… bottom line of 19.79% is growing faster than top line growth of 15.03% might suggest e2e is beginning to see scale-advantages work in their favour. (in my prior experience in this business … ) This often appears in items like per-rack-datacenter-leasing-cost, deployment costs and other operating costs increasing linearly even if there is an exponential increase in number of racks deployed. Given the stack is fully built and model perfected, I fully expect this gap to increase in the future as they get more and more of this.

PS: Long term investor in E2E.

Update

Switched out completely from Thyrocare (889 price point, buy avg 535), gave me an IRR of 31%. Added whole proceeds to Manappuram and a bit more as well yesterday and today at around 139-147 price points

Believe it to be a good value buy considering gold price trajectory and trading valuations at 1.1 PB. High probability it might go down towards 0.9 or 0.8 PB but who knows. Going to hold through the storm. Manappuram is now around 13% of PF at avg buy price of 130 or so

management has guided ~2-2.5% on steel trading, and ~4% margin on service centres. So margin will stay in this ballpark. But the play is on high volumes

Somewhat muted results from Varun Beverages, I think. Headline numbers are good but includes the effects of Bevco acquisition. I was not fully satisfied with the results, but the stock has reacted positively even in today’s market. Maybe the markets were expecting worse.

Some highlights from VBL concall (E & OE):

India business

1. India volume growth is 5.7 % and revenue growth a bit below 7 %. All three segments – CSD, Juices and Water have grown equally. I note that this is among the weakest performance for the quarter ever. The management blamed excessive rains in several parts of India for the same and said one should look at 2Q and 3Q in totality as the rain shifts a month here or there sometimes.

2. I also noted that Standalone entity contributed about 63 % of the consolidated revenues, and Africa 37 %. This is among the highest Africa contribution we have seen for the quarter. This will only increase next quarter as Africa season peaks.

3. About 49 % of the consolidated sales volume came from Low sugar / No sugar products in 9M CY2024

4. Gross margins are lower in India business due to an accounting policy change. Water cost is now included in COGS, earlier it was under the line at operating level.

5. Capital WIP is Rs.400 crore as of date, it was Rs.1200 crore in March. So, a lot of assets have been capitalized in H1.

6. Management pointed out that all the new plants are much more efficient than older plants, better backward integrated etc. In all 17 plants are fully backward integrated, plus four more which are coming up. Cost of production is much lower in the newer plants.

7. Sri Lanka subsidiary declared its maiden dividend this year

8. One analyst pointed out that Jira Masala Soda as a category seems to be doing quite well. Management said we are looking at it closely and may come up with a product early next year. it is being studied by Pepsi as Jira has high sodium level.

9. New facilities coming up in India before the start of the season next year – Buxar in Bihar, Meghalaya, Kangra in Himachal and Prayagraj in Uttar Pradesh. Capex for these four is around Rs.2400 crores

BevCo

During the last few months, the back end has been corrected significantly, so reasonable growth Is expected in Africa. September month growth itself was 20 % which was very heartening. The peak season is only now starting from Oct and will run till march. We are ramping up.

Democratic Republic of Congo

1. The management said we were ourselves surprised that the existing capacities are all sold out so soon. It is just one month and production volume is 5 million cases.

2. Current capacity is 35 million cases

3. We are expanding capacities; a second facility will commence operation partly in Jan / Feb next year and partly in July / Aug

4. Overall, it will be more than doubling the capacity, , so it will be 70+ by this time next year

I remember it was pointed out in one of the earlier concalls that Congo is a huge country with 10 crore people, with soft drink consumption 4 times that of India. And it is on the equator with summer all year round. This makes the Congo market comparable to India itself ! (my comment).

Reliance / Campa

Lot of questions on Campa’s entry.

1. It was pointed out by one analyst that Tata Consumer said in their concall that beverages were impacted due to Reliance’s aggressive entry. But VBL management said that is not the reason for our slow growth in India this quarter (it was rains).

2. We do not have Rs.10 SKU like Campa, we have Rs.20 only

3. VBL has not increased its trade margins.

4. VBL is adding 3 to 4 lacs outlets every year, Campa will also take time to have the same reach.

5. It was pointed out that Campa does not have to pay royalty on the concentrate like Coke or Pepsi, so they are able to price their products lower. But management said that is a very small component of the total cost and not very important.

I believe Campa is the main reason for VBL stock underperforming in recent months. But I think if one thinks objectively, VBL is too large geographically with too wide a product portfolio. SKUs impacted by Campa’s competition will form a small portion of overall revenues. So these fears are overdone. I may be wrong here, but that is what I think right now.

Food business

1. Structurally it will be similar to beverages. VBL will take the seasoning and manufacture for Pepsi’s brands. This is how it will be done for Morocco and Zimbabwe

2. Except South Africa, Pepsi does not produce anywhere else in Africa. Africa is a large continent and distances are huge. Transporting it is not cost efficient. That is why they are giving it to us, said the management

3. In foods business, three new plants are coming up next year – Zimbabwe, Zambia and Morocco. About USD 100 million is the potential revenue from these three plants.

Fund raise

Will be used for debt reduction and acquisitions. Also looking to increase snack business in Africa.

(Disc.: Invested)