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Varun Beverages Ltd.

BSE: 540180 Sector: Agri and agri inputs
NSE: VBL ISIN Code: INE200M01013
BSE 00:00 | 18 Jun 797.15 5.95
(0.75%)
OPEN

785.00

HIGH

799.95

LOW

783.20

NSE 00:00 | 18 Jun 796.45 5.30
(0.67%)
OPEN

791.90

HIGH

800.00

LOW

783.05

OPEN 785.00
PREVIOUS CLOSE 791.20
VOLUME 37990
52-Week high 918.60
52-Week low 392.74
P/E 125.54
Mkt Cap.(Rs cr) 34,519
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 785.00
CLOSE 791.20
VOLUME 37990
52-Week high 918.60
52-Week low 392.74
P/E 125.54
Mkt Cap.(Rs cr) 34,519
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Varun Beverages Ltd. (VBL) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting the 26th (Twenty Sixth) AnnualReport on the business and operations of your Company along with the Audited FinancialStatements for the Financial Year ended December 31 2020.

Financial Performance

The financial performance of your Company for the Financial Year ended December 312020 is summarized below:

( Rs. in million)

Particulars Standalone Consolidated
Financial Year ended December 31 2020 Financial Year ended December 31 2019 Financial Year ended December 31 2020 Financial Year ended December 31 2019
Total Revenue 49484.43 57136.71 65927.63 72909.86
Total Expenses 46792.34 50793.80 61637.29 65990.75
Profit before tax after exceptional items 2026.80 6342.91 3625.05 6962.72
Less: Tax Expenses (237.49) 1857.44 52.34 2240.67
Profit after tax 2264.29 4485.47 3289.95* 4689.75*
Balance brought forward from last year 8619.78 4972.54 5560.11 1720.41
Balance carried over to Balance Sheet 10074.42 8619.78 8042.43 5560.11
General Reserve 444.26 444.26 444.26 444.26
Other Reserves 26712.10 26720.24 23866.43 24392.96
Reserves & Surplus carried to Balance Sheet 37230.78 35784.28 32353.12 30397.33

*After adjustment on account of non-controlling interest and/or share profit ofassociate Companies.

Consolidated Financial Statements

The Consolidated Financial Statements of your Company for the Financial Year 2020 areprepared in compliance with the applicable provisions of the Companies Act 2013(‘the Act') Indian Accounting Standards (‘Ind AS') and the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 [‘SEBI (LODR) Regulations'] which shall also be provided to the Members in theirforthcoming Annual General Meeting (‘AGM').

State of the Company's Affairs

Your Company has presence in 27 States and 7 Union Territories in India and 5 othercountries across the world (viz. Nepal Sri Lanka Morocco Zambia & Zimbabwe).Further Company is having more than 2500 owned vehicles more than 1500 primarydistributors and more than 90 depots. Company is creating long term value throughdifferent facets of its business. Our strong execution capabilities efficiency inoperations and operating leverage lead us to acquire greater scale and productivity.

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 your Company has not transferred any amount to GeneralReserve.

Change in the Nature of Business if any

During the year under review there was no change in the nature of 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 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 in their meeting held on August 42020 declared an interim dividend of Rs. 2.50 per Equity Share (face value of Rs. 10/- perEquity Share) to the eligible equity shareholders of the Company. The Board of Directorsdo not recommend any final dividend for the Financial Year 2020.

Your Company has transferred the unpaid or unclaimed interim dividend to the UnclaimedDividend Account

– Varun Beverages Limited and the details of unpaid and unclaimed dividend amountlying in the said Accounts (maintained with HDFC Bank Limited for the dividend declared in2017 Yes Bank Limited for the dividend declared in 2018 IndusInd Bank Limited for thedividend declared in 2019 and Axis Bank Limited for the dividend declared in 2020) areuploaded on website of the Company at https://varunpepsi.com/corporate-governance/.

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 website of the Company at https://varunpepsi.com/wp-content/uploads/2017/08/VBL-Guidelines-for-Acquisition-in-India.pdf

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 only) each and 50000000 (FiftyMillion) Preference Shares of s. 100/- (Rupees Hundred only) each and the IssuedSubscribed and Paid-up Share Capital of the Company is Rs. 2886887200/- (Rupees TwoBillion Eight Hundred Eighty Six Million Eight Hundred Eighty Seven Thousand and TwoHundred only).

During the year under review there was no change in the Authorized Issued Subscribedand Paid-up Share Capital of the Company.

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 Beverages LimitedEmployee Stock Option Scheme 2016 (‘ESOP Scheme 2016'). During the year under reviewthere was no change in the said scheme(s).

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 will be uploaded on website viz. https://varunpepsi.com/ for inspection byMembers of the Company.

Relevant disclosures pursuant to Rule 12 (9) of the Companies (Share Capital andDebentures) Rules 2014 and Regulation 14 of the SEBI (Share Based Employee Benefits)Regulations 2014 are attached to this report as

Annexure – A.

Credit Rating

During the year under review your Company's credit ratings by CRISIL is as below:

Long Term Rating CRISIL AA/Stable (Re-affirmed)
Short Term Rating CRISIL A1+ (Re-

Related Party Transactions

To comply with the provisions of Section 188 of the Act and Rules made thereunder readwith Regulation 23 of SEBI (LODR) Regulations your Company took necessary prior approvalof the Audit Risk Management and Ethics Committee before entering into related partytransactions. All contracts / arrangements / transactions entered into by the Companyduring the Financial Year 2020 with related parties as defined under the Act and SEBI(LODR) Regulations 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 synchronized and synergized with the Company'soperations. Attention of Members is drawn to the disclosure of transactions with therelated parties set out in Note No. 44 of the Standalone Financial Statements formingpart of the Annual Report.

Your Company has framed a Policy on Related Party Transactions in accordance with theAct and SEBI (LODR) Regulations. The Policy intends to ensure that proper reportingapproval and disclosure processes are in place for all transactions between the Companyand related parties. The policy is uploaded on website of the Company athttps://varunpepsi.com/wp-content/uploads/2016/09/Policy-On-Related-Party-Transactions.pdf

Since all transactions which were entered into during the Financial Year 2020 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 2020 as perPolicy on Related Party Transactions hence no detail is required to be provided in FormAOC-2 prescribed under Clause (h) of Subsection (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 or Investments covered under the provisions of Section 186of the Act are given in the Notes to the Standalone Financial Statements.

Subsidiaries Associates and Joint Ventures

Your Company has following subsidiaries as on December 31 2020:

Varun Beverages (Nepal) Private Limited;

Varun Beverages Lanka (Private) Limited;

- Ole Springs Bottlers (Private) Limited (step-down subsidiary);

Varun Beverages Morocco SA;

Varun Beverages (Zambia) Limited;

Varun Beverages (Zimbabwe) (Private) Limited; and

Lunarmech Technologies Private Limited.

Pursuant to the approval of Hon'ble National Company Law Tribunal Special Bench NewDelhi Angelica Technologies Private Limited ("Angelica") was merged withLunarmech Technologies Private Limited ("Lunarmech") accordingly your Companyis now directly holding 55.04% of the Equity Share Capital of Lunarmech. Lunarmech is nowa direct subsidiary of VBL instead of Angelica which stands dissolved without winding upw.e.f. July 7 2020.

Further Varun Beverages (Botswana) (Proprietary) Limited had been dissolved w.e.f.March 11 2020 and accordingly ceased to be step-down subsidiary of the Company.

As on December 31 2020 there was no associate/joint venture of the Company as definedunder the provisions of the Act.

To comply with the provisions of Section 129 of the Act a separate statementcontaining salient features of Financial Statements of Subsidiaries of your Company(including their performance and financial position) in prescribed Form AOC-1 forms partof Consolidated Financial Statements and therefore not repeated here to avoid duplication.Further contribution of subsidiary to the overall performance of your Company is outlinedin Note No. 60 of the Consolidated Financial Statements.

Financial Statements of the aforesaid subsidiary companies are kept open for inspectionby the Members at the Registered Office of your Company on all days except SaturdaySunday and Public Holidays up to the date of AGM i.e. April 7 2021 between 11:00 a.m. to5:00 p.m. as required under Section 136 of the Act. Any Member desirous of obtaining acopy of the said Financial Statements may write to the Company at its Registered Office orCorporate Office. The Financial Statements including the Consolidated Financial Statementsand all other documents required to be attached with this Report have been uploaded onwebsite of the Company at https://varunpepsi.com/annual-reports.

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. Further Varun Beverages (Zimbabwe) Private Limited has become a materialsubsidiary of the Company w.e.f. February 16 2021. Policy on Material Subsidiary isuploaded on website of the Company at https://varunpepsi.com/wp-content/uploads/2021/02/1doc.pdf

Directors and Key Managerial Personnel Directors

During the year under review in terms of Regulation 17(1A) of SEBI (LODR) Regulationsthe Board of Directors on the recommendation of Nomination and Remuneration Committee andsubject to the approval of Members of the Company accorded its approval to continue andhold office of Non-executive Independent Director of the Company by Dr. Naresh Trehan(DIN: 00012148). Further Dr. Naresh Trehan has affirmed that he is not debarred fromholding the office of Independent Director by virtue of any SEBI order or any other suchAuthority.

To comply with the provisions of Section 152 of the Act and in terms of the Articles ofAssociation of the Company Mr. Ravi Jaipuria (DIN: 00003668) Non-executive Chairman andMr. Raj Gandhi (DIN: 00003649) Whole-time Director are liable to retire by rotation atthe ensuing AGM and being eligible seeks re-appointment. The Board of Directors on therecommendation of Nomination and Remuneration Committee recommended their re-appointment.

Further at the 25th AGM of the Company held on June 26 2020 Mr. VarunJaipuria (DIN: 02465412) and Mr. Raj Gandhi (DIN: 00003649) were re-appointed asWhole-time Directors of the Company for a period of up to 5 (Five) years w.e.f. November1 2019 and Mr. Rajinder Jeet Singh Bagga (DIN: 08440479) was appointed as Whole-timeDirector of the Company for a period of up to 5 (Five) years w.e.f. May 2 2019.

Company has received declarations from all the

Independent Directors of the Company confirming that they meet the criteria ofindependence as prescribed both under sub-section (6) of Section 149 of the Act and SEBI(LODR) Regulations.

Brief resume and other details of the Director(s) being appointed/re-appointed at theensuing AGM as stipulated under Secretarial Standard-2 issued by the Institute of CompanySecretaries of India and Regulation 36 of the SEBI (LODR) Regulations is separatelydisclosed in the Notice of the ensuing AGM.

Key Managerial Personnel

Mr. Kapil Agarwal Whole-time Director and Chief Executive Officer Mr. Vikas BhatiaChief Financial Officer and Mr. Ravi Batra Chief Risk Officer & Group CompanySecretary continued to be the Key Managerial Personnel of your Company in accordance withthe provisions of Section 203 of the Act read with the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014.

Board Evaluation

To comply with the provisions of Section 134(3)(p) of the Act and Rules made thereunderand Regulation 17(10) of SEBI (LODR) Regulations the Board has carried out the annualperformance evaluation of the Directors individually including the Independent Directors(wherein the concerned Director being evaluated did not participate) Board as a whole andfollowing Committees of the Board of Directors:

i) Audit Risk Management and Ethics Committee; ii) Nomination and RemunerationCommittee; iii) Stakeholders' Relationship Committee; and iv) Corporate SocialResponsibility 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 the 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 whole at a separate meeting of Independent Directors.

Board and Committees of the Board

The number of meetings of the Board and various Committees of the Board includingcomposition are set out in the Corporate Governance Report which forms part of thisreport. The intervening gap between the meetings was within the period prescribed underthe provisions of Section 173 of the Act and SEBI (LODR) Regulations.

Remuneration Policy

To comply with the provisions of Section 178 of the Act and Rules made thereunder andRegulation 19 of SEBI (LODR) Regulations the Company's Remuneration Policy for DirectorsKey Managerial Personnel (KMP) Senior Management and other Employees of the Company isuploaded on website of the Company at https://varunpepsi.com/wp-content/uploads/2020/03/Remuneration-Policy.pdf. The Policy includes inter-alia the criteria for appointment andremuneration of Directors KMPs Senior Management Personnel and other employees of theCompany.

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 to this report as Annexure – B.

Statutory Auditors

Members of the Company in their 22nd AGM held on April 17 2017 appointedM/s. APAS & Co. Chartered Accountants (Firm Registration Number 000340C) as JointStatutory Auditors of the Company to hold office for a period of up to 5 (five) years i.e.till the conclusion of 27th AGM of the Company to be held in the Financial Year2022.

Further Members in their 23rd AGM held on April 17 2018 appointed M/s.Walker Chandiok & Co. LLP Chartered Accountants (Firm Registration Number 001076N/N500013) 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 28th AGM of the Company to be held inthe Financial Year 2023.

The Statutory Auditors' Report for the Financial Year 2020 does not contain anyqualification reservation or adverse remark. The Statutory Auditors have not reported anyfrauds 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 Cost Audit is not applicable to the Company for the Financial Year ended 2020.

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

To comply with the provisions of Section 134 of the Act and Rules made thereunder yourCompany has complied with the provisions relating to constitution of Internal ComplaintsCommittee under the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. Company is conducting training programs periodically to educate itsemployees so that the provisions of above-mentioned Act are complied in true spirit.

During the year under review no complaint was filed under the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 and no complaint waspending at the beginning and end of Financial Year 2020.

Vigil Mechanism / Whistle Blower Policy

Pursuant to the provisions of Section 177 of the Act and Regulation 22 of SEBI (LODR)Regulations the Company has adopted a Vigil Mechanism / Whistle Blower Policy to providea platform to the Directors and Employees of the Company to raise concerns regarding anyirregularity misconduct or unethical matters / dealings within the Company. The same isdetailed in the Corporate Governance Report which forms part of this report.

Secretarial Auditors

The Board of Directors on the recommendation of the Audit Risk Management and EthicsCommittee has appointed M/s. Sanjay Grover & Associates Company Secretaries toconduct Secretarial Audit of your Company. The Secretarial Audit Report for the FinancialYear 2020 is attached to this report as Annexure - C.

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. The AuditRisk Management and Ethics Committee of the Board of Directors inter-alia monitors andreviews the risk management plan and such other functions as assigned from time to time.

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 InternalFinancial Controls issued by M/s. Walker Chandiok & Co. LLP CharteredAccountantsandM/s.APAS&Co.CharteredAccountants the Joint Statutory Auditors of theCompany is annexed to the Audit Report on the Financial Statements of the Company and doesnot contain any reportable weakness of the Company.

Corporate Social Responsibility (CSR)

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

Annual Report on CSR activities for the Financial Year 2020 as required under Sections134 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 to thisreport as Annexure - D.

Directors' Responsibility Statement

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

(a) in the preparation of the annual accounts for the Financial Year ended December 312020 the applicable accounting standards have been followed along with proper explanationrelating to material departures;

(b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of your Company as at December 31 2020 and of the profits of theCompany for the period ended on that date;

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

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

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

Other Information

Management Discussion & Analysis Report

Management Discussion & Analysis Report for the year under review as stipulatedunder Regulation 34(2)(e) of SEBI (LODR) Regulations forms part of the Annual Report.

Business Responsibility Report

Business Responsibility Report for the year under review as stipulated underRegulation 34(2)(f) of SEBI (LODR) Regulations forms part of the Annual 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 the Companies(Accounts) Rules 2014 is attached to this report as Annexure - E.

Corporate Governance Report

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 is attached to this report as Annexure - F. The certificate from M/s.Sanjay Grover & Associates Company Secretaries confirming compliance with theconditions of corporate governance is also attached to the Corporate Governance Report.

Awards

Your Company has been awarded with the following: (a) Winner of Best FMCG CorporateGovernance India 2020 awarded by Capital Finance International.

(b) Winner of Bottler of the Year 2019 by PepsiCo in AMESA Sector (Africa Middle Eastand South Asia) received in 2020.

Listing

The Equity Shares of the Company are listed on the National Stock Exchange of IndiaLimited and BSE Limited. Both these stock exchanges have nation-wide trading terminals.Annual listing fee for the Financial Year 2020-21 has been paid to the National StockExchange of India Limited and BSE Limited.

Extract of the Annual Return

Extract of the Annual Return in Form No. MGT – 9 in accordance with the provisionsof Section 92 of the Act read with the Companies (Management and Administration) Rules2014 is attached to this report as

Annexure - G.

Annual Return of the Company for the Financial Year 2019 is uploaded on website of theCompany at https://varunpepsi.com/wp-content/uploads/2021/03/ AnnualReturnFY2019.pdf

Research and Development

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

Cautionary Statement

Statements in the Board's Report and the Management Discussion & Analysis Reportdescribing the Company's objectives expectations or forecasts may be forward lookingwithin the meaning of applicable laws and regulations. Actual results may differ fromthose 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.

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

No material changes and commitments have occurred after the closure of the FinancialYear 2020 till the date of this Report which would affect the financial position of yourCompany.

Acknowledgement

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 variousGovernment Authorities Banks / Financial Institutions and other stakeholders such asmembers customers and suppliers among others. Your Directors also commend the continuingcommitment and dedication of employees at all levels which has been vital for theCompany's success. Your Directors look forward to their continued support in future.