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Varun Beverages Ltd.

BSE: 540180 Sector: Agri and agri inputs
NSE: VBL ISIN Code: INE200M01013
BSE 00:00 | 19 Feb 798.95 -7.35
(-0.91%)
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812.05

HIGH

819.15

LOW

793.20

NSE 00:00 | 19 Feb 798.15 -10.00
(-1.24%)
OPEN

815.85

HIGH

819.80

LOW

793.25

OPEN 812.05
PREVIOUS CLOSE 806.30
VOLUME 6620
52-Week high 869.95
52-Week low 496.64
P/E 51.41
Mkt Cap.(Rs cr) 23,065
Buy Price 795.00
Buy Qty 5.00
Sell Price 810.00
Sell Qty 10.00
OPEN 812.05
CLOSE 806.30
VOLUME 6620
52-Week high 869.95
52-Week low 496.64
P/E 51.41
Mkt Cap.(Rs cr) 23,065
Buy Price 795.00
Buy Qty 5.00
Sell Price 810.00
Sell Qty 10.00

Varun Beverages Ltd. (VBL) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting the 24th (Twenty Fourth) Annual Report onthe business and operations of your Company along with the Audited Financial Statementsfor the Financial Year ended December 31 2018.

Financial Results

The financial performance of your Company for the Financial Year ended December 312018 is summarized below:

(Rs in Million)

Standalone Consolidated
Particulars

Financial Year ended December 31 2018

Financial Year ended December 31 2017

Financial Year ended December 31 2018

Financial Year ended December 31 2017
Total Revenue 39584.91 35380.90 52499.51 45288.89
Total Expenses 34955.33 32338.97 48191.73 42392.85
Profit before tax after prior period items 4629.58 3041.93 4337.98 2909.54
Less: Tax Expenses 1305.99 685.95 1339.35 768.95
Profit after tax 3323.59 2355.98 2928.41* 2101.54*
Balance brought forward from last year 2268.84 614.82 (594.12) (2007.59)
Balance carried over to Balance Sheet 4972.54 2268.84 1720.41 (594.12)
Debenture Redemption Reserve 0.00 159.17 0.00 159.17
General Reserve 444.26 191.25 444.26 191.25
Other Reserves 18646.17 18521.80 15993.95 16111.03
Reserves & Surplus carried to 24062.97 21141.06 18158.62 15867.33
Balance Sheet

*After adjustment on account of non-controlling interest and share profit of associateCompanies.

Consolidated Financial Statements

The Consolidated Financial Statements of your Company for the Financial Year 2018 areprepared in compliance with the applicable provisions of the Companies Act 2013("the Act") Indian Accounting Standards ("Ind AS") and the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 ["SEBI (LODR) Regulations"] which shall be placed before the members intheir forthcoming Annual General Meeting (AGM).

To comply with Section 129 (3) of the Act a statement containing the salient featuresof the Financial Statement of subsidiary/ associate/ joint venture companies is providedas Annexure in Form AOC – 1 to the Consolidated Financial Statement of the Companyand therefore not repeated hereby to avoid duplication.

Deposits

Your Company has not accepted any deposits during the year under review falling withinthe ambit of Section 73 of the Act and the Companies (Acceptance of Deposits) Rules 2014.

Transfer to General Reserve

During the year under review the Company has transferred Rs 253.01 Million to GeneralReserve.

Change in the Nature of Business if any

During the year under review there was no change in the nature of the business of theCompany.

Dividend Distribution Policy

The Board of Directors of the Company in their meeting held on August 9 2017 approvedand adopted a Policy on Distribution of Dividend to comply with Regulation 43A of SEBI(LODR) Regulations and the same is uploaded on the website of the Company athttps://varunpepsi.com/ wp-content/uploads/2019/03/Dividend-Distribution-Policy.pdf

Dividend

During the year under review the Board of Directors of the Company declared an interimdividend of Rs 2.50 per Equity Share (face value of Rs 10/- per Equity Share) for the year2018. The Board of Directors do not recommend any final dividend for the Financial Year2018.

Your Company has transferred the unpaid or unclaimed Interim Dividend to the UnclaimedDividend Account – Varun Beverages Limited and the details of unpaid and unclaimeddividend amounts lying in the said Accounts (maintained with HDFC Bank Limited and YesBank Limited) are uploaded on the website of the Company athttps://varunpepsi.com/wp-content/uploads/2019/02/ Unclaimed-Dividend-Data-2018.pdf

Acquisition Guidelines

Your Company applies stringent strategic and financial criteria to any potentialacquisition or partnership and to enhance transparency the Board of Directors of theCompany in their meeting held on August 9 2017 approved and adopted AcquisitionGuidelines for Company's M&A activities for viable acquisitions and the same isuploaded on the website of the Company athttp://varunpepsi.com/wp-content/uploads/2017/08/VBL-Guidelines-for-Acquisition-in-India.pdf

Acquisitions

After the close of the Financial Year your Company concluded acquisition of franchiserights from SMV Group to sell and distribute PepsiCo beverages in 13 Districts in theState of Karnataka 14 Districts in the State of Maharashtra and 3 Districts in the Stateof Madhya Pradesh.

Further the Board of Directors in their meeting held on February 18 2019 consideredand approved its intent to enter into a binding agreement with PepsiCo India HoldingsPrivate Limited ("PepsiCo") to acquire franchise rights in South and Westregions of India from PepsiCo for a national bottling sales and distribution footprint in7 States and 5 Union Territories (subject to receipt of necessary statutory approvals). Oncompletion of the acquisition and related formalities the Company will be a franchise ofPepsiCo's beverages business across 27 States and 7 Union Territories of India.

Credit Rating

During the year under review CRISIL has re-affirmed your Company's credit ratings asbelow:

Long-Term Rating CRISIL AA-/Positive
(Outlook revised from ‘Stable' and rating reaffirmed)
Short-Term Rating CRISIL A1+ (Reaffirmed)
Rs 2500 Million Commercial CRISIL A1+ (Reaffirmed)
Paper

Share Capital

The Authorized Share Capital of the Company is

Rs 10000000000/- (Rupees Ten Thousand Million only) divided into 500000000 (FiveHundred Million) equity shares of Rs 10/- (Rupees Ten) each and 50000000 (Fifty Million)Preference Shares of Rs 100/- (Rupees Hundred) each. During the year under review thereis no change in the Authorized Share Capital of the Company.

During the year under review the paid up capital of the Company has been increasedfrom Rs 1825869400/- (Rupees One Billion Eight Hundred and Twenty-Five Million EightHundred and Sixty-Nine Thousand Four Hundred) to Rs 1826419400/- (Rupees One BillionEight Hundred and Twenty-Six Million Four Hundred and Nineteen Thousand Four Hundred) dueto exercise of 55000 Stock Options (equivalent to 55000 equity shares having face valueof Rs 10 each) under Varun Beverages Limited Employee Stock Option Scheme 2013.

Employee Stock Option Schemes

Your Company has two Employee Stock Option Schemes viz. Varun Beverages LimitedEmployee Stock Option Scheme 2013 ("ESOP Scheme 2013") and Varun BeveragesLimited Employee Stock Option Scheme 2016 ("ESOP Scheme 2016"). ESOP Scheme 2016is in line with the provisions of SEBI (Share Based Employee Benefits) Regulations 2014.

Your Company has received a certificate from the Statutory Auditors of the Company thatESOP Scheme 2016 has been implemented in accordance with the SEBI (Share Based EmployeeBenefits) Regulations 2014 and the resolution(s) passed by the Members of the Company.The certificate would be placed at the ensuing AGM for inspection by Members of theCompany.

Relevant disclosures pursuant to Rule 12 (9) of the Companies (Share Capital andDebentures) Rules 2014 and Regulation 14 of Securities and Exchange Board of India (ShareBased Employee Benefits) Regulations 2014 are attached to this report as Annexure– A.

Non-Convertible Debentures

During the year under review pursuant to the exercise of put option by Debentureholders for redemption of 3000

Secured Rated Listed Redeemable Non- Convertible Debentures("Debentures"/ "NCD's") of a face value of

Rs 1000000 (Rupees Ten Lacs) each aggregating to

Rs 3000000000 (Rupees Three Billion) your Company has made the full payment ofprincipal and accrued interest on June 29 2018.

Accordingly as on the date of this report the Company has no outstanding NCD's.

Related Party Transactions

TocomplywiththeprovisionsofSection188oftheActand Rules made thereunder read withRegulation 23 of SEBI (LODR) Regulations your Company took necessary prior approval ofthe Audit and Risk Management Committee before entering into related party transactions.All contracts / arrangements / transactions entered into by the Company with relatedparties as defined under the Act and SEBI (LODR) Regulations during the Financial Year2018 were in the ordinary course of business and on arm's length basis.

During the year under review your Company had not entered into any contract/arrangement/ transaction with related parties which could be considered material inaccordance with the Policy of the Company for Related Party Transactions.

None of the transactions with any of the related parties were in conflict with theinterest of the Company rather these were synchronised and synergised with the Company'soperations. Attention of Members is drawn to the disclosure of transactions with therelated parties set out in Note no. 45 of the Standalone Financial Statements formingpart of the Annual Report.

Your Company has framed a Policy on Related Party Transactions in accordance with SEBI(LODR) Regulations and as per the amended provisions of the Act. The Policy intends toensure that proper reporting approval and disclosure processes are in place for alltransactions between the Company and related parties. The policy is uploaded on thewebsite of the Company at http://varunpepsi.com/wp-content/uploads/2016/09/Policy-On-Related-Party-Transactions.pdf

Since all transactions which were entered into during the Financial Year 2018 were onarm's length basis and in the ordinary course of business and there was no materialrelated party transaction entered by the Company during the Financial Year 2018 as perRelated Party Transactions Policy hence no detail is required to be provided in FormAOC-2 prescribed under Clause (h) of Sub-section (3) of Section 134 of the Act and Rule8(2) of the Companies (Accounts) Rules 2014.

Particulars of Loans Guarantees or Investments

Details of Loans Guarantees Securities and Investments covered under the provisionsof Section 186 of the Act are given in the Notes to the Standalone FinancialStatements.

Subsidiaries Associates and Joint Ventures

Your Company has following subsidiaries / associate companies:

Subsidiaries

Varun Beverages (Nepal) Private Limited; Varun Beverages Morocco SA; Varun BeveragesLanka (Private) Limited; Ole Springs Bottlers (Private) Limited (step-down subsidiary);Varun Beverages (Zambia) Limited; and Varun Beverages (Zimbabwe) (Private) Limited.

Associate Company

Angelica Technologies Private Limited

To comply with the provisions of Section 129 of the Act a separate statementcontaining salient features of Financial Statements of Subsidiaries Associates and JointVentures of your Company forms part of Consolidated Financial Statements.

Financial Statements of the aforesaid subsidiary companies are kept open for inspectionby the Members at the Registered Office of your Company during business hours on all daysexcept Saturday and Sunday up to the date of the AGM i.e. April 17 2019 between 11:00a.m. to 5:00 p.m. as required under Section 136 of the Act. Any Member desirous ofobtaining a copy of the said Financial Statements may write to the Company at itsRegistered Office or Corporate Office. The Financial Statements including the ConsolidatedFinancial Statements and all other documents required to be attached with this Report havebeen uploaded on the website of the Company athttps://varunpepsi.com/wp-content/uploads/2019/02/ FinancialStatements31122018.pdf

To comply with the provisions of Regulation 16(c) of SEBI (LODR) Regulations the Boardof Directors of the Company have approved and adopted a Policy for determining MaterialSubsidiary and as on December 31 2018 none of the subsidiary is a Material Subsidiary ofthe Company in terms of the said policy. The policy on Material Subsidiary has beenuploaded on the website of the Company at http://varunpepsi.com/wp-content/uploads/2016/09/Policy-For-Determination-Of-Material-Subsidiary-And-Governance-Of-Subsidiaries.pdf

Directors and Key Managerial Personnel

Appointments

Dr. Naresh Trehan (DIN 00012148) was appointed as an Independent Director of theCompany for a period of three years with effect from December 1 2015. Accordingly hisfirst term of office expired on November 30 2018. Pursuant to the provisions of Section161 of the Companies Act 2013 and based on the performance evaluation of IndependentDirectors and on the recommendations of the Nomination and Remuneration Committee theBoard of Directors in their meeting held on October 25 2018 reappointed Dr. Naresh Trehanas an Independent Director of the Company (subject to the approval of members by a specialresolution) with effect from December 1 2018 for a period of up to 5 (Five) years.

Your Company has also received a declaration from Dr. Naresh Trehan that he meets thecriteria of independence as prescribed both under sub-section (6) of Section 149 of theAct and under the SEBI (LODR) Regulations. He has further affirmed that he is not debarredfrom holding the office of an Independent Director by virtue of any SEBI order or anyother such Authority.

Your Company has received necessary declarations from Dr. Naresh Trehan that he fulfilsthe conditions specified in the Act and rules made thereunder for his reappointment as anIndependent Director of the Company and is independent of the management. The Boardconsidered the same and is of the view that he fulfill / meets the criteria ofindependence and accordingly recommends re-appointment of Dr. Naresh Trehan.

Dr. Naresh Trehan being eligible and offering himself for re-appointment is proposedto be re-appointed as an Independent Director for a second term of upto 5 (Five) yearswith effect from December 1 2018.

Mr. Kapil Agarwal (DIN 02079161) was appointed as Whole Time Director of the Companyfor a period of three years with effect from January 1 2016. Accordingly his term ofoffice expired on December 31 2018. Pursuant to the provisions of Section 196 of theCompanies Act 2013 and based on the performance evaluation report and on therecommendations of Nomination and Remuneration Committee the Board of Directors in theirmeeting held on October 25 2018 re-appointed Mr. Kapil Agarwal as Whole Time Director andChief Executive Officer of the Company (subject to the approval of members by an ordinaryresolution) with effect from January 1 2019 for a period of up to 5 (Five) years.

Your Company has also received a declaration from Mr. Kapil Agarwal as requiredunder the Act and under the SEBI (LODR) Regulations. He has further affirmed that he isnot debarred from holding the office of a Whole Time Director by virtue of any SEBI orderor any other such Authority.

To comply with the provisions of Section 152 of the Act and in terms of the Articles ofAssociation of the Company Mr. Varun Jaipuria Whole-time Director and Mr. Kamlesh KumarJain Whole-time Director and Chief Financial Officer are liable to retire by rotation atthe ensuing AGM and being eligible seeks re-appointment. Your Board of Directorsrecommend their re-appointment.

Key Managerial Personnel

Mr. Kapil Agarwal Whole-time Director and Chief Executive Officer Mr. Kamlesh KumarJain Whole-time Director and Chief Financial Officer and Mr. Ravi Batra

- Chief Risk Officer and Group Company Secretary continued to be the Key ManagerialPersonnel of your Company in accordance with the provisions of Section 2(51) and Section203 of the Act read with Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014.

Board Evaluation

To comply with the provisions of Section 134 (3)(p) of the Act and the rules madethereunder and Regulation 17(10) of SEBI (LODR) Regulations the Board has carried outthe annual performance evaluation of the Directors individually including the IndependentDirectors (wherein the concerned director being evaluated did not participate) Board as awhole and following Committees of the Board of Directors:

i) Audit and Risk Management Committee; ii) Nomination and Remuneration Committee; iii)Stakeholders' Relationship Committee; and iv) Corporate Social Responsibility Committee.

The manner in which the annual performance evaluation has been carried out is explainedin the Corporate Governance Report which forms part of this report. Board is responsibleto monitor and review Directors' Evaluation framework.

Further to comply with Regulation 25 (4) of SEBI (LODR) Regulations IndependentDirectors also evaluated the performance of Non Independent Directors Chairman and Boardas a body at a separate meeting of Independent Directors.

Meetings of the Board and Committees

The number of meetings of the Board and various Committees of your Company are set outin the Corporate Governance Report which forms part of this report.

The intervening gap between the meetings was within the period prescribed under theprovisions of Section 173 of the Act and SEBI (LODR) Regulations.

Remuneration Policy

To comply with the provisions of Section 178 of the Act read with Rules made thereunderand Regulation 19 of SEBI (LODR) Regulations the Company's Remuneration Policy forDirectors Key Managerial Personnel and Senior Management is uploaded on the website ofthe Company at http://varunpepsi.com/wp-content/ uploads/2016/09/Remuneration-Policy.pdf

Remuneration of Directors Key Managerial Personnel and Particulars of Employees

The information required to be disclosed in the Board's Report pursuant to Section 197of the Act read with Rule 5 of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is attached with this report as Annexure – B.

Statutory Auditors

Members in their 23rd Annual General meeting held on April 17 2018 appointed M/s.Walker Chandiok & Co. LLP (Firm Registration Number 001076N/N500013) as JointStatutory Auditors of the Company to hold office for a period of up to 5 (Five) years i.e.till the conclusion of the 28th AGM of the Company to be held in the Financial Year 2023subject to ratification by the Members at every AGM of the Company.

Further Members of the Company in their 22nd Annual General Meeting held on April 172017 appointed M/s. APAS & Co. Chartered Accountants (Firm Registration Number000340C) as Joint Statutory Auditors of the Company to hold office for a period of up to 5(five) years i.e. till the conclusion of the 27th AGM of the Company to be held in theFinancial Year 2022 subject to ratification by the Members at every AGM of the Company.

Pursuant to the notification issued by the Ministry of Corporate Affairs on May 7 2018amending Section 139 of the Companies Act 2013 and the Rules framed thereunder themandatory requirement for ratification of appointment of Auditors by the Members at everyAGM has been omitted. Accordingly the Notice of ensuing AGM does not include the proposalfor seeking Members approval for ratification of appointment of Joint Statutory Auditorsof the Company.

The Statutory Auditors' Report for the Financial Year 2018 does not contain anyqualification reservation or adverse remark.

The Statutory Auditors have not reported any frauds under Section 143(12) of the Act.

Cost Audit

In terms of Section 148 of the Act and the Companies (Cost Records and Audit) Rules2014 and any amendment thereto Cost Audit is not applicable to the Company.

Disclosure Under Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.

To comply with provisions of Section 134 of the Act and rules made there under yourCompany has duly constituted Internal Complaints Committee under the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.

During the year under review no case was filed under the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013.

Secretarial Auditors

Your Board on the recommendations of the Audit and Risk Management Committee hasappointed M/s. Sanjay Grover & Associates Company Secretaries to conduct SecretarialAudit of your Company. The Secretarial Audit Report for the Financial Year 2018 isattached to this report as Annexure - C to this Report and does not contain anyqualification reservation or adverse remark.

Risk Management

Pursuant to the provisions of Regulation 21(5) of SEBI (LODR) Regulations the top 500listed entities determined on the basis of market capitalization as at the end of theimmediate previous financial year shall constitute a Risk Management Committee.Accordingly during the year under review your Company has renamed its Audit Committee asAudit and Risk Management Committee and also updated the terms of reference of thisCommittee to cover provisions related to Risk Management review as approved by the Boardof Directors in their meeting held on August 9 2018.

Your Company has a robust Risk Management Policy which identifies and evaluatesbusiness risks and opportunities. The Company recognize that these risks need to bemanaged and mitigated to protect the interest of the stakeholders and to achieve businessobjectives. The risk management framework is aimed at effectively mitigating the Company'svarious business and operational risks through strategic actions.

Internal Financial Controls

Your Company has in place adequate Internal Financial Controls. The report on theInternal Financial Controls issued by M/s. Walker Chandiok & Co. LLP CharteredAccountants and M/s. APAS & Co. Chartered Accountants the Joint Statutory Auditorsof the

Company is annexed to the Audit Report on the Financial Statements of the Company anddoes not contain any reportable weakness of the Company.

Corporate Social Responsibility

Your Company has a Corporate Social Responsibility Policy which is uploaded on thewebsite of the Company http://varunpepsi.com/wp-content/uploads/2016/09/Corporate-Social-Responsibility-Policy.pdf

Annual Report on CSR activities for the Financial Year 2018 as required under Section134 and 135 of the Act read with Rule 8 of the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 and Rule 9 of the Companies (Accounts) Rules 2014 is attached withthis report as Annexure - D.

Directors' Responsibility Statement

Pursuant to Section 134(3)(c) read with Section 134(5) of the Act the Directors state:

(a) that in the preparation of the annual accounts for the Financial Year endedDecember 31 2018 the applicable accounting standards have been followed along withproper explanation relating to material departures;

(b) that the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of your Company as at December 31 2018and of the profits of the Company for the period ended on that date;

(c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of Act for safeguarding the assets ofyour Company and for preventing and detecting fraud and other irregularities;

(d) that the annual accounts have been prepared on a going concern basis;

(e) that proper internal financial controls laid down by the Directors were followed bythe Company and that such internal financial controls are adequate and were operatingeffectively; and

(f) that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adequate and operating effectively.

Other Information

Management Discussion and Analysis Report

Management Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34(2)(e) of SEBI (LODR) Regulations is attached with this report.

Business Responsibility Report

Business Responsibility Report for the year under review as stipulated underRegulation 34(2)(f) of SEBI (LODR) Regulations is attached with this report.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3) (m) read with Rule 8 of theCompanies (Accounts) Rules 2014 is attached with this report as Annexure – E.

Corporate Governance

Your Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by Securities and Exchange Boardof India. The report on Corporate Governance as stipulated under the SEBI (LODR)Regulations forms an integral part of this Report and the same is attached with thisreport as Annexure – F. The requisite certificate from M/s. SanjayGrover & Associates Company Secretaries confirming compliance with the conditions ofcorporate governance is also attached with the Corporate Governance Report.

Listing

The Equity Shares of the Company are listed on the trading terminals of the NationalStock Exchange of India Limited and BSE Limited.

Both these stock exchanges have nation-wide terminals. The Company has paid the listingfee to both the Stock Exchanges.

Extract of the Annual Return

The details forming part of the extract of the Annual Return in Form No. MGT – 9in accordance with the provisions of Section 92 of the Act read with the Companies(Management and Administration) Rules 2014 is attached with this report as Annexure– G.

Research and Development (R&D)

During the year under review no Research & Development was carried out.

Cautionary Statement

Statements in the Board's Report and the Management Discussion & Analysisdescribing the Company's objectives expectations or forecasts may be forward lookingwithin the meaning of applicable laws and regulations. Actual results may differmaterially from those expressed in the statements.

General

Your Directors confirm that no disclosure or reporting is required in respect of thefollowing items as there was no transaction on these items during the year under review:-

1. Issue of equity shares with differential voting rights as to dividend voting orotherwise.

2. The Whole-time Directors of the Company does not receive any remuneration orcommission from any of its subsidiaries.

3. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.

4. Issue of Sweat Equity Shares.

5. The Company is in regular compliance of the applicable provisions of SecretarialStandards issued by the Institute of Company Secretaries of India.

Acknowledgements

Your Company's organizational culture upholds professionalism integrity and continuousimprovement across all functions as well as efficient utilization of the Company'sresources for sustainable and profitable growth.

Your Directors wish to place on record their appreciation for the sincere servicesrendered by employees of the Company at all levels. Your Directors also wish to place onrecord their appreciation for the valuable co-operation and support received from thevarious Government Authorities the Banks / Financial Institutions and other stakeholderssuch as members customers and suppliers among others. Your Directors also commend thecontinuing commitment and dedication of the employees at all levels which has beencritical for the Company's success. Your Directors look forward to their continued supportin future.

For and on behalf of the Board of Directors
For Varun Beverages Limited
Place: Gurugram
Date : February 26 2019 Ravi Kant Jaipuria
Chairman
DIN : 00003668

Annexure – A

Statement as at December 31 2018 pursuant to Rule 12 (9) of Companies (Share Capitaland Debentures) Rules 2014 and the Regulations 14 of Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014:

The Company has two Employee Stock Option Schemes viz. Employee Stock Option Scheme– 2013 (ESOS-2013) and Employee Stock Option Scheme - 2016 (ESOS – 2016). Allthe relevant details of these schemes are provided below.

Following details are also available on the website of the Company and can be accessedat www.varunpepsi.com A. Relevant disclosures in terms of the ‘Guidance noteon accounting for employee share-based payments' issued by

ICAI or any other relevant accounting standards as prescribed from time to time.

Please refer Note no. 51 of Notes to the Standalone Financial Statements forming partof the Annual Report.

B. Diluted EPS on issue of shares pursuant to all the schemes covered under theregulations in accordance with

‘Indian Accounting Standard (Ind AS) - 33 - Earnings Per Share' or any otherrelevant accounting standards as prescribed from time to time:

Disclosure on diluted EPS

Fully diluted EPS pursuant to issue of Equity Shares on exercise of options calculated in accordance with Ind AS - 33 ‘Earning Per Share' ESOS - 2013 ESOS – 2016
Rs 18.20 on a standalone basis Not Applicable

C. Details Relating to ESOS – 2013

Particulars Details
(i) (a) Date of shareholders' approval May 13 2013
(b) Total number of options approved/granted 2675400
(c) Vesting requirements 25% - On the date of Grant of options (First Vesting);
25% - On the 1st day of January in the calendar year succeeding the calendar year of First Vest (Second Vesting);
25% - On the 1st day of January in the calendar year succeeding the calendar year of Second Vest (Third Vesting); and
25% - On the 1st day of January in the calendar year succeeding the calendar year of Third Vest (Fourth Vesting)
All the options granted under this scheme have been vested on or before January 2016.
(d) Exercise price or pricing formula Rs 149.51 per equity share
(e) Maximum term of options granted 5 years for exercising the options from the date of vesting
(f) Source of shares (primary secondary or combination) Primary
(g) Variation in terms of options Under the erstwhile ESOS 2013 the vesting was to occur at the time of filing of the Red Herring Prospectus by the Company for the purpose of IPO and the exercise period was to commence only after the IPO. The vesting period got amended by the Board of Directors on December 1 2015 in such a way that the 1st 2nd and 3rd vesting occurred on December 1 2015 and the restriction on exercise of the option after IPO was removed. Thereafter the ESOS 2013 was amended on November 2 2016 removing the restriction to exercise the Options in full in respect of the shares vested on a Vesting Date. During the year under review there was no variation in terms of options.
(ii) Method used to account for ESOS - 2013 Fair value
(iii) Difference between the employee compensation cost using the intrinsic value of stock options and the employee compensation cost that shall have been recognized if it had used the fair value of the options. During the Financial Year 2018 the Company followed Fair Value accounting of stock options. All the options have been vested & there were no accounting charge to Statement of Profit & Loss for the year
The impact of this difference on profits and on EPS of the Company.
(iv) Option movement during Financial Year – 2018
Number of options outstanding at the beginning of the year 78285
Number of options granted during the year Nil
Number of options forfeited / lapsed during the year Nil
Number of options vested during the year Nil
Number of options exercised during the year 55000
Number of shares arising as a result of exercise of options 55000
Money realized by exercise of options if scheme is implemented directly by the Company Rs 8223050
Loan repaid by the Trust during the year from exercise price received Not Applicable
Number of options outstanding at the end of the year 23285
Number of options exercisable at the end of the year 23285
(v) Weighted-average exercise prices and weighted- average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock Please refer Note No. 51 of Notes to the Standalone Financial Statements forming part of the Annual Report.

(vi) Employee wise details of the shares issued during the year to:

Name Designation No. of Options granted Exercise Price (Rs )
(i) Senior Managerial Personnel – Nil
(ii) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year - Nil
(iii) identified employees who were granted option during any one year equal to or exceeding 1% of the issued capital of the Company (excluding outstanding warrants and conversions) at the time of grant Nil Nil Nil Nil
(vii) Method and significant assumptions used during the year to estimate the fair value of options including the following information: Kindly refer Note No. 51 to Standalone Financial Statements forming part of the Annual Report
(a) the weighted-average values of share price Rs 721.66
(b) weighted average exercise price Kindly refer Note No. 51 to Standalone Financial Statements forming part of the Annual Report
(c) expected volatility -do-
(d) expected option life -do-
(e) expected dividends -do-
(f) risk-free interest rate and any other inputs to the model -do-
(g) the method used and the assumptions made to incorporate the effects of expected early exercise; -do-
(h) how expected volatility was determined including an explanation of the extent to which expected volatility was based on historical volatility; and -do-
(i) whether and how any other features of the option grant were incorporated into the measurement of fair value such as a market condition. -do-
D. Details Relating to ESOS – 2016*
(i) (a) Date of shareholders' approval

April 27 2016

(b) Total number of options approved / granted Nil
(c) Vesting requirements Unless otherwise specified in ESOS-2016 the continuation of the Grantee in the services of the
Company shall be primary requirement of the
Vesting
25% - one year from the date of Grant (First Vesting)
25% - On the 1st day of January in the calendar
year succeeding the calendar year of First Vest (Second Vesting)
25% - On the 1st day of January in the calendar year succeeding the calendar year of Second Vest (Third Vesting)
25% - On the 1st day of January in the calendar year succeeding the calendar year of Third Vest (Fourth Vesting)
(d) Exercise price or pricing formula Not applicable.
(e) Maximum term of options granted Not applicable.
(f) Source of shares (primary secondary or combination) Not applicable.
(g) Variation in terms of options Not applicable.
(ii) Method used to account for ESOS – 2016 Not applicable.
(iii) Difference between the employee compensation cost using the intrinsic value of stock options and the employee compensation cost that shall have been recognized if it had used the fair value of the options. Not applicable.
The impact of this difference on profits and on EPS of the Company. Not applicable.
(iv) Option movement during Financial Year – 2018 Number of options outstanding at the beginning of the year Nil
Number of options granted during the year Nil
Number of options forfeited / lapsed during the year Nil
Number of options vested during the year Nil
Number of options exercised during the year Nil
Number of shares arising as a result of exercise of options Nil
Money realized by exercise of options if scheme is implemented directly by the Company Not applicable
Loan repaid by the Trust during the year from exercise price received Not Applicable
Number of options outstanding at the end of the year Nil
Number of options exercisable at the end of the year Nil
(v) Weighted-average exercise prices and weighted- average fair values of options whose exercise price either equals or exceeds or is less than the market price of the stock Not applicable

 

(vi) Employee wise details of the shares issued to:
Name Designation No. of Options granted Exercise Price (Rs )
(i) Senior Managerial Personnel Not applicable.
(ii) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year Not applicable.
(iii) identified employees who were granted option during any one year equal to or exceeding 1% of the issued capital of the Company (excluding outstanding warrants and conversions) at the time of grant. Not applicable.
(vii) Description of the method and significant assumptions used during the year to estimate the fair value of options including the following information: Not applicable.
(a) the weighted-average values of share price exercise price expected volatility expected option life expected dividends the risk-free interest rate and any other inputs to the model;
(b) the method used and the assumptions made to incorporate the effects of expected early exercise;
(c) how expected volatility was determined including an explanation of the extent to which expected volatility was based on historical volatility; and
(d) whether and how any other features of the option grant were incorporated into the measurement of fair value such as a market condition.

*The Company has not granted any stock options under ESOS 2016 till date.

For and on behalf of the Board of Directors
For Varun Beverages Limited
Place: Gurugram
Date : February 26 2019 Ravi Kant Jaipuria
Chairman
DIN : 00003668

Annexure – B

Details pertaining to Remuneration as required under Section 197 (12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014

(i) Ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the Financial Year 2018 the percentage increase inremuneration of each of the Director Chief Financial Officer and Company Secretary duringthe Financial Year 2018:

(Rs in Million)
Name of Director/KMP and Designation

Remuneration of Director/KMP for Financial Year 2018

% increase in Remuneration in Financial Year 2018

Ratio of Remuneration of Director to Median Remuneration of employees
1. Mr. Varun Jaipuria Whole-time Director 31.22 6.11 %# 111.50
2. Mr. Raj Pal Gandhi Whole-time Director 48.68 26.96 % 173.85
3. Mr. Kapil Agarwal Whole-time Director & Chief Executive Officer 47.48 6.12 % 169.57
4. Mr. Kamlesh Kumar Jain Whole-time Director & Chief Financial Officer 12.27 9.07 % 43.82
5. Mr. Ravi Batra Chief Risk Officer & Group Company Secretary 7.46 75.53 %* 26.64

# There was no increase in the salary of Mr. Varun Jaipuria during the Financial Year2018. However the increase in Financial Year 2017 was effective from April 1 2017thereby indicating the increase.

* For calculation of percentage increase in Remuneration for Financial Year 2018 of Mr.Ravi Batra remuneration figures from May 12 2017 have been considered.

(ii) The number of permanent employees as on December 31 2018 were 5662 and themedian remuneration was

Rs 0.28 Million annually. The median remuneration of employees (excluding aboveDirectors and KMPs) in Financial

Year 2018 has increased by 7.69 % as the Company had set an aggressive business targetsand expansions for the year ahead.

(iii) The remuneration of Directors KMPs and other employees is in accordance with theRemuneration Policy of the Company which is uploaded on the website of the Company athttp://varunpepsi.com/wp-content/ uploads/2016/09/Remuneration-Policy.pdf

(iv) The average percentile increase already made in the salaries of employees otherthan Managerial personnel in the last Financial Year was 7.60% and the average percentileincrease in the remuneration of Managerial Personnel was 15.70%. The higher percentage inthe increase of Managerial Personnel was based on external benchmarking growth plans ofthe Company and individual performance of the Managerial Personnel.

Statement of particulars under Section 197(12) of the Act and Rule 5 (2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 for the yearended December 31 2018 (also includes the details of top ten employees of the Company)

Name Designation Remuneration Received Age Qualification Experience in years Last Employment Date of Commencement of Employment
(Rs in million)
1 Mr. Varun Jaipuria Whole-time Director 31.22 31 Attended Millfield School Somerset England 10 - July 01 2009
2 Mr. Raj Pal Gandhi Whole-time Director 48.68 61 FCA 38 Devyani Beverages Ltd. November 01 2004
3 Mr. Kapil Agarwal Whole-time Director & Chief Executive Officer 47.48 54 PGDM 27 Devyani Beverages Ltd. November 01 2004
4 Mr. Vivek Gupta* Executive Director 24.40 55 PGDM 31 Lunarmech Technologies Pvt. Ltd. April 01 2015
5 Mr. R.J.S. Bagga Chief Operating Officer 24.23 56 M.Tech. 32 Eveready Industries December 11 1995
6 Mr. Kamlesh Kumar Jain Whole-time Director & Chief Financial Officer 12.27 56 FCA 29 Devyani Beverages Ltd. November 01 2004
7 Mr. Sudin Kumar Gaunker Chief Operating Officer 12.00 47 B.Com. 19 Goa Bottling Company Limited June 21 2000
8 Mr. Bhupinder Singh Sr. Vice President 11.97 54 MBA 28 ABinbev India Private Limited May 01 2015
9 Mr. Kamal Karnatak Sr. Vice President 10.44 46 MBA 23 Unitech Limited October 01 2008
10 Mr. Sugato Palit Chief HR Officer 9.60 47 MBA 23 Accumen March 31 2017

* Not a member of the Board of Directors of the Company.

Notes:-

1. Mr. Varun Jaipuria is the son of Mr. Ravi Kant Jaipuria Chairman of the Company andholds 39175500 (21.45%) equity shares in the Company. None of the other employees holdby himself or along with his/her spouse and dependent children 2% or more of equityshares of the Company.

2. None of the employee receive remuneration during 2018 in excess of the remunerationof any of the Directors except the details of employees forming part of this annexure.

3. Nature of employment for all these employees are permanent.

For and on behalf of the Board of Directors For Varun Beverages Limited

Ravi Kant Jaipuria Chairman

DIN : 00003668

Place: Gurugram

Date : February 26 2019