Motilal Oswal Financial Services

Manpasand Beverages

BSE Sensex

26,398

S&P CNX

8,089

Manpasand Consumer

Initiating Coverage | Sector: Beverages

CMP: INR520

TP: INR750 (+44%)

Buy

Manpasand Beverages (MANB) is leading player in beverages segment through its

flagship product Mango Sip, a mango-based fruit drink launched in 1997. The product

contributed 80% to revenues in FY16 (97% in FY14). To diversify the portfolio, MANB

launched Fruits Up in FY15, a premium fruit drink (Carbonated and non-carbonated) in

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

M.Cap. (INR b)

M.Cap. (USD b)

1, 6, 12 Rel. Per (%)

Avg Val, (INR m)

Free float (%)

mango, litchi, guava, apple, orange and mixed fruit flavors. It recently launched its

MANB IN

50.1

588/286

26.1

0.4

-3/16/-

49.6

natural coconut water through brand Coco Sip in May 2016. In 2015, it raised INR 4b

through IPO to set up a manufacturing facility in Haryana (INR.1.5b), modernization of

existing plants and repay the entire long-term debt (INR1b).

Juicing it up

Expanding capacity by 80% over FY16-18 to bolster growth



MANB is expected to improve its market share from 5% in 2016 and 7.5% in 2018

in INR 132bn fruit juice market.

Low penetration of 30% and per capita annual consumption of soft drinks in India

at 16 ltrs v/s 166 ltrs in the US, provide significant market opportunities for

growth.

Financial Snapshot (INR b)

Y/E Mar

2016 2017E 2018E

Sales

5.6

8.4 12.3

EBITDA

1.1

1.7

2.5

0.5

0.8

1.3

EPS (Rs)

10.1 16.7 26.8

EPS Gr. (%)

26.7 65.0 60.6

BV/Sh. (INR)

120.2 135.2 159.3

RoE (%)

11.4 11.6 16.2

RoCE (%)

12.2 13.1 18.2

P/E (x)

51.5 31.2 19.4

P/BV (x)

4.3

3.8

3.3

Shareholding pattern (%)

As On

Promoter

Public

Others

Mar-16 Dec-15 Sep-15

50.4

49.6

50.4

49.6

50.4

49.6



Mango sip has been able to gain significant market share over last few years on

back of its strategy to focus on rural India which contributes 55% of revenues.

MANB expanded the product portfolio by launching Fruits Up (Carbonated and

non-carbonated) in FY15 which now contributes 20% to revenues in FY16. It

recently launched natural coconut water under brand Coco Sip.



It has 200,000 retailers, 2,000 distributors, 200+ super stockists, and plans to add

500–1000 distributors in the medium term with a special focus on south India

where it has a low penetration.



Strategically expanding its capacities by 80% over FY16-18 (capex of INR3.2b) into

north and south India will not only address the supply side issues but also help to

reduce logistics cost and improve working capital cycle going forward.



MANB to clock 49% revenue CAGR and 63% PAT CAGR over FY16-18E. We value

the stock at PE of 28x FY18 EPS (~0.3x PEG v/s ~ 1.6x of consumer peers). We

initiate coverage with a ‘Buy’ with TP of INR750 (~44% upside).

Manpasand Beverages

Juicing it up

Set to gain market share in INR 132b fruit juice market

Within overall soft drink market size of INR524b (as on 2015), MANB

participates in fruit juice category, an INR132b size market with expected

growth of 19% CAGR over 2015-18. We expect MANB to grow at 49% CAGR

driven by new product launches, increased distribution reach and increased

capacities leading to increase its market share from 5% in 2016 to 7.5% by 2018.

With 70% of the market being untapped and per capita consumption of soft

drinks in India is just 16 ltrs v/s 166 ltrs in the US, opportunities is very

significant. Gestation in the beverages space is long as brands take longer time

to develop and withstand competition, resulting in the survival of few players.

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24 June 2016

Manpasand Beverages

Fruits up

170

Growth %

123

Ramp up of new products to drive utilization, beat seasonality

400

FY15

1,080

FY16

2,327

FY17E

3,623

FY18E

Capacity (cases/day,'000)

Utilisation (%)

72.5

FY15

125

FY16

After stellar success of Mango Sip with a view to diversify its product portfolio

MANB launched Fruits Up (Carbonated and non-Carbonated) in FY15, a premium

fruit drink (pulp content of 16–17%) in multiple flavors. We believe Fruits Up will

move from urban to rural vis a vis Mango Sip which will move from rural to urban

over the medium to long term. We believe Fruits Up is positioned to tap the shift in

consumption pattern from artificial flavor based drinks (Coke and Pepsi) to natural

fruit based drink providing huge opportunity. MANB recently launched Coco Sip first

of its kind natural coconut water in May 2016 for non-south markets to be

manufactured through outsourcing model. The company derives ~70% of revenues

during 1Q and 4Q owing to seasonality of Mango Sip. With expansion of product

portfolio over last 2 years we expect capacity utilization to inch up from 55% in FY16

to ~58% in FY18 on expanded capacity as Fruits Up and Coco Sip would be marketed

as a year round product. MANB has a strong product pipeline of newer product

launches over next few years in the funnel which will help MANB further diversify its

product concentration and reduce seasonality.

Expanding capacities by 80% over FY16–18 to address supply side issues

177.5

225.0

FY17E FY18E

Urban

, 45%

MANB has planned to increase its capacity by 80% over FY16–18 (58% increase for

fruit drinks and 300% for carbonated fruit drinks) increasing capacity from 125,000

in FY16 to 225,000 cases per day in FY18. New facilities in Haryana, Dehradun and

existing Varanasi plant, would cater to north and north east, while facilities in

Vadodara would cater to west and south. It also plans to set up new capacities in

south India in FY18. Capacity constraints and preference for geographical diversity

vis-à-vis regional concentration led to stock out situation for both Mango Sip and

Fruits Up over last few years. We believe MANB strategy to open new facilities in

north and south India will not only address the supply side issues but also reduce

logistics cost and improve working capital cycle going forward.

Rural,

55%

Increased focus on distribution to result in higher visibility

MANB’s key differentiator vis-à-vis global MNCs is presence at a lower price point

through wide range of SKUS of 80–100 ml tetra packs (INR10) and pet bottle of 250

ml (INR15) and strong rural focus. In addition, MANB offers higher margins of 30–

35% vis-à-vis 20–22% for global MNCs. MANB has a strong presence in railways,

which accounts for ~20% of revenues and enhances visibility. It has 200,000

retailers, 2,000 distributors, 200+ super stockists, and expects to add 500–1000

distributors in the medium term with higher focus on less penetrated south India

market. Leaders in the space like Coca Cola and Pepsico have reach of 2.6m and

2.5m retails outlets respectively. Recently MANB has started tapping urban markets

by offering its products through modern trade and on-trade channels.

Stock Performance (one-year)

Valuation and view; At an inflexion point, Growth set to accelerate

MANB is on the cusp of a high growth cycle, led by capacity expansion, new product

launches and increase in distribution network, which should lead to market share

gains from 5% in 2016 to 7.5% in 2018. Launch of Fruits Up and Coco Sip is expected

to beat seasonality and ramp up capacity utilization thereby driving margins higher.

We expect sales and PAT CAGR of 49% and 63% respectively. The stock trades at PE

of 31x/19x FY17/18E EPS. We value the stock at PE of 28x FY18 EPS (~0.3x PEG v/s ~

1.6x of consumer peers). We initiate coverage with a ‘Buy’ with TP of INR750 (~44%

upside).

24 June 2016

Manpasand Beverages

Company overview

Sole beverage player listed in India

MANB has the unique distinction of being the sole listed company in the beverages

sector. The company’s revenue expanded at a CAGR of 60% over FY12–16, while net

profit grew 70% during the same period.

India’s leading beverage manufacturer

MANB primarily focuses on mango-based drinks. Mango Sip, launched in 1997, is the

company’s flagship product, contributing 80% to revenues in FY16 (97% in FY14).

Mango Sip is strategically focused on semi-urban and rural markets; MANB derives

~55% of revenues from rural areas, 20–22% through railways and the remaining

from urban areas.

Exhibit 1: MANB’s brands

Source: Company, MOSL

To diversify the portfolio, the company launched Fruits Up and Manpasand ORS as

well as commenced the marketing of Pure Sip bottled water in July 2014. Under

Fruits Up, MANB offers premium fruit and carbonated drinks in various flavors;

through Manpasand ORS, the company provides fruit drinks (apple and orange

flavors) with energy-replenishing qualities across northeast India. Fruits Up is

currently available in mango, apple, guava, litchi, orange and mixed fruit flavors; the

packaging of Fruits Up carbonated fruit drinks, available in grape, orange and lemon

flavors, is similar to Thums Up, Mirinda and Sprite.

Five manufacturing facilities by FY18

MANB had three manufacturing facilities at the end of FY16: two at Vadodara and

one in Varanasi; the second unit at Vadodara commenced production in April 2015.

The company is also setting up a facility in Haryana (expected to be commissioned

by June FY17) to cater to markets in north and northeast India. Another facility in

Dehradun is scheduled to start production by Q4FY17. Management has highlighted

plans to commission a facility in South India as well towards end of FY18.

24 June 2016

Manpasand Beverages

IPO proceeds to be primarily utilized for Haryana facility and paring debt

In 2015, MANB raised INR4b through an IPO, primarily to set up a manufacturing

facility at Haryana (INR1.5b) and pare long-term debt (totaling INR1b). The Haryana

facility has a production capacity of 10,000 tetra pack cases (TPC) and 20,000 pet

bottle cases (PBC) per day of fruit drinks and 20,000 PBC per day of carbonated fruit

drinks. MANB turned debt-free in 4QFY16 by repaying the long-term debt of INR1b

from IPO proceeds. The balance proceeds are expected to be utilized for

modernization of facilities at Vadodara and Varanasi (INR0.4b), and setting up a

corporate office at Vadodara (INR0.2b). Going forward, management expects

working capital-related borrowings to be the only debt.

Exhibit 2: Summary of utilization of IPO proceeds

INR m

IPO proceeds

New manufacturing facility – Ambala, Haryana

Paring debt

Modernization of existing manufacturing facilities – Vadodara I and Varanasi

New corporate office at Vadodara

General corporate expenses

4,000

(1,523)

(1,009)

(389)

(221)

(857)

Source: MOSL, Company

24 June 2016

Manpasand Beverages

Fruits Up and Coco Sip to reduce seasonality and

improve utilization

Additions to product portfolio for enhancing market presence



Mango Sip has been the company’s flagship product since the launch in 1997 in Uttar

Pradesh, and slowly extended to other parts of India (24 states).

Revenues from Mango Sip registered a robust CAGR of 51% over FY12–16, led by the

4.5x increase in capacity and increased distribution network.

MANB launched Fruits Up range of premium fruit drinks (pulp content of 16–17%) and

fruit-based carbonate drinks in 2015 that expand opportunity size.

While Mango Sip was targeted as a rural product, Fruits Up with premium flavors

(such as guava and litchi) and fruit-based carbonates are considered more urban in

nature.

As capacities are fungible, addition of products would help beat seasonality and ramp

up utilization from 55% in FY16 to ~58% in FY18, along with expanded capacities in

fruit drinks, and carbonates.

Expansion of the product portfolio lowers risks related to seasonality, since Fruits Up

will be marketed as a year round product compared to Mango Sip.

Mango Sip – an existing money spinner with strong presence in rural India

MANB launched Mango Sip, a mango-based drink, in 1997. The product was initially

introduced in Uttar Pradesh, and then gradually diversified across the north and

other parts of India, such that it is now available in 24 states. Mango Sip was largely

targeted at Tier II and Tier III cities and has a strong rural presence (55–56% of sales

from this channel). Besides, IRCTC comprises 20–22% of revenues, with urban areas

accounting for the rest. A strong rural focus reduces competition as Tier II and Tier

III cities are not focus areas for Maaza and Slice that are more urban-centric.

Exhibit 3: SKU-wise comparison of Mango Sip with peers (INR)

SKU (ml)

80–100

160

200

500–600

1200

Pulp content

Mango Sip

14%

Frooti

16%

Tropicana Slice

Not present

13.6%

Maaza

Not present

19%

Source: Company, MOSL

Key reasons for Mango Sip gaining market share as per our channel checks are as

follows:

1) Company has around 75 SKUs for Mango Sip and Fruits Up put together, highest

by any player in the market.

2) MANB derives 40% of revenues from below 200ml size of SKUs, an area where

competition like Maaza and Slice is not present.

3) MANB provides higher distributor and retail margins to the tune of 35% v/s 22%

for MNC players.

4) MANB keeps the channel starving for products thereby generating pricing

power.

24 June 2016

Manpasand Beverages

Exhibit 4: Mango Sip revenues to post 34% CAGR over FY16–18

Mango SIP

174%

4,487

46%

5,983

33%

35%

Growth %

8,053

857

2,345

2,850

22%

3,069

Source: Company, MOSL

Differentiated product strategy in affordable small packs

MANB offers fruit drinks in small packs—small tetra packs (also known as tetra

classic aseptic) of 80–100 ml, and pet bottle and tetra pack of 160 ml—where global

competitors are not present. The segmental margins are inferior due to lower prices

and proportionately higher costs, such as packaging, which discourages global giants

like Coca Cola (Maaza) and Pepsico (Tropicana Slice). With Mango Sip, largely a rural

focused drink, MANB’s offering at affordable prices (INR5 for 80–100 ml and INR10

for 160 ml) helps in acquiring customers and retaining them at a lower price point.

Exhibit 5: Small packs a key differentiator

SKU (ml)

80–100

160

Mango Sip

Frooti

Tropicana Slice

Not present

Maaza

Not present

Source: Company, MOSL

Exhibit 6: Various SKUs of Mango Sip: From 80 ml small tetra classic pack to 1200 ml PET bottle

Source: Company, MOSL

24 June 2016

Manpasand Beverages

Fruits Up – Positioned to capitalize on shift from flavored based drinks

MANB intends to capitalize on the gradual shift in consumer preferences from

flavored based drinks (Coke and Pepsi) to natural fruit based drinks, including

carbonated fruit drinks, and thereby expand market share and products.

Accordingly, the company launched Fruits Up, a premium fruit drink under various

flavors, including versions of carbonated beverages in FY15. Fruits Up is available in

mango, apple, guava, litchi, orange and mixed fruit flavors, while Fruits Up

carbonated fruit drinks are available in grape, orange and lemon flavors.

In 2 years of its launch, the company has registered a turnover of INR 1.1bn (70%

from non-carbonates and 30% from carbonates) in FY16 without any pan India

marketing campaign. Also the company has set up separate dedicated distribution

network for Fruits Up which will help individual teams to focus on scaling up the

brand. We believe Fruits Up will move from urban to rural vis a vis Mango Sip which

will move from rural to urban over the medium to long term.

Exhibit 7: SKUs for Fruits Up fruit drinks

Source: Company, MOSL

Packaging for carbonated drinks resembles famous brands such as Thums Up,

Mirinda and Sprite. The product is expected to draw good response from health-

conscious consumers seeking alternatives to cola drinks.

Exhibit 8: Comparison of Fruits Up carbonates with peers (INR)

SKU

250 ml PET

600 ml PET

250 ml CAN

MANB

Pepsi

Coke

Thums up

Source: MOSL, Company

24 June 2016

Manpasand Beverages

Exhibit 9: Fruits Up carbonates

Source: Company, MOSL

Exhibit 10: Fruits Up to post 83% CAGR over FY16–18E

Fruits up

170%

115%

56%

400

1,080

2,327

3,623

Growth %

Source: Company, MOSL

Coco Sip- Virgin market with huge opportunity

MANB in May 2016 launched its new product Coco Sip targeted for non-south

markets. Coco Sip will be first of its kind natural coconut water without having any

preservatives in it. The product will be available across SKUs size at affordable

pricing starting INR 10 and will be manufactured through outsourcing model. Our

channel checks suggest fresh coconut (water) in non-south markets are sold at INR

30-40 per coconut water and most of them are very small in size. It roughly costs

around INR80k per truck to bring coconut water from south India to North India.

Hence we believe there is a huge opportunity for MANB to launch natural coconut

water at INR10 and grand the entire non-south market. We believe Coco Sip will

clock revenues of INR 500mn in FY18 with margins of 20 %.

Pure Sip – Bottled water

MANB commenced the marketing of Pure Sip bottled water in July 2014. The

product is currently manufactured through a third-party in Vadodara. As of date,

Pure Sip is being used as a trade incentive: as a combined offer with fruit drinks to

distributors and retailers. Based on our discussion with management, we

understand this initiative is for a longer term horizon of 4–5 years, and the company

aims to diversify the product base and gradually gain visibility.

24 June 2016

Manpasand Beverages

Exhibit 11: Pricing for Pure Sip vs. peers

Brand

Pure Sip

Bisleri

Bailey

Aquafina

Kinley

MRP (INR)

SKU (ml)

1,000

Source: MOSL, Company

The company launched Manpasand ORS fruit drinks with energy-replenishing

qualities (apple and orange flavors) in July 2014. It is targeted at the northeastern

markets. The product contributed 3.8% to total revenues in FY15. Mary Kom is the

brand ambassador for Manpasand ORS. Management highlights the market size for

ORS drinks is about INR2b, expanding at a CAGR of 10%. However, management has

commented it is primarily focusing on Mango Sip and Fruits Up.

Manpasand ORS – An energy replenishing drink targeting the northeast

Portfolio diversification helps mitigate seasonality risks, ramp up utilization

Seasonally, the first and fourth quarters are the strongest for sales of mango-based

drinks; for MANB, the two quarters account for ~70% of annual sales. Inclusion of

Fruits Up would help de-risk seasonality as it would be sold through the year.

Capacities for fruit drinks are fungible; hence, addition of products to the portfolio

shall further augment capacity utilization. It would also aid in addition of other fruit

drink products on an annual basis. Given significant demand in Fruits Up the

management has proponed its capex in Ambala from Sep 2016 initially to June 2016.

MANB is also likely to launch and ad campaign for Fruits Up starting June 2016

colliding it with commissioning of new capex.

Considering the low base and strong market opportunity, we expect robust growth

for Fruits Up (Non-carbonates and carbonates) in the future. With Fruits Up

expected to grow its sales by 3.4x to INR 3.6bn in FY18E, we believe that capacity

utilization in the lean quarters i.e Q2 and Q3 is set to improve there by leading to

improvement in utilization rates from 55% in FY16 to 58% in FY18E on expanded

capacities.

Exhibit 12: Break-up of quarterly revenue (FY16)

4Q, 41%

1Q, 28%

Exhibit 13: Break-up of quarterly EBITDA (FY16)

4Q, 39%

1Q, 31%

2Q, 15%

3Q, 16%

Source: Company, MOSL

3Q, 16%

2Q, 14%

Source: Company, MOSL

24 June 2016

Manpasand Beverages

Expanding capacities by 80% over FY16-18

Expect CAGR of 49% in revenue, supply side issues to get addressed



MANB plans to aggressive expand its capacities by 80% over FY16–18. Fruit drinks and

carbonate capacity is expected to increase 58% and ~300%, respectively, which should

address supply side constraints to match up to increasing demand.

MANB’s existing capacities are situated in Varanasi and Vadodara. New capacities to

come in Haryana and Dehradun which would aid geographical diversification. It also

plans to set up new capacity in south India in FY18.

We believe MANB strategy to open new facilities in north and south India will not only

address the supply side issues but also help to reduce logistics cost and improve

working capital cycle going forward

Due to the lack of capacities in the past, there were MANB has been facing stock out

situation for its products last few years. With an increase in capacities and ramping up

of production, MANB is on the cusp of a strong supply-led growth.

Capacity to increase by 80% over FY16–18 to drive growth

MANB plans to aggressive expand its capacities by 80% over FY16–18. The company

aims to increase capacity from 1,25,000 cases per day in FY16 to 2,25,000 cases per

day in FY18. Fruit drink and carbonated fruit drink capacities are projected to

increase 58% and 300%, respectively, during the same period. The company had

existing facility in Vadodara and Varanasi and commenced another facility in

Vadodara in April 2015, yet continued to face stock out situation for its products.

Given the huge demand, it has now proponed its capex in Ambala, Haryana, by Sep

2016 to June 2016 to cater to north and northeastern India. The facility is expected

to produce the entire range of fruit as well as carbonated drinks: Mango Sip and

Fruits Up. It plans to expand in south India in FY18.

Exhibit 14: Utilizations to inch up on expanded capacity

Capacity (cases per day)

63%

49%

53%

55%

Utilisation (%)

55%

56%

58%

24,000

FY12

35,000

FY13

56,667

FY14

72,500

FY15

125,000

FY16

177,500

225,000

FY17E

FY18E

Source: Company, MOSL

We expect capacity expansion to aid robust growth in supply, with revenue

increasing at a CAGR of 49% over FY16–18. The company’s preference for

geographical diversity (presence in 24 states) over regional concentration led to

product shortage in the past. We believe MANB strategy to open new facilities in

north and south India will not only address the supply side issues but also help to

reduce logistics cost and improve working capital cycle going forward.

24 June 2016

Manpasand Beverages

Exhibit 15: MANB’s Vadodara-II plant

Source: Company, MOSL

Capacity expansion strategically geared toward geographical diversification

MANB intends to set up manufacturing facilities across India; among the existing

facilities, Vadodara caters to western and southern India, while Varanasi supplies to

northern and eastern parts of the country. Vadodara and Varanasi contributed ~60%

and ~40% to volumes, respectively, in FY16. Capacity expansion would aid

geographical diversification, since the facility in Haryana is strategically located to

cater to the north and northeastern markets. The facility at Dehradun, with a

relatively smaller capacity of 5,000 PBC per day, would supply to Uttarakhand and

Himachal Pradesh. The company has also planned to set up a facility in southern

India in FY18.

FMCG products require dispersed and geographically diversified manufacturing to

decrease transportation costs. Logistics costs, as a percentage of revenues, averaged

~4% over FY12–16. With expansion in north India and south India we believe that

MANB will not only be able to save logistics cost but would be able to supply to

market much quicker thereby improving turnaround time leading to higher growth .

Considerable benefits in direct and indirect taxes

MANB enjoys considerable advantages in direct and indirect taxes as it operates in

the food processing industry. Under the Income Tax Act (Section 80IB 11A), the

company receives 100% exemption on profits from a new facility for first five years,

followed by 30% for the next five years. Accordingly, Vadodara-I facility would have

an income-tax exemption on 30% of profits over FY16–20, while Vadodara-II will

have 100% exemption until FY20 and 30% until FY25. The Varanasi facility is entitled

to 100% exemption until FY16 and 30% until FY21. The facility in Haryana, expected

to commence operations in FY17, shall be exempt from tax for the first five years

and 30% thereafter. In terms of indirect taxes, the excise duty stands at 2%, while

blended VAT is 5%, which are low as the company operates in the food processing

industry.

Exhibit 16: Facility wise direct tax benefits – Exemptions from profits

Vadodara I

Vadodara II

Varanasi

Haryana

FY11

100%

N.A

FY12

100%

N.A

100%

N.A

FY13

100%

N.A

100%

N.A

FY14

100%

N.A

100%

N.A

FY15

100%

N.A

100%

N.A

FY16E

30%

100%

N.A

FY17E

30%

100%

30%

100%

FY18E

30%

100%

30%

100%

FY19E

30%

100%

30%

100%

FY20E

30%

100%

30%

100%

Source: MOSL, Company

24 June 2016

Manpasand Beverages

Distribution thrust to enhance brand visibility

Focus on expanding newer channels like modern retail and on trade tieups



MANB has over 200,000 retailers, 2000 distributors, and 200+ super stockists. The

company plans to add 500–1000 distributors in the near to medium term with

significant focus to expand in South India.

MANB offers higher margins of 30–35% compared to 20–22% by global MNCs such as

Pepsi and Coca Cola.

The company has entered into tie-ups with IRCTC’s vendors for the supply of products

in trains and railway stations, and derives ~20–22% of sales through this channel. In

our opinion, the channel not only has a significant share in sales, but also acts as an

effective mode of communication and increases brand visibility.

It has set up separate distribution network for fruits Up and Coco Sip. It plans to

enhance the network to ~200–250 with a supply of ~2000 vans in the medium term

Focus on tapping urban markets through inclusion of fruit flavors such as guava and

litchi in Fruits Up, and strengthening presence in modern trade and on-trade through

tie-ups with Metro Cash & Carry, Havmor as well as Baskin & Robbins shall augur well

for urban presence, as MANB focused on rural areas, Tier II and Tier III cities earlier.

We believe expansion in capacity and distribution would lead to higher visibility and

brand building, thereby indicating sales would be gradually led by brand pull than

supply push.

MANB viewed as a pan-India player with brand pull vis-à-vis supply push

Initially

the company focused on rural areas for the sale of beverages, with Mango

Sip marketed in Uttar Pradesh, and thereafter across north India. Gradually, the

company moved to rural areas, Tier II and Tier III cities, and non-metros across the

country. MANB is now looking to strengthen presence in urban areas, as highlighted

earlier, through additional tie-ups in modern trade, on-trade, launch of Fruits Up,

raising ad spends and promotions as well as expanding the distributor base.

Moreover, it is undertaking specific steps such as introducing large-size family pack

for Mango Sip and Fruits Up in guava and litchi flavors (considered more urban in

nature). In our opinion, an increase in supply and distributorship could result in

higher visibility and brand building that, in turn, would drive long-term sales through

brand pull than supply push.

Distributor-led strategy with higher margins and incentives

MANB’s distribution network is spread across 24 states in India. The company offers

higher margins (15% distributor and 20% retailer margins) to distributors compared

to peers. It also provides incentives like selling the ‘Pure Sip’ brand of bottled water

in conjunction with fruit drinks and carbonates. MANB also offers certain free packs

of Mango Sip and Fruits Up, and combo offers in retail to increase volumes.

Management reiterated plans to focus on topline growth through higher channel

margins, even if it is at the cost of restricting profitability.

MANB currently has over 200,000 retailers, 2000 distributors, and 200+ super

stockists. The company plans to add 500–1000 distributors in the near to medium

term. For Mango Sip, it adopted a unique strategy of penetrating Tier II and Tier III

cities initially, and thereafter strengthening presence in urban markets. MANB plans

to operate across all 29 states in next 5 years. It also plans to achieve 100%

penetration in existing 24 states where it operates in next 2-3 years

24 June 2016

Manpasand Beverages

Exhibit 17: Highest channel margins vs. peers (approx.)

Distributor margin

Pepsi

Coca Cola

Parle Agro

Manpasand Beverages

10%

15%

Retailer margin

15%

16%

20%

Source: MOSL, Company

Exhibit 18: Distribution reach vs. peers offers scope for growth

Retail outlets (mn)

Pepsi

Coca Cola

Manpasand Beverages

2.5

2.6

0.2

Source: MOSL, Company

Dedicated distribution for Fruits Up and Coco Sip

MANB has adopted a dedicated distribution strategy for Fruits Up; the company’s

~40–50 distributors are actively engaged in supply through vans. MANB plans to

enhance the distributorship to ~200–250 with a supply of ~2000 vans in the medium

term. Similarly the company has already appointed multiple distributor in north

India before launching the product and plans to expand its distributorship by around

100 distributors in the near term.

Sales through railways aids higher penetration

Currently, Indian Railways contributes ~20–22% to total revenues and rural areas

account for 52–56%. MANB is empaneled with the IRCTC for direct selling to

vendors approved by the former. Apart from being an additional sales channel, we

believe this strategy would also help the company cater to a wider audience. Given

the penetration of Indian Railways, it is as an effective communication mode to

enhance visibility. Furthermore, this tie-up is expected to bolster sales of Mango Sip

in Tier II and Tier III cities, which are prime focus areas for the product. MANB’s

products have high visibility at railway stations and in trains.

Exhibit 19: Renowned celebrities as ambassadors

Source: Company, MOSL

24 June 2016

Manpasand Beverages

Spends on brand building and business promotion set to increase

MANB spends around 3.5-4% of its sales on advertisement. The company plans to

launch ad campaign for Fruits Up in June 2016 as new capacities are commissioned.

Though rural and smaller cities would continue to be the prime focus areas,

management plans to aggressively tap urban markets and metro cities through

Fruits Up and Coco Sip. The company has roped in Bollywood actor Sunny Deol for

promoting the Mango Sip brand and would be unveiling the advertising campaign

for Fruits Up in June 2016.

Exhibit 20: Sales promotion expenses to remain between ~15%

Sales promotion to revenues (%)

14%

15%

FY12

FY13

FY14

FY15

Source: Company, MOSL

While the on-trade channel for fruit drinks is low at 31%, it is significantly higher for

carbonated beverages (~59%). MANB strives to use the existing outlets of several

branded products by entering into contracts. The company is tapping the on-trade

channel through tie-ups with QSRs such as Baskin & Robbins, Costa Coffee, Barista,

Havmor and Goli Vadapav. MANB’s products – Mango Sip and Fruits Up – are

available at Havmor’s 209 food outlets in Gujarat (164), Mumbai (28) and Punjab

(17). MANB plans to extend the tie-up with Havmor’s other food outlets in

Rajasthan, Madhya Pradesh and rest of Maharashtra in the future. Also, the

company entered into a contract with Baskin & Robbins (Graviss Foods Pvt. Ltd.) to

sell Mango Sip and Fruits Up at the latter’s outlets.

Tapping on-trade channel to gain traction

Growing presence in modern trade

MANB seeks to tap newer modern trade channels, which account for a higher

revenue share in the packaged juice segment vis-à-vis the overall FMCG market in

urban India. This channel would be an effective way to gain ground in urban areas.

The company recently tied up with Germany-based wholesale major, Metro Cash &

Carry, to tap urban markets—this is MANB’s first major tie up with an international

retail brand. Metro Cash & Carry works on an exclusive business-to-business

wholesale concept, where MANB will supply Mango Sip and Fruits Up in varied sizes

to the former’s outlets.

Multiple suppliers de-risk raw material requirements

Of the total raw material cost, packaging material (35%) accounts for a major share,

followed by mango pulp (23%) and sugar (21%). The normal industry trend is to use

Totapuri variety of mangoes as pulp for fruit drinks. Totapuri is grown in southern

and western India, and MANB procures the fruit from Jain Irrigation, Capricorn

Group, Mother Dairy and few other suppliers in Andhra Pradesh, Karnataka and

24 June 2016

Manpasand Beverages

Maharashtra. For other fruit juices, the company procures concentrates from

various suppliers in Maharashtra. Mango pulp, which has a shelf life of more than

12–18 months, is supplied in frozen sterilized aseptic bags or cans. Sugar is procured

from multiple sugar co-operatives and wholesale distributors in Gujarat and Uttar

Pradesh. The principal packaging materials are tetra packs, PET bottles and caps. The

packaging material for aseptic tetra packs is procured from Tetra Pak India Private

Limited, while PET bottles and caps are bought from some suppliers in Gujarat and

Uttar Pradesh.

Exhibit 21: Break-up of total raw material cost

Mango pulp

26%

23%

18%

22%

12%

FY13

Sugar

Preform

22%

17%

21%

18%

FY14

Laminates

Others

20%

16%

21%

23%

FY15

Source: Company, MOSL

SWOT Analysis



Strong rural presence

(55–56% of revenues)

Effective tapping of

railways channel (20–

22% of revenues)

Presence in small

packs segment: key

focus where MNCs

are not present

Fruit-based

carbonates a

healthier alternative



Lack of presence in

urban areas

Lack of resources and

muscle power

compared to MNCs

Seasonality

revenues

Higher channel

margins and

increased promotion

spends



Large market worth

INR524b with growth

rates upward of 11%

Tapping the fruit-based

carbonates segment

Shifting of consumer

preferences from global

MNC fruit drinks and

colas to locally

manufactured drinks

Increasing consumer

spends

Per capita consumption

in India just 16 liters vis-

à-vis 160 in the US



Competitive intensity

with MNCs launching

smaller packs and lower

fruit content

Rising competition from

unorganized and

regional companies

Concentration of

revenues with Railways



24 June 2016

Manpasand Beverages

Earnings to post 63% CAGR over FY16–18

Capacity expansion to lead topline growth; margin expansion and

deleveraging to drive PAT

We expect PAT to post a CAGR of 63% over FY16–18, led by the 49% CAGR in

revenue due to capacity expansions. Revenue growth will be driven by 34% revenue

CAGR in Mango SIP while Fruits Up to post higher revenue CAGR of 83% over the

same period. Accordingly, we expect Fruits Up to increase its share from 19% in

FY16 to 31% in FY18E. Seasonally, the first and fourth quarters are the strongest for

sales of mango-based drinks; for MANB, the two quarters account for ~70% of

annual sales. Inclusion of Fruits Up would help de-risk seasonality as it would be sold

through the year. Capacities for fruit drinks are fungible; hence, addition of products

to the portfolio shall further augment capacity utilization. It would also aid in

addition of other fruit drink products on an annual basis.

Exhibit 22: Revenues to post 49% CAGR over FY16–18

Revenues (INR m)

180.0%

12,336

8,380

54.7%

857

FY12

2,398

FY13

22.7% 22.2%

2,943

3,598

FY14

FY15

5,567

FY16

FY17E

FY18E

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

50.5%

47.2%

100

Growth (%)

Exhibit 23: Diversification into new products (% share)

Mango SIP

Fruits up

Source: Company, MOSL

We expect EBITDA margins to largely remain unchanged over FY16-18E as company

is likely to pass on the benefits of higher utilization towards promotional spends.

The PAT margins will expand from 9.1% in FY16 to 10.9% in FY18 on account of

deleveraging of balance sheet as company has retired its debt through IPO proceeds

in FY16. Additionally, the company will continue to enjoy lower tax rate of 11% due

to tax benefits under Income Tax Act (section 80IB 11A) and lower indirect taxes.

Exhibit 24: EBITDA to register a CAGR of 49% over FY16–18

EBITDA (INR m)

16.3%

17.8%

Margins (%)

19.8%

19.7%

20.0%

268.1%

1,340

2,467

140

FY12

387

FY13

457

FY14

641

FY15

1,104

FY16

1,651

FY17E

FY18E

FY12

224

FY13

-8.5%

205

FY14

300

FY15

506

FY16

46.2%

68.8%

65.0%

834

FY17E

FY18E

60.6%

Exhibit 25: PAT to record a CAGR of 63% during FY16–18

PAT (INR m)

Growth (%)

16.1%

15.5%

Source: Company, MOSL

24 June 2016

Manpasand Beverages

Exhibit 26: Continue to remain debt free

Net Cash (INR mn)

0.6

0.4

-277

-492

314

(0.2)

-142

FY12

Source: Company, MOSL

FY13

FY14

FY15

FY16

FY17E

FY18E

Source: Company, MOSL

521

0.7

0.6

Net Debt to Equity (x)

1,229

928

914

Exhibit 27: Cash flow from operations set to increase

CFO (INR m)

1,390

865

1,818

-696

-1,136

(0.2)

(0.1)

High topline growth will be supported by expansion of capacities by 80% over FY16-

18. It aims to increase capacity from 125,000 cases per day in FY16 to 225,000 cases

per day in FY18. The new capacities will come up in Ambala (Haryana) with 50,000

cases per day in FY17 and another 10,000 cases per day in FY18. Remaining

capacities to come up in Vadodara unit 2 and Varanasi.

Exhibit 28: Utilization to grow on expanded capacities

Capacity (cases/day,'000)

63%

49%

53%

55%

Utilisation (%)

55%

56%

58%

1.0

1.8

1.7

1.2

0.9

1.2

Exhibit 29: Asset turnover to improve to 1.5x in FY18

Asset Turnover (x)

1.5

FY12

FY13

FY14

FY15

125

FY16

178

FY17E

225

FY18E

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

Source: Company, MOSL

Exhibit 30: Management to focus on reducing WC

Working Cap. Turnover (Days)

151

Exhibit 31: Higher utilization to improve return ratios

RoE

RoIC

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

Source: Company, MOSL

24 June 2016

Manpasand Beverages

Valuation and view

Initiate with a Buy

Compelling story of India’s booming consumer spends and beverages

market



MANB is expected to improve in market share from 5% in 2016 to 7.5% in 2018

in INR 132bn fruit juice market.

Low penetration of 30% and per capita annual consumption of soft drinks in

India at 16 liters v/s 166 in the US, provide significant market opportunities for

growth.

MANB has planned to increase its capacity by 80% over FY16–18 (58% increase

for fruit drinks and 300% for carbonated fruit drinks) which should drive growth

by reducing supply side constraints.

MANB expanded the product portfolio by launching Fruits Up (Carbonated and

non-carbonated) in FY15 which now contributes 19% to revenues in FY16. It

recently launched natural coconut water under brand Coco Sip.

It has 200,000 retailers, 2,000 distributors, 200+ super stockists, and plans to

add 500–1000 distributors in the medium term with a special focus on south

India.

Focus on urban areas through Fruits Up, increase in distributors (50% additions

in the medium term), and modern trade and on-trade tie-ups would strengthen

presence in urban areas, thereby enabling MANB to be a pan-India player.

The company’s three-pronged strategy: (i) increase available capacity; and (ii)

enhance penetration and distribution in its present 24 states, sets the stage for

a multi-year growth story (iii) Launch of new products.

We believe, margins will remain resilient at 20% as the contribution of high

margin Fruits Up business will increase from 19% in FY16 to 31% in FY18E.

Additionally, company has also recently increased prices of its products to

neutralize the impact of increase in raw material prices and inspite of it the

company continues to face stock out situation at many instances. This also

signifies pricing power and company will be in a situation to pass on any further

increase in raw material prices.

The RoIC for the company will increase from 18% in FY16 to 24% in FY18E which

has further scope of expansion as the capacities will get fully utilized over next

3-4 years as the contribution of Fruits Up will increase. Higher contribution from

Fruits Up over a period of time will help to reduce the seasonality attached to

utilization. Over FY16-18E, utilization will increase from 55% to 58% on an

increased capacity from 125,000 cases per day to 225,000 cases per day over

FY16-18.

We expect sales and PAT CAGR of 49% and 63% respectively over FY16-18

translating into improvement of post tax ROIC/ ROE from 18%/11% in FY16 to

24%/16% respectively in FY18. At current levels, the stock trades at PE of

31x/19x FY17/18E EPS. We value the stock at PE of 28x FY18 EPS of INR26.8

which is justified based on low PEG ratio of 0.3x compared average PEG ratio of

1.6x of peer companies, debt free status and strong CFO generation of

INR1.4b/1.8b in FY17/18.

We initiate coverage with a

‘Buy’

arriving at a price

target of INR750,

implying 44% upside from current levels

24 June 2016

Manpasand Beverages

Exhibit 32: Assumption sheet

FY12

Installed Capacity per day

Tetra Pak Case - Fruit Drinks

Pet Bottle Case - Fruit Drinks

Pet Bottle Case - Carbonates

Revenues (INR m)

Fruit Drinks

Carbonates

Others

Revenue Growth (%)

Fruit Drinks

Carbonates

12,000

857

FY13

19,750

15,250

2,396

2,345

180%

174%

FY14

26,667

30,000

2,932

2,850

22%

FY15

30,000

32,500

10,000

3,622

3,332

137

153

24%

17%

FY16

40,000

67,500

17,500

5,567

5,243

324

54%

57%

136%

FY17E

50,000

85,000

42,500

8,380

7,437

960

150

54%

40%

196%

FY18E

50,000

120,000

55,000

12,336

10,724

1,358

500

47%

40%

41%

Source: Company, MOSL

(One

tetra pack case

contains 27 pieces of 200 ml or 160 ml each or 64 cases of 100

ml each, while

one PET bottle case

contains: a) six PET bottles of two liters each, or

b) 12 PET bottles of 1,200 ml each, or c) 24 PET bottles of 160/200/250/500/600 ml

each, or d) 50 PET bottles of 125 ml each.)

Exhibit 33: Peer valuation

Company Name

Dabur India Ltd

Britannia Industries Ltd

Hindustan Unilever Ltd

Jubilant Foodworks Ltd

Manpasand Beverages Ltd*

*MOSL Estimates

Sales PAT

CAGR CAGR

FY17E FY18E FY17E FY18E FY17E FY18E FY17E FY18E FY17E FY18E FY17E FY18E FY16- FY16-

18E 18E

2.3

2.1

EV/EBITDA

RoE %

RoCE %

EV/Sales

PEG

114

129

177

209

2.5

3.1

1.2

0.5

1.4

2.1

0.9

0.3

24 June 2016

Manpasand Beverages

Bull & Bear case

Bull case



Our bull case assumptions have positive impact on sales growth and operating

margins. We assume higher capacity utilization on account strong traction in

Fruits Up. Additionally, we assume prices of critical raw material like mango pulp

and sugar decrease for FY17E and FY18E.

Instead of assuming a flattish EBITDA margins over FY16-18E in the base case

due to raw material prices remaining steady, we are assuming 100bps YoY

improvement each for FY17E and FY18E and 5% increase in sales each year over

base case. In the base case we are expecting over 20 bps increase in EBITDA

margin over FY16-18E.

In the bull case we are assuming that company will not pass on benefit on lower

raw material prices and thus enjoy higher margins. Company has recently taken

price increases to neutral the impact of recent price increase in raw material.

There is an increase of 16% in FY17E EPS and 24% in FY18E EPS over the base

case EPS to INR19.3 and INR33.2 respectively.

Assuming the same 28x target multiple that we have taken for the base case, we

get a bull case target price of INR929 (upside of 79% to CMP) based on FY18 EPS

instead of the base case target price of INR750, upside of 44%.

Exhibit 34: Bull case scenario

FY16

Sales (INR m)

Sales growth (%)

EBITDA (INR m)

EBITDA Margin (%)

EBITDA growth (%)

PAT (INR m)

PAT Margin (%)

PAT growth (%)

EPS (INR)

Target multiple (x)

Target price (INR)

Upside/downside (%)

5,567

54.7

1,104

19.8

72.2

506

9.1

68.8

10.1

FY17E

8,691

56.1

1,799

20.7

62.9

966

11.1

91.1

19.3

FY18E

12,972

49.3

2,828

21.8

57.2

1,661

12.8

71.9

33.2

929

Source: Company, MOSL

Bear case



Our bear case assumptions mainly have a negative impact on both sales growth

and operating margins for FY17E and FY18E.

We are assuming a EBITDA margin decline of 140bp over FY16-18E in the bear

case and sales decline of 14%/20% in FY17E/FY18E over our base case.

In our bear case, we assume that new capacities get delayed which has a

negative impact of sales volume growth and also impacts the growth of high

margin Fruits Up business. Additionally, we assume the company is unable to

pass on the increase in raw material prices and the benefits of operating

leverage will also get delayed.

This will lead to decrease of 33% in FY17E EPS and 43% decrease in FY18E EPS

over the base case to INR11.3 and INR15.2 respectively.

24 June 2016

Manpasand Beverages



Assuming the same 28x target multiple that we have taken for the base case, we

get a bear case target price of INR424 (downside of 18% to CMP) based on FY18

EPS instead of the base case target price of INR750, upside of 44%.

Exhibit 35: Bear case scenario

FY16

Sales (INR m)

Sales growth (%)

EBITDA (INR m)

EBITDA Margin (%)

EBITDA growth (%)

PAT (INR m)

PAT Margin (%)

PAT growth (%)

EPS (INR)

Target multiple (x)

Target price (INR)

Upside/downside (%)

5,567

54.7

1,104

19.8

72.2

506

9.1

68.8

10.1

FY17E

7,197

29.3

1,346

18.7

21.9

563

7.8

11.4

11.3

FY18E

9,856

36.9

1,814

18.4

34.7

758

7.7

34.7

15.2

424

-18

Source: Company, MOSL

24 June 2016

Manpasand Beverages

Industry overview

Beverages market presents a huge opportunity with rising consumer spends

Soft drinks represent significant market opportunity

The Indian soft drinks market was pegged at 12b liters in volume terms and INR524b

in value terms in 2015, implying a CAGR of 17.9% and 18.7%, respectively, over

2010–15. Per capita consumption of soft drinks stood at ~10 liters per annum

compared to ~160 liters in the US, indicating significant growth potential.

India Soft Drinks Industry (2015)

Volume: 12.1b liters

Bottled water

Volume: 5.6b liters

Value: INR121b

Carbonates

Volume: 4.6b liters

Value: INR251b

Juice

Volume: 1.8b liters

Value: INR132b

Others

Volume: 0.1b liters

Value: INR20b

Manpasand Brands

Fruits Up

carbonates

Mango Sip

Fruits Up

Exhibit 36: Soft drinks volume trend (bn litres)

17.9% CAGR

7.6

8.9

10.4

12.1

Exhibit 37: Soft drinks value trend (INR bn)

18.7% CAGR

447

264

315

375

524

5.3

6.4

223

2010

2011

2012

2013

2014

2015

2010

2011

2012

2013

2014

2015

Source: Euromonitor International March 2016

Exhibit 38: Soft drinks volume mix (%) - 2015

Juice, 14.9

Others, 0.8

Exhibit 39: Soft drinks value mix (%) - 2015

Others, 3.9

Juice, 25.1

Bottled

Water, 46.4

Bottled

Water, 23.1

Carbonates,

37.9

Carbonates,

47.9

Source: Euromonitor International March 2016

24 June 2016

Manpasand Beverages

In terms of distribution channels, the soft drinks market is divided into off-trade and

on-trade.

Off-trade sales

refer to those undertaken at retail outlets such as grocery

stores, hypermarkets, supermarkets etc.

On-trade sales

consist of sales at food

service outlets, restaurants, bars, and clubs, among others. The distinction between

off-trade and on-trade channels is significant as the latter generally takes place at

higher sales prices, and hence, impacts the break-up in value terms.

Exhibit 40: Off-trade vs On-trade volume mix

Off-trade

33%

32%

On-trade

32%

31%

Exhibit 41: Off-trade vs On-trade value mix

Off-trade

On-trade

46%

49%

48%

47%

67%

68%

69%

51%

52%

53%

54%

2010

2011

2012

2013

2014

2015

2010

2011

2012

2013

2014

2015

Source: Euromonitor International March 2016

As per Euromonitor International March 2016 International March 2016, the soft

drinks market is expected to post a CAGR of 10.8% over 2015–20 and reach

INR874b, with on-trade rising 8.2% and off-trade growing 12.8%. Overall, volume

CAGR is estimated at 22%.

Exhibit 42: Soft drinks market to post 11% CAGR over 2015-20

788

874

524

580

642

711

2015

2016E

2017E

2018E

2019E

2020E

Source: Euromonitor International March 2016

Juice market pegged at INR132b

The Indian juice industry was pegged at INR132b in 2015, with 77% being off-trade

(INR101b) and the remaining on-trade. The juice market is divided into three

categories: 100% juice, nectars and Juice drinks.

24 June 2016

Manpasand Beverages

Exhibit 43: Juice consists of three categories

Category

100% juice

Nectars

Juice drinks

Fruit content

100%

25% and above

Up to 24%

Target income segment

High

Mid-high

Low-mid

Off-trade value CAGR 2010–15

31%

26%

27%

Source: Euromonitor International March 2016

Under off-trade, the juice drink market was the largest segment at 71% in value

terms and 81% in volume terms in 2015. Juice drinks posted a value CAGR of 27.2%

and volume CAGR of 22.4% over 2010–15.

Exhibit 44: Summary of the juice market (2015)

INR b

On trade

Off-trade

100% Juice

Juice Drinks

Nectars

Total

101

132

Source: Euromonitor International March 2016

Manpasand is present in

Juice drinks market through

its brands Mango SIP and

Fruits Up

Mango is the largest selling flavor in the juice drink category, contributing 85% to

off-trade volumes. MANB is a player in this segment, which was estimated at INR72b

(off-trade) as of 2015 and is expected to reach INR191b by 2020.

Exhibit 45: Juice drinks account for 71% market share

Nectars,

20%

100% Juice,

10%

Exhibit 46: Mango contributes 85% to off-trade volumes

Orange, 5%

Other

flavours,

Apple, 1%

Lemon, 5%

Mango,

85%

Juice

Drinks ,

71%

Source: Euromonitor International March 2016

Maaza leads the juice drinks market

In value terms, Maaza by Coca Cola led the off-trade market with a 22% share in

2015, followed by Slice by Pepsico (15%). MANB, along with other smaller players,

accounted for 20%.

24 June 2016

Manpasand Beverages

Exhibit 47: Brandwise value market share change (%) – Off-trade

Maaza (Coca Cola)

2012

Slice (Pepsico)

2013

Réal (Dabur)

2014

Frooti (Parle Agro)

Others

2015

Source: Euromonitor International March 2016

Indian off-trade juice drink market expected to reach INR192b by 2020

The off-trade juice drink market (71% of the total off-trade juice market in 2015 in

value terms) is expected to reach INR192b by 2020. MANB’s target category (juice

drinks) is projected to increase 23.6% in volume and 21.8% in value. Consumers are

expected to shift from carbonated drinks to juices due to rising health awareness

and changing food habits. Growth in nectars and juice drinks is estimated to be at a

faster pace, vis-à-vis 100% juice, as higher prices and stressful lifestyles may restrict

demand for the latter.

Exhibit 48: Category-wise breakdown of expected growth rates in the off-trade market

over 2015–20

Product

100% juice

Juice drinks

Nectars

Overall juice market

Volume CAGR

19.0%

23.6%

11.2%

22.0%

Value CAGR

18.5%

21.8%

9.8%

19.4%

Source: Euromonitor International March 2016

Exhibit 49: Off-trade Juice drinks market to post value CAGR of 21.8% (2015-20)

191.5

156.3

86.5

104.8

127.8

21.5

2010

26.8

2011

34.2

43.7

55.7

71.5

2012

2013

2014

2015

2016E

2017E

2018E

2019E

2020E

Source: Euromonitor International March 2016

Indian carbonates market pegged at INR251b

The carbonates market was worth INR251b in 2015, with volumes aggregating 4.6b

liters growing at 10.7% CAGR on volume terms and 12.5%in value terms.

24 June 2016

Manpasand Beverages

Exhibit 50: Carbonates volume trend (bn litres)

Exhibit 51: Carbonates value trend (INR bn)

226

251

2.8

3.1

3.5

3.9

4.2

4.6

140

159

180

201

2010

2011

2012

2013

2014

2015

2010

2011

2012

2013

2014

2015

Source: Euromonitor International March 2016

The off-trade channel contributed 60.6% by volume, but just 41.6% by value.

Consequently, on-trade accounted for majority of sales owing to higher prices in

QSRs, multiplexes, clubs, etc. The consumption trend in such places is greater for a

segment like carbonates.

Exhibit 52: Carbonates off-trade vs on-trade mix (Volume)

Exhibit 53: Carbonates off-trade vs on-trade mix (INR bn)

On-trade,

39.4%

On-trade,

58.4%

Off-trade,

41.6%

Off-trade,

60.6%

Source: Euromonitor International March 2016

Cola-based carbonates contributed 40%, while lemonade/lime-based carbonates

accounted for 37% of the off-trade carbonate volume; a similar pattern was visible

in value terms.

Exhibit 54: Off-trade volume break up

Others,

12%

Cola , 40%

Exhibit 55: Off-trade value break up

Others,

11%

Orange ,

11%

Orange ,

11%

Cola , 40%

Lemonade,

37%

Source: Euromonitor International March 2016

Lemonade,

37%

Source: Euromonitor International March 2016

24 June 2016

Manpasand Beverages

Carbonates market dominated by Coca Cola and Pepsi

The carbonates market in India is duopolistic in nature; in terms of volume, Coca

Cola and Pepsi accounted for 95% of the total off-trade market in 2015. Coca Cola

contributed 60%, with a strong product portfolio including Sprite, Thums Up, Coca-

Cola, Limca and Fanta, while Pepsi (34%) was the second largest player.

Exhibit 56: Off-trade value share (2015)

Others, 5%

Pepsico,

34%

Coca-Cola,

60%

Pepsico,

34%

Coca-Cola,

62%

Exhibit 57: Off-trade volume share (2015)

Others, 4%

Source: Euromonitor International March 2016

Exhibit 58: Brand-wise value market share (2015)

Brand

Sprite (Coca-Cola)

Thums Up (Coca-Cola)

Pepsi

Limca (Coca-Cola)

Coca-Cola

Mountain Dew (Pepsi)

7-Up (Pepsi)

Mirinda (Pepsi)

Fanta (Coca-Cola)

Others

Market share

20%

16%

14%

Source: Euromonitor International March 2016

Off-trade carbonates market expected to reach INR125b in 2020

In the off-trade market, carbonates posted a CAGR of 12.8% in value terms and

10.9% in volume terms during 2010–15. Lemonades registered a strong growth of

17.5% during the same period, while cola carbonates rose 11.4%. Going forward,

growth is expected to normalize, with volumes expanding at a CAGR of 7.7% over

2010–15, resulting in a value CAGR of 3.8%. Lemonade/lime-based carbonate

volume is forecast to register a CAGR of 11% (6.4% in value) and cola-based

carbonates at 5.6% (2.1% in value).

Exhibit 59: Expected growth in off-trade carbonates over FY14–19

Manpasand has a

differentiated offering in

the category with fruit

based carbonates under

brand Fruits Up

Product

Cola

Lime/Lemonade

Orange

Carbonates overall

Volume CAGR

5.6%

11.0%

1.9%

7.7%

Value CAGR

2.1%

6.4%

-1.7%

3.8%

Source: Euromonitor International March 2016

24 June 2016

Manpasand Beverages

Growth in lemonade/lime-based carbonates is expected to outpace that in cola and

the overall carbonates market as they are perceived to be healthier options. The

shift in preferences to healthier alternatives shall augur well for brands offering

carbonates with fruit contents.

Exhibit 60: Off-trade carbonates market to grow at CAGR of 4% over 2015-20 (INR b)

104.3

108.7

112.9

117.1

121.6

125.5

2015

2016

2017

2018

2019

2020

Source: Euromonitor International March 2016

24 June 2016

Manpasand Beverages

Key risks

Competitive intensity

MANB competes with global multinationals such as Coca Cola and Pepsico as well as

large-sized Indian companies like Parle, Dabur, etc. Competitors are larger in scale

and have significant resources at their disposal.

Product concentration

Mango Sip contributed 97% to revenues in FY14 and 80% in FY16. MANB was largely

a single product entity until FY14, wherein the company launched Fruits Up and

Manpasand ORS. Though we are optimistic about the prospects of a ramp-up in new

products, Mango Sip would continue to remain the major revenue contributor.

Channel concentration

MANB gains 20–22% of revenues from IRCTC’s empaneled vendors. In the past,

IRCTC shifted to its brand of bottled water from other brands. While we believe such

a step in fruit drinks is less likely, any such policy change can impact MANB’s

revenues. However, there exists sufficient alternate sales channels.

Slowdown in economy

The company’s products are a part of discretionary spending and might have tepid

demand in the event of an economic slowdown.

Seasonality and weather impact

MANB’s sales are subject to seasonal variations, where sales in the first and fourth

quarters comprise ~68–69% of revenues due to the summer season. However, the

weather also has an impact on demand, which is generally lower at times of a cooler

summer, strong monsoon and winter.

24 June 2016

Manpasand Beverages

Management overview

Mr Dhirendra Singh, Chairman & Managing Director

Mr Singh, promoter and founder of the company, serves as Chairman and Managing

Director. He holds a BA degree and was previously employed at ONGC and Petrofils

Limited. He has 15+ years of experience in the food and beverages industry.

Mr Abhishek Singh, Whole-time Director

Mr Abhishek Singh, son of Dhirendra Singh and a Whole-time Director, has been

associated with MANB since incorporation. He holds a Bachelor of Engineering

degree in Food Technology and has three years of experience in the food &

beverages industry. He oversees operations, with a special focus on marketing.

Mr Dharmendra Singh, Whole-time Director

Mr Dharmendra Singh, brother of Dhirendra Singh, is a Whole-time Director and has

been associated with the company since November 2011. He holds a Bachelor of

Arts degree.

Mr Dhruv Agrawal, Director – Finance and Investor Relations

Mr Agrawal serves as a Non-executive, Non-independent Director of MANB. He is a

Chartered Accountant and is responsible for investor relations.

Mr Paresh Thakkar, Chief Financial Officer

Mr Thakkar holds the position of Chief Financial Officer in the company.

24 June 2016

Manpasand Beverages

Financials and Valuation

Standalone - Income Statement

Y/E March

Total Income from Operations

Change (%)

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT

Current Tax

Deferred Tax

Tax Rate (%)

PAT

Change (%)

Margin (%)

FY12

857

717

83.7

140

16.3

10.7

7.1

FY13

2,398

180.0

2,011

83.9

387

16.1

102

286

246

-2

9.1

224

268.1

9.3

FY14

2,943

22.7

2,486

84.5

457

15.5

149

308

231

11.5

205

-8.5

7.0

FY15

3,598

22.2

2,956

82.2

641

17.8

205

436

107

334

-2

10.2

300

46.2

8.3

FY16

5,567

54.7

4,463

80.2

1,104

19.8

571

533

567

10.9

506

68.8

9.1

FY17E

8,380

50.5

6,729

80.3

1,651

19.7

823

828

110

938

103

11.0

834

65.0

10.0

(INR Million)

FY18E

12,336

47.2

9,869

80.0

2,467

20.0

1,093

1,374

131

1,506

166

11.0

1,340

60.6

10.9

Standalone - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Deferred Tax Liabilities

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Total Investments

Curr. Assets, Loans & Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Deferred Tax assets

Appl. of Funds

E: MOSL Estimates

FY12

502

536

318

855

399

528

160

204

123

133

395

855

FY13

722

756

548

1,304

927

707

207

326

118

334

184

373

1,304

FY14

923

957

743

1,701

1,213

294

919

1,036

416

478

257

176

779

1,701

FY15

376

1,534

1,909

1,179

3,088

1,345

499

847

1,316

1,341

424

593

280

417

225

924

3,088

FY16

501

5,515

6,016

3,573

1,070

2,503

1,520

2,579

704

677

928

270

593

450

130

1,986

6,016

FY17E

501

6,266

6,767

6,766

5,323

1,892

3,430

1,200

3,205

1,106

849

914

335

1,076

701

251

124

2,129

6,766

(INR Million)

FY18E

501

7,472

7,973

6,823

2,986

3,837

1,200

4,555

1,649

1,183

1,229

493

1,627

1,082

370

175

2,928

7,973

24 June 2016

Manpasand Beverages

Financials and Valuation

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Working Cap. Turnover (Days)

Leverage Ratio (x)

Debt/Equity

FY12

1.6

2.8

14.3

0.0

FY13

6.0

8.7

20.1

0.1

1.7

FY14

5.5

9.4

25.5

0.1

1.9

FY15

8.0

13.4

50.8

1.3

19.7

65.2

10.2

5.7

32.2

0.3

-28.2

20.3

20.5

22.3

1.0

151

0.6

31.5

24.3

26.0

1.8

0.7

21.2

18.2

18.8

1.7

0.8

18.8

16.5

23.2

1.2

0.6

FY16

10.1

21.5

120.2

1.0

9.9

51.5

4.3

4.5

22.7

0.2

-38.3

11.4

12.2

18.0

0.9

0.0

FY17E

16.7

33.1

135.2

1.7

10.0

31.2

3.8

3.0

15.2

0.3

-0.8

11.6

13.1

18.0

1.2

0.0

FY18E

26.8

48.6

159.3

2.7

10.0

19.4

3.3

2.0

10.1

0.5

6.4

16.2

18.2

24.0

1.5

0.0

Standalone - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

E: MOSL Estimates

FY12

-3

-279

-142

-140

-521

-660

-577

475

318

-30

-29

734

FY13

247

102

-61

-13

314

319

-553

-234

-492

230

-43

187

FY14

232

149

-28

-412

-147

-124

-146

195

-77

-4

114

-9

FY15

333

205

102

-55

-65

521

527

-1,586

-1,059

-1,582

263

436

-101

-4

458

1,051

-4

FY16

567

571

-34

-62

-177

865

-349

516

-2,431

-1,915

-2,346

4,000

-1,179

-57

-50

2,714

884

927

FY17E

938

823

-110

-103

-157

1,390

-1,430

-40

-1,320

-83

-13

927

914

(INR Million)

FY18E

1,506

1,093

-131

-166

-484

1,818

-1,500

318

-1,369

-134

315

914

1,229

24 June 2016

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