This presentation was done by Yash Bhansali & Varun Bisen both students of the School of Market Studies' Mastercourse in Equity Research & Valuation. It is a realtime demonstration of the skills that you will acquire once you finish the course. The Mastercourse in Equity Research & Valuation has enabled both Yash and Varun to prepare and present a financial model on Varun Beverages Ltd with forecasting and calculation of intrinsic value using DCF Valuation methodology absolutely independently. Normally a research analyst takes two years to "officially" be termed as a sector specialist. However, under the able guidance of Vinit Bolinjkar who has 28 years of market experience your process of learning the ropes of equity research, financial modeling, and forecasting goes much faster. In fact, he virtually guarantees that after 4 months of the internship (following the two months of online learning) you will be able t easily forecast 80% of the market and be as good as any analyst on Dalal Street with two years of work experience.

1. VARUN BEVERAGES
Equity Research &
Valuation
WEBINAR LEARNING SERIES

2. Varun Beverages is engaged in
manufacturing, selling, bottling and
distribution of beverages of Pepsi Cos brand.
Second-largest franchisee in the world
(outside the United States) of carbonated soft
drinks and noncarbonated beverages

3. Varun
Beverages
Pepsi,
Sting,
Aquafina,
etc.
Devyani
International
Limited
KFC, Pizza
Hut, Costa
Coffee, etc
Devyani
Food
Industries
Limited
Cream
Bell
Cryoviva
Biotech Pvt
Ltd
Cryoviva
India,
Diagno
Labs, etc
RJ Corp
Retail Ltd
Nike,
Rookie
USA

5. Management Team
● Mr. Ravi Kant Jaipuria is the
promoter and founding Chairman of
Varun beverages Limited.
● Mr. Jaipuria has three decades of
hands-on experience in
conceptualizing, executing,
developing and expanding the Food,
Beverages and Dairy business in
South Asia & Africa.

6. KEY MANAGERIAL PERSONNEL
Sr. Name and Designation
1
Mr. Kapil Agarwal
Whole-time Director
2
Mr. Vikas Bhatia
Chief Financial Officer
3
Mr. Ravi Batra
Chief Risk Officer &
Group Company Secretary
4
Manmohan Rupal Paul
Chief Operating Officer of Sales

7. Company Snapshot
Cover 1.35 Billion
Customers
2 Million Retail outlets
and
38 Manufacturing Units
11000+ people
employed
493 Million Cases Sold
(A unit case equals
5.67 Litres)

8. Stock Performance
Stock Price
CAGR
3 Years: 20.98%
1 Year: 13.19%

9. Acquisition of
Territories in
West and
South India

10. Symbiotic Relationship with PepsiCo

11. VBL pays 14% of sales
to PepsiCo for
concentrates,
advertisements and
royalty
Source:- Brokerage Report

12. Business Operations
Carbonated Soft
Drinks
Packaged Drinking
Water
Fruit pulp/ Juice
based drinks

15. INDUSTRY ANALYSIS
1)Carbonated Soft Drinks
2) Fruit Pulp/ Juice based Drinks
3) Packaged Drinking water

16. India’s Carbonated soft drinks market is forecasted to accelerate with a CAGR
of 6.7% from 2018 – 2023, which is expected to drive the market to a value of
$12bn in 2023.
Source:- Annual Report 2018

17. Juice (NCB) category is expected to grow at an 10.1%
volume CAGR with increased rising health awareness for
healthier variants which will add to the volume.
Juice market in India – 15% CAGR from 2013 to 2018 with a
sales value of INR 18,962.79 Mn in 2018
Source :-Research Report

18. Packaged Drinking Category is
expected to reach INR ~403.06
Bn by the end of 2024.
Based on volume, the market is
likely to reach ~35.53 Bn liters
by 2024, expanding at a CAGR
of ~13.2% from 2018 to 2024.
Overall Industry Growth

19. Industry Players

20. Pepsico’s Market Share
Source :- Research Report

21. Lower Raw Material
Cost
No refund policy
Higher Margins
Varun Beverages VS Hindustan Coca Cola Beverages

22. Business Model
Business Model

23. MOAT
• Franchise rights in all over india except 2 state (Till
April 2039).
• Has global footprint in Nepal, Africa, Sri Lanka,
Zambia, Morocco and Zimbabwe.
• Products across different categories Health drink,
Energy drink, CDS and water.
• Manufacturing plant across India which are closer
to higher demand areas.
• The majority of the Indian population live in hot
and dry regions.

24. Geographical Footprint

25. Growth Driver
VBL plans to annually place 40000 visi-coolers to
drive Penetration and Branding
Visi - Cooler

26. Primary
distributors
contribute ~85% of
the overall
volumes for VBL
Growth Driver

27. Lunarmech Technologies Private Limited
● Company acquired 20% of the issued and paid-up share capital of Lunarmech Technologies Private
Limited, which makes and sells PET bottles caps and crown caps.
● Post-acquisition, VBL's holds 55% of the effective equity share capital of Lunarmech.
Angelica Technologies Private Limited
● Acquired control of Angelica Technologies Private Limited by appointment of majority of Directors
on the Board of Angelica.
● Angelica and Lunarmech (in which Angelica holds 74% equity share capital) became subsidiaries of
the Company.
Mergers and Acquisitions

28. Key Developments 2019
• Acquisition of sub-territories
• Bottling Appointment and Trademark License Agreement for India
• QIP Issue: The Company has raised Rs. 9,000 million through fresh issue of
14,705,882 equity shares of Rs. 10.
• Introduction of ambient temperature value added dairy beverages
• Increased shareholding in Lunarmech Technologies Pvt. Ltd
• Purchase of two production facilities
• Introduction of new corporate tax rates.
Particular Existing Revised
Franchise Rights October 2, 2022 April 30, 2039

29. Conference Call Update
• Sales volume got severely impacted due to the lockdown measures.
• VBL acquired almost all the territory so there is no need for further debt for
expansion.
• Demand will impact due to COVID-19 but in further after unlock 1 demand
has increased.
• Promoter Vivek Gupta sold 11,000 shares on June 12.
• We are still trying to maintain our margins even with lesser volumes.

30. Financial Performance &
other Highlights

31. ● VBL had built up additional stock of inventory in the month of
March, Encouragingly they have been able to sell most of the
inventory.
● Some of the plants became operational by April 20th .
● Plants which are operational now and are in a position to supply
whatever the demand is.
● 30% to 40% of consumption was on-the-go and 10% of sales is
institutional.
● Company has not awailed moratorium for its debt.
Covid-19
Updates

32. Relief In uncertain Times Sugar Price

33. Sales Growth Analysis
Compounded Sales
Growth
5 Years: 20.8%
3 Years: 22.68%

35. ● KEY MARGINS

36. Growth is seen in both
Domestic and
International markets
Country YoY Growth
Sri Lanka 11.9%
Nepal 8.4%
Zambia -38.2%
Zimbabwe 21%
Morocco 40.1%

37. 2019 Volume Break-up

38. Volume Mix
0%
20%
40%
60%
80%
100%
120%
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Water
Juice
CSD
Share of Juice and water segments is
expected to go up due to rising health
concerns.
Volume of the company is
expected to grow at a healthy rate
with increased focus on Juice and
water segments.
0
200
400
600
800
1000
1200
1400
1600
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Water
Juice
CSD

39. Why Summer is important for VBL ?
Q2 Contributes
40% of annual
sales and 55-
60% of Annual
EBIDTA

40. Financial Statements

41. PROFIT & LOSS STATEMENT CY17 CY18 CY19 CY20E CY21E CY22E
TOTAL SALES 4,004 5,105 7,130 5,552 7612 8467
Growth (YoY) 3.7% 27.5% 39.7% -22.1% 37.1% 11.2%
Increase/Decrease in Stock (73) (62) (144)
Raw Material Consumed 1,883 2,307 3,363
Raw Material Cost 1,810 2,244 3,219 2,498 3,425 3,827
Material Cost to Sales 45.2% 44.0% 45.2% 45.00% 45.00% 45.20%
Gross Profit 2,193 2,861 3,910 3,054 4,186 4,640
Gross Margin 54.8% 56.0% 54.8% 55.0% 55.0% 54.80%
Employee Cost 463 583 811 831 852 873
Employee Cost to Sales 11.6% 11.4% 11.4% 15.0% 11.2% 10.3%
Other Expenses 892 1,261 1,637 1,527 1,903 2,032
Other Expenses to Sales 22.3% 24.7% 23.0% 27.5% 25.00% 24.00%
Operating Profit (Excl OI) 838 1,017 1,462 696 1,432 1,735
Margin 20.9% 19.9% 20.5% 12.5% 18.8% 20.5%
Growth (YoY) 5.0% 21.3% 43.8% -52.4% 105.8% 21.2%
Depreciation 347 385 489 512 538 568
Other Depreciation
Depreciation due to Right to Use
Depreciation to Sales 8.66% 7.54% 6.85% 9.22% 7.07% 6.71%
Growth (YoY) 1.5% 11.1% 26.9% 4.7% 5.2% 5.6%
PBIT 492 632 974 184 893 1,166
Margin 12.3% 12.4% 13.7% 3.3% 11.7% 13.8%
Growth (YoY) 3.3% 28.5% 54.1% -81.1% 385.6% 30.6%

42. PROFIT & LOSS STATEMENT CY17 CY18 CY19 CY20 E CY21 E CY22 E
Other Income 13 22 43 30 32 32
Exceptional Income / Expenses 0 0 0 0 0 0
Interest 215 223 324 308 293 278
Interest Coverage Ratio 2.3 2.8 3.0 0.6 3.1 4.2
Interest to Sales 5.36% 4.36% 4.55% 4.60% 3.85% 3.28%
PBT 290 431 692 (94) 633 920
Margin 7.2% 8.4% 9.7% -1.7% 8.3% 10.9%
Growth (YoY) 276.3% 48.7% 60.6% -113.6% -771.9% 45.5%
Provision for Tax 77 134 224 0 205 298
Tax Rate 26.6% 31.1% 32.4% 32.4% 32.4% 32.4%
Profit After Tax 213 297 468 (94) 428 622
Margin 5.3% 5.8% 6.6% -1.7% 5.6% 7.3%
Growth (YoY) 365.9% 39.6% 57.6% -120.1% -554.3% 45.5%
Minority Int/Share of Associates (3) (1) (5)
Consolidated Net Profit 213 297 468 (94) 428 622
Margin 5.3% 5.8% 6.6% -1.7% 5.6% 7.3%
Growth (YoY) 39.6% 57.6% -120.1% -554.3% 45.5%
Equity Dividend Paid 46 46 69 0 43 93
Dividend Payout Ratio 21.5% 15.4% 14.8% 0% 10% 15%
Tax Paid on Dividend 9 5 9 0 0 0
Face Value (In Rs) 10 10 10 10 10 10
Total number of shares outstanding 18.3 18.3 28.9 28.9 28.9 28.9

43. BALANCE SHEET CY17 CY18 CY19 CY20 E CY21 E CY22 E
Gross Block 5,633 6,172 8,745 8,995 9,345 9,795
Less: Accumulated Depreciation 1,654 1,785 2,265 2,829 3,413 4,028
Less: Impairment of Assets 0 0
Net Block 3,981 4,387 6,479 6,165 5,931 5,767
Lease Adjustment A/c 0 0 0
Capital Work in Progress 145 352 64 150 100 90
Intangible assets under development 0 0 0 0 0 0
Pre-operative Expenses pending 0 0 0 0 0 0
Assets in transit 0 0 0 0 0 0
Non Current Investments 8 11 0 0 0 0
Long Term Loans & Advances 169 103 156 190 141 200
Other Non Current Assets 4 4 5 5 5 5
Total Non-Current Assets 4,307 4,857 6,704 6,510 6,177 6,062
Currents Investments 0 0 0 50 50 50
Inventories 439 578 882 890 845 1081
Sundry Debtors 150 128 173 250 296 300
Cash and Bank 94 93 171 189 277 474
Other Current Assets 139 149 234 294 324 354
Short Term Loans and Advances 146 192 213 230 250 270
Amt Due from firm (directors interested) 0 0 0 0 0 0
Miscellaneous Expenses not written off 0 0 0 0 0 0
Total Current Assets 969 1,141 1,672 1,903 2,042 2,529
TOTAL ASSETS 5,276 5,998 8,376 8,413 8,218 8,591

44. BALANCE SHEET CY17 CY18 CY19 CY20E CY21E CY22E
Share Capital 183 183 289 289 289 289
Share Warrants & Outstandings 0 0 0 0 0
Total Reserves 1,587 1,816 3,040 3,508 3,371 3,900
Shareholder's Funds 1,769 1,999 3,328 3,796 3,659 4,188
Minority Interest (1) 8 31 31 31 31
Secured Loans 1,633 1,974 2,355 2,120 1,908 1,717
Unsecured Loans 59 6 0 0 0 0
Deferred Tax Assets / Liabilities 142 159 270 100 130 130
Other Long Term Liabilities 12 7 1 1 1 1
Long Term Trade Payables 0 0 0 0 0 0
Long Term Provisions 73 105 170 150 200 250
Total Non-Current Liabilities 1,919 2,251 2,796 2,371 2,239 2,098
Trade Payables 191 317 478 505 549 564
Other Current Liabilities 1,021 998 1,230 1,200 1230 1230
Short Term Borrowings 353 378 467 480 480 450
Short Term Provisions 24 49 45 30 30 30
Total Current Liabilities 1,589 1,741 2,220 2,215 2,289 2,274
TOTAL LIABILITIES 5,276 5,998 8,376 8,413 8,219 8,592

45. CASH FLOW CY17 CY18 CY19 CY20E CY21E CY22E
Profit Before Tax 290 431 692 (94) 633 920
Adjustments 478 642 1,127 524 911 866
Add: Depreciation 347 385 489 512 538 568
Add: Interest Expenses / Finance Cost 215 223 324 308 293 278
Deferred Tax Assets / Liabilities 20 17 111 (170) 30 0
Other Long Term Liabilities (3) (5) (6) 0 0 0
Long Term Provisions 13 32 65 (20) 50 50
Other Current Liabilities 2 (23) 232 (30) 30 0
Short Term Provisions 1 25 (3) (15) 0 0
Pre-operative Expenses pending 0 0 0 0 0 0
Other Non Current Assets (1) (0) (1) (0) 0 0
Other Current Assets (114) (11) (85) (60) (30) (30)
Amt Due from firm (directors interested) 0 0 0 0 0 0
Miscellaneous Expenses not written off 0 0 0 0 0 0
Change in Working Capital (52) 9 (187) (59) 44 (226)
Trade Payables (84) 126 161 27 44 15
Long Term Trade Payables 0 0 0 0 0 0
Inventories 51 (140) (303) (8) 45 (236)
Sundry Debtors (19) 22 (45) (77) (46) (4)
Cash Flow after Change in Working Capital 717 1,082 1,632 371 1,587 1,561
Tax Paid (77) (134) (224) 0 (205) (298)
Cash Flow from Operations 640 948 1,408 371 1,382 1,263

46. CASH FLOW CY17 CY18 CY19 CY20 E CY21 E CY22 E
Capital Expenditure (516) (809) (733) (250) (400) (450)
Purchase of Fixed Assets (533) (859) (754) 0 0 0
Sale of Fixed Assets 17 50 21 0 0 0
Capital Work in Progress (50) (207) 289 (86) 50 10
Long Term Loans & Advances (18) 66 (53) (34) 50 (60)
Short Term Loans and Advances (5) (45) (21) (17) (20) (20)
(590) (995) (519) (387) (321) (520)
Change in Equity Capital 4 1 900 0 0 0
Proceeds from Issue of Equity Share Capital 4 1 900 0 0 0
Expenses on issue of shares 0 0 (16) 0 0 0
Change in Long Term Borrowing 473 289 375 (236) (212) (191)
Change in Short Term Borrowing (58) 24 89 13 0 0
Dividend (55) (51) (78) 0 0 0
Equity Dividend Paid (46) (46) (69) 0 43 93
Income tax on dividend paid (9) (5) (9) 0 0 0
Add: Interest Expenses / Finance Cost (215) (223) (324) (308) (293) (278)
Cash Flow from Financing 150 40 962 (531) (505) (469)
Net Cash Flow 200 (7) 1,851 (546) 557 275
Opening Balance of Cash 66 94 93 171 189 277
Other Adjustments (170) 6 (1,773) 564 (469) (77)
Closing Balance of Cash 96 93 171 189 277 474

47. RATIOS
CY17 CY18 CY19 CY20 E CY21 E CY22 E
Total Debt to Equity 1.2 1.2 0.8 0.7 0.7 0.5 0.4 0.3 0.3
Net Debt to Equity 1.1 1.1 0.8 0.6 0.6 0.4 0.2 0.0 -0.1
Net Debt to EBITDA 2.3 2.2 1.8 3.4 1.4 0.9 0.4 0.0 -0.3
Return on Equity 12.0% 14.9% 14.1% -2.5% 11.7% 14.9% 18.0% 19.0% 20.2%
Return on Capital Employed 12.9% 14.5% 15.8% 2.9% 14.8% 18.4% 22.1% 23.8% 25.7%
Return on Invested Capital 13.2% 14.8% 16.3% 3.0% 15.6% 20.0% 26.3% 31.0% 36.6%
NOPLAT 361 435 658 94 604 789 1,029 1,213 1,467
FCFF 140 20 227 547 1,186 1,131 1,529 1,667 2,025
FCFE (1,810) (2,244) (2,424) (1,814) (875) (512) 639 1,588 2,828
Enterprise Value 13,843 16,641 23,089 23,709 23,409 22,991 23,606 22,794 21,912
Market Capitalization 11,893 14,377 20,438 21,348 21,348 21,348 22,716 22,716 22,716
P/E 55.9 48.4 43.7 -226.8 49.9 34.3 25.7 20.9 16.8
P/B 6.7 7.2 6.1 5.6 5.8 5.1 4.6 4.0 3.4
EV/EBITDA 16.5 16.4 15.8 34.1 16.4 13.3 11.1 9.4 7.7

48. DCF
Valuation

49. PEER COMPARISON

55. Thank you!
Got any questions?
Varun Bisen
Varunbisen104@gmail.com
https://www.linkedin.com/in/varun-
bisen-b334b7149
Yash Bhansali
Ybhansali17@gmail.com
https://www.linkedin.com/in/
yash-bhansaliii