, May is not contributing 15%. The seasonality on the overall business is also changing. If you see April, where it heavily rained, even May for us this year, we saw some effect of the El Niño in May as well, even though May we grew handsomely. Each month when the weather impact is not there, the kind of growth we are seeing are fabulous. High double-digit growth is what we are seeing.
Essentially, it is the weather impact which is holding it back. The month we are not seeing weather impact, if you compare the last three-year CAGR growth or from 2024, we are growing heavy double digits on those months.
Understood. Second question on margins, again, for the India business, also to an extent for the consolidated business as well. If we have to maintain EBITDA margins largely on a year-over-year basis going ahead, up to what level of crude we are confident that we can maintain the margins?
We can comfortably maintain our margins even in a year which is the worst year in the geopolitical reasons and all the costings have gone up internationally here, transportation cost has gone up. We have still been able to maintain our margins. When the war stops or all these issues come down, our margins cannot get worse. It'll only get better. We are not worried about, and we have never said our margins will be higher than X percentage, which we are maintaining and more than comfortably doing that.
Sure, sir. Understood. That's all from me. Thanks. All the best.
Thank you.
Thank you. The next question is from Jay Doshi from Kotak. Please go ahead.
Yeah. Hi. Thanks for the opportunity. I've got two questions. First one is, could you comment a little bit on what's happening at the industry level in energy drinks? How has the industry body responded to and have you seen any impact at all on?
No, I think there's a temporary effect because I think there was a confusion created without giving a clear direction, and now we've got the clear direction. In June and July, it affected a little bit, but going forward, there is going to be no effect. They just want the word energy to be taken away, which does not change anything for us. It was a very small.
Yeah. I think what has happened in this is due to the confusion of the category in India, since energy was not a category which was registered with FSSAI, hence they had come after to say that, "Listen, you cannot use energy and the positioning of energy, what you guys are doing." Like the chairman mentioned, we've removed energy and the industry has done it. What we have seen is that even though there's been a temporary dip in the mix of energy, we are seeing all of that volume has shifted to CSD. Now, as the new labels are out in the market for us, we are seeing the uptake back into energy in terms of back into Sting as a brand for us, and the volumes are coming back.
You don't foresee any further regulatory challenges or anything, right? This is sorted for now.
They have come out with a clear guideline that we should have the word energy removed within next 90 days.
Understood. Our second question is, we picked up that Campa has reduced INR 10 SKU size to 150 ml from 200 ml, which kind of suggests that they are also making an attempt to upgrade the consumer to INR 20 price point because they continue to offer 500 ml at INR 20. Now, you have responded with upsizing over the past six, nine months. Are you able to sort of see any change in your market share trends at that INR 20 price point after increasing the volumes from 250 to 400 ml? The gap has significantly narrowed versus Campa now at INR 20.
No, that's why it's looking positive, and that's why we are confident of the growth to continue, and we are showing growth, and we accept that one month, as we are saying, if we can grow healthily 20% and above, there's nothing better we can look at.
See, Jay, the way we're looking at the business right now, I know there's been a lot of chatter around INR 10 category and Campa's launching it. What should you do? There are already B brands that are selling at INR 10, which have been selling for the last 10 years. What our focus out here is to build a profitable business and deliver the right growth. The earlier question when somebody asked me that how are you looking at INR 10, my answer is that wherever, and at India level, if month-on-month my growths are exceeding 20% without a INR 10 category, then I'm not interested to get into it because that's not a category we would like to fight.
Today, that's what we are seeing on month-on-month. Apart from April, like we mentioned, because this is the El Niño effect, we did not get a growth in April, but other months we are growing 20%+. The 400 ml pack, what we have launched, we are obviously seeing larger recruitment of consumers coming in, and that strategy for us and majority of our markets is working for us, driving growth.
Sure. Thank you.
Also what is happening, if some people want to look at the pricing, then two people are sharing it. We are happy both ways.
Understood. One last question. I don't know if you can answer that or not, but in PepsiCo's press release, they have indicated that their market share in India was stable or better for the three months starting 1st March through 31st May. How do they look at, because you generally mention that it's very difficult to get accurate data of industry. What data do they look at when they make a comment?
I think you should ask that question to them. I'll leave it for them to answer this.
Understood. Got it. Thank you.
We don't go into market share.
Got it. Thank you, sir.
Yeah. Thank you.
Thank you. The next question is from Naman from Sanghvi Family Office. Please go ahead.
Yeah. I hope you can hear me.
Yeah, Naman. We can hear you. Go ahead, please.
Sir, going forward, how do we see the strategy for us? Would it be singularly focused on ramping up our current businesses, which includes the low sugar, no sugar? You see that right now the proportion of low sugar, no sugar is very high, and it may retreat to somewhat lower, and then again, some sugar-related impact would come in in our overall gross margin. How are we seeing that, sir?
No. Largely, our portfolio is mid-sugar, low sugar now, or low sugar or zero sugar as you call it, right? There will be no sugar impact going forward because we've converted the entire portfolio already.
Okay. Sir, second question was that in April, the impact was majorly driven by El Niño. It was not because of some supply chain issues or raw material availability?
No.
No, the only minor issue was cans, there was nothing else, which is a very small portion of our business. Cans were the only affected for the quarter.
Okay. Sir, just if you could highlight what will be the percentage of total percentage of total that is attributable to Can in the mix?
No, Can is 1% or 2% of our business, nothing meaningful.
Okay. Thank you. That's it. All the best.
Thank you. The next question is from the line of Nitin from Green Capital. Please go ahead.
Hi, good afternoon. This is Nitin Shakdher from the Green Capital Single Family Office. First of all, congratulations to the management on the CALPIS manufacture distribution agreement. More on that as an investor, is there any thought process to expand the Asahi Group Holdings lines now, whether it comes to Wonda or Wilkinson or whether it comes to Solo? Because what we are seeing across the world is certain niche value-based line products are increasing volumes. For example, Schweppes Manao Soda is doing very well. Similarly, I'm assuming CALPIS is a strategic direction towards trying to identify high volume players. Just wanted to get a sense of future direction with your distribution a s it relates to the Asahi.
I'll tell you, Nitin. What our idea is, dairy as a category, we're very bullish on. We've been doing dairy as a category for many years now in the country, and we're seeing huge growth coming. Asahi is one of the world's leading companies with the best system processes and product quality. CALPIS is a great addition to our entire portfolio and to strengthen further our portfolio and our system processes and our manufacturing capability, taking and learning from the Japanese as well. Our idea is to build a solid portfolio, our starting point is CALPIS right now. We want to stabilize CALPIS. We want to structure CALPIS right in the market. So far, our conversation is only here let's see what the future holds.
I would assume then ready-to-drink teas, coffees would also be on the radar at some point in time.
Well, we're not sure as yet. We've not decided, it's pretty much CALPIS for now. As I said, going forward, based on figuring out what categories we want to do.
Okay, great. All the best and best of luck. Thank you.
Thank you.
Thank you. Thank you very much. We'll take that as the last question. I would now like to hand the conference over to the management team for closing comments.
Thank you very much. Thanks for the participation. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our investor relations team. Thank you once again for your interest and support for taking the time to join us on this call. Look forward to interacting with you soon. Thank you.
Thank you very much. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.