*Manpasand Beverages analyst meet:*

An effort to clean up the mess; though not convincing enough

• Capex: The management revealed that the capex will be ~Rs1500Crs but refrained from providing its funding plan. We highlight that this will be 2x of FY18 net block, with ROE and ROCE for the same year at ~8%, which is very low compared to other consumer companies.
• Auditor resignation: The company maintained that it hasn’t denied any significant information to the auditor. However, the management was unable to provide a satisfactory explanation on the issue.
• Use of QIB proceeds: Management stated that the QIB money is being utilized for expansions. The company is currently in process of setting up four new plants, of which Vadodara facility has already been commissioned and Varanasi plant is expected to be functional soon. In addition to this, the management sees a requirement of 10 more plants in long-term.
• Capacity increase: The production capacity has increased from 1.7 lakh cases per day to 2.25 lakh cases per day and it would increase further to 3.75 lakh cases per day after all four new plants come on stream.
• Distribution agreement with Parle: The agreement entails reaching to 10K distributors and 60 lakh shops.
• Industry growth prospects: The cold drink industry size is ~Rs100,000Crs and the company still represents a meagre 1% share. Furthermore, 65% of the company’s sales come from rural area, where competition is minimal. In light of these factors, the company believes it would continue to grow at a strong pace.
• Hansraj Agro controversy: The management stated that there was no transaction involved. The company belongs to the promoter’s brothers however they do not have a cordial relationship anymore.
• Railway business: The company is IRCTC 'category A' supplier. The market size for railway business is Rs3000-4000Crs and the company can easily reach Rs1000Crs, however it is not desirable due to low profitability. The company has a Rs100-150Crs turnover from railway business.
• Outlook: The company refrained from providing any numbers however it expects this year’s sales to be better yoy. It doesn’t expect Parle deal to have any noticeable impact on margins.
Overall, we sensed a lack of transparency and the management was unable to address investor queries in a fitting manner.