Tag: Varun Beverages

Pepsi bottler wants to make the most of heat wave and growing refrigeration in villages

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s Pepsi bottler Varun Beverages’ shares neared the 52-week high in early trade on May 14, a day after the firm released a strong first-quarter earnings report.

Varun Beverages shares traded 2.15%  higher at ₹1,509.35 on NSE at 10:24 am.

The gains come as Pepsi India bottler benefited from an uptick in demand for soft drinks in the January to March 2024 period due to an early onset of summer. The company witnessed almost 100% utilisation of the plant in April 2024.

It noted that consumers opted more for cold beverages amid the sweltering summer heat, helping boost the firm’s bottom-line numbers. It expects the strong demand trend to continue in the April to June 2024 quarter as well amid heatwave conditions.

Varun Beverages expects strong sales growth in 2QCY24 led by heat waves, elections, and a lower base in the corresponding quarter last year, brokerage firm Motilal Oswal pointed out.

The analyst has given it a buy rating and set the target price of ₹1,720, implying it sees a potential upside of 16% from the May 13 closing price.

According to Motilal Oswal, there are five reasons why it expects the earnings momentum to continue in the June quarter. Increased penetration in newly acquired territories in India and Africa, higher acceptance of newly launched products, continued expansion in capacity and distribution reach, growing refrigeration in rural and semi-rural areas, and a scale-up in international operations.

For the current quarter, the brokerage expects Varun Beverages to witness a compound annual growth rate (CAGR) of 21% in revenue, 22% in EBITDA and 29% in profit after tax (PAT) over calendar years 2023-26.

Morgan Stanley has an overweight call on the stock with a target price of ₹1,701. It highlighted that the bottle makers’ Q1 earnings were 13% ahead of estimate and 11% above consensus with better margins. The management is optimistic about near-term demand trends in India and growth drivers in international markets, it added.

Meanwhile, Nuvama also expects the June quarter to be bumper due to a harsh summer and a low base.

The brokerage commentary comes against the backdrop of Varun Beverages reporting revenue of ₹4,398 crore for the January to March quarter, which on a year-on-year basis, was a growth of 11%. Net profit for the period increased by 25% to ₹537.2 crore. earnings before interest, tax, depreciation and amortisation increased by 24% to ₹990 crore, while EBITDA margin expanded by 230 basis points to 22.5% from 20.2% last year.

The company’s realisation per case increased by 3.5% during the quarter, when compared to the year-ago period, which reflected an improved product mix in India and higher contributions from the international markets, the company said in a statement.

Varun Beverages also said it is focusing on reducing sugar content in its products. Nearly 46% of the consolidated sales volume of the company came from no-sugar or low-sugar products.

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Varun Beverages Q1 Results: Revenue rises 11%, gross margin improves further

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Varun Beverages Ltd. reported revenue of ₹4,398 crore during the January to March quarter, which on a year-on-year basis, was a growth of 11%. The company follows a January-December calendar year format.

The management said that the overall operational and financial performance during the quarter was strong despite a delay in the festival of Holi by 17 days, which resulted in a delayed seasonality cycle.

Net profit for the period increased by 25% to ₹537.2 crore. Earnings Before Interest, Tax, Depreciation and Amortisation increased by 24% to ₹990 crore, while EBITDA margin expanded by 230 basis points to 22.5% from 20.2% last year.

The company’s realisation per case increased by 3.5% during the quarter, when compared to the year-ago period, which reflected an improved product mix in India and higher contributions from the international markets, the company’s press release said.

Varun Beverages said that it is focusing on reducing sugar content in its products. Nearly 46% of the consolidated sales volume of the company came from no sugar or low sugar products.

Removal of corrugated pads in packaging and use of light-weight packaging material, is another focus area for the company, which has improved the company’s gross margin by 385 basis points to 56.3% from 52.4%.

For the core Indian market, Varun Beverages has commenced three new greenfield facilities in Maharashtra, Uttar Pradesh and Odisha, with a capex outlay of ₹1,000 crore, ₹1,100 crore and ₹700 crore respectively, to meet the rising beverage demand and support its long-term growth trajectory.

During the quarter, Varun Beverages also completed the strategic acquisition of The Beverage Company (BevCo) in South Africa.

Varun Beverages Morocco SA, a wholly-owned subsidiary, has entered into an exclusive snacks appointment agreement to manufacture and package Cheetos in Morocco by May 2025.

The three growth engines highlighted by Varun Beverages for its international business include the combined territory of South Africa, including Lesotho, Eswatini, Namibia, Botswana, Mozambique and Madagascar. The company will also foray into the Democratic Republic of Congo where PepsiCo is not present.

Varun Beverages, the largest franchise of PepsiCo in the world, outside the US, has also approved the incorporation of Varun Foods (Zimbabwe) Pvt. Ltd. to carry out the business of food products.

Shares of Varun Beverages are trading 1% lower post the results announcement at ₹1,449.8. The stock is up 17% so far in 2024.

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Varun Beverages gets an ‘overweight’ initiation from Morgan Stanley; Find out why

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm Morgan Stanley has initiated coverage on Varun Beverages with an “overweight” rating. Its price target of ₹1,701 implies a potential upside of 23% from the stock’s closing levels on Monday.

Morgan Stanley has now become the 18th brokerage that has a “buy” or equivalent rating on Varun Beverages, out of the 22 analysts that have coverage on the stock. Morgan Stanley’s price target is also the third highest on the street after CLSA’s ₹1,774 and KR Choksey Shares’ ₹1,732 per share.

Varun Beverages has a solid track record of scaling domestic and global opportunities, according to Morgan Stanley. That, coupled with strong profitability, will ensure that PepsiCo’s largest bottling partner outside the US continues to outpace the F&B industry’s growth, the brokerage said.

Morgan Stanley’s note also said that the preference for mass discretionary names in 2024 also makes Varun Beverage a proper fit (to investors’ portfolio)

Over the next three years, Varun Beverages is expected to deliver 19% annual revenue growth for its India business, with EBITDA margins remaining steady, averaging 23.7%.

On the valuation front, the stock appears better placed compared to peers, trading at 57x calendar year 2025 Earnings Per Share (EPS) estimates, compared to Nestle, which trades at 66x financial year 2026 EPS and Tata Consumer, which trades at 54x EPS for financial year 2026.

Shares of Varun Beverages went public in 2016 and have since returned over 18x to shareholders. The stock has delivered positive annual returns every calendar year since its listing.

Over the first four months of 2024, shares of Varun Beverages are up 12%, following an 87% rally in 2023 and a 123% surge in 2022.

CNBC-TV18 had reported in December that India’s domestic mutual funds had missed the rally in Varun Beverages with no fund house holding a stake in excess of 1% in the company. As of March, domestic funds held a 2.26% stake in the company, down from 2.31% in December. Even FPIs have marginally pared their stake to 25.06% in March from 25.73% in December last year.

Shares of Varun Beverages ended 0.4% lower on Monday at ₹1,380.

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Varun Beverages completes acquisition of South Africa’s Bevco

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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PepsiCo’s largest franchise in the world outside the US, Varun Beverages Ltd, on Wednesday, March 27, announced that it has completed the acquisition of the South African company, The Beverage Company Proprietary Limited, along with its subsidiaries, collectively known as ‘Bevco’.

In a stock exchange filing, Varun Beverages said that as of March 26, 2024, Bevco has become a subsidiary of Varun Beverages, on receiving all the required approvals, including from PepsiCo Inc, Competition Commission South Africa, among others.

Varun Beverages has also issued a ccorporate guarantee of an amount of ZAR 1,500 million on behalf of its subsidiary, The Beverage Company Proprietary Ltd, South Africa.

The corporate guarantee is valid for not longer than 42 months and is in favour of FirstRand Bank Ltd, acting through its Rand Merchant Bank division in order to secure credit facilities extended to Bevco.

In December 2023, Varun Beverages had announced the acquisition of South Africa’s Bevco for ₹1,320 crore. The company’s board approved the acquisition of 100% stake in The Beverage Company, South Africa, along with its wholly-owned subsidiaries.

The strategic acquisition of Bevco aligns with Varun Beverages’ vision for expansion, enabling the company to tap into the South African company’s established market presence and leverage its strong ties with PepsiCo Inc, it said.

The deal positions Varun Beverages to strengthen its position in the African beverage market, marking a significant milestone in the company’s growth trajectory, stated the CNBC-TV18 report.

Varun Beverages shares were trading 0.7% lower at ₹1,391.85 per piece on the BSE at 12:20 pm on Wednesday.

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Varun Beverages Share Price: Big investments can surprise positively in this calendar year, says Emkay

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Varun Beverages Ltd, PepsiCo’s largest franchise bottler ,were trading in the green on Monday and scaled a day’s high of ₹1,447.85 level, up 1.3% from its previous close of ₹1,428. The counter has gained nearly 60% in the last six months and is up a solid 120% in the last year. A few analysts suggested that the stock is likely to witness more gains.

Domestic brokerage firm Emkay Global has maintained an ‘Add’ rating on the counter, citing an upgrade potential to Street numbers post a strong summer. It has a revised target price of ₹1,500 on the Varun Beverages Ltd stock.

Motilal Oswal, too, is positive on the counter with a ‘Buy’ rating and a target price of ₹1,600 per share, indicating an upside potential of 12% from the current market levels.

Meanwhile, UBS has initiated coverage with a ‘Neutral’ rating on Varun Beverages Ltd, with a base target of ₹1,550 per unit.

Analysts at Emkay Global said Varun Beverages is making big investments to capture industry tailwinds and expand new categories. With the likely commissioning of four new plants and expansion in eight existing plants, the company’s capacity ahead of this calendar year (CY24) season is 45% higher versus CY22, they said.

In addition, the domestic brokerage said that Varun Beverages Ltd’s traction in ‘Sting’ has helped the company to nearly double its distribution reach while near-tripling of capacities for high realisation juice/dairy segments should drive better EBITDA/case.

Among subsidiaries, Zimbabwe and Morocco are gaining share and delivering strong 43-55% growth, while Nepal and Zambia saw weak trends in CY23 due to macros. The beverage company’s operating cash flows remain healthy at 85% of tax-adjusted EBITDA, while capacity expansion drove negative free cash flow, Emkay said.

Meanwhile, Motilal Oswal in a note said it expects Varun Beverages to maintain its earnings momentum, aided by higher acceptance of newly launched products; increased penetration in newly acquired territories in India and Africa; continued expansion in capacity and distribution reach; growing refrigeration in rural and semi-rural areas’ and a scale-up in international operations.

Factoring the strong fundamentals and potential for future growth, the brokerage expects the company’s revenue, EBITDA, and profit after tax to grow at a CAGR of 21%, 22%, and 28%, respectively, over CY23-26.

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Varun Beverages Q4 Results: Cons PAT at Rs 132 crore; final dividend declared

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Varun Beverages Ltd, PepsiCo’s largest franchise bottler, on Monday reported a consolidated net profit of ₹132 crore for the fourth quarter ended December 2023, up 77% year-on-year, helped by growth in revenue and improved profit margins. The company, which follows the calendar year as its financial year, had posted a net profit of ₹74.7 crore during the October-December quarter a year ago.

Its revenue from operations during October-December 2023 stood at ₹2,731 crore, a jump of 21% as compared with ₹2,257 crore in the the year-ago period, Varun Beverages said in a regulatory filing.

Varun Beverages’ total expenses stood at ₹2,552 crore, a jump of 17% as against ₹2,177 crore.

Ebitda for the reported quarter rose 37% YoY to ₹419 crore, led by increased realisation, higher gross margins and improved operational efficiencies. Margin stood at 15.3%.

The board of PepsiCo’s largest franchise bottler also recommended a final dividend of ₹1.25 per equity share for the financial year ended December 31, 2023 to the shareholders of the company. The record date will be fixed by the Board of Directors of the company.

Ravi Jaipuria, Chairperson of Varun Beverages, said that despite the abnormally high unseasonal rains in the peak season, his company concluded 2023 on a strong note. He said his company witnessed a healthy double-digit volume growth in both Indian and International markets.

“Our consolidated sales volume increased by 13.9%, and the net realisation per case increased by 7% in 2023. Both these together contributed to our remarkable revenue growth of 21.8 per cent and an impressive PAT growth of 35.6 per cent. In line with our strategic objectives, we have successfully commissioned multiple greenfield and brownfield facilities across key geographies during the year. This expansion not only strengthened our manufacturing capabilities but also extended our market reach,” he added.

Shares of Varun Beverages Ltd was trading almost flat at ₹1,287.75 apiece on the NSE.

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Ravi Jaipuria of Varun Beverages is now richer than India’s richest banker: CNBC-TV18 Edge

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With shares of Varun Beverages gaining 18x from its IPO back in 2016, Ravi Kant Jaipuria – the founder and chairman of RJ Corp – has seen his net worth surge by $6 billion in 2023. In the process, India’s “Cola King” has overtaken the country’s richest banker – Uday Kotak, in terms of net worth.

Jaipuria, the promoter of bottling and beverage company Varun Beverages and QSR player Devyani International, companies named after his children, ranks 14th in the Bloomberg Billionaires Index, with a $14.5 billion net worth. 85% or $12.8 billion of that comes solely from Varun Beverages.

In comparison, the net worth of Uday Kotak, founder & former CEO of Kotak Mahindra Bank, increased by $414 million since January to $14.1 billion.

Source: Bloomberg

On Tuesday, Varun Beverages announced its entry into the South African market through the acquisition of a 100% stake in Bevco for ₹1,320 crore. BevCo is PepsiCo’s bottling partner in South Africa and also has franchise rights for the Lesotho and Eswatini regions, along with distribution rights for Namibia and Botswana.

The street cheered the acquisition with the stock having gained 17% over the last four trading sessions and has also hit a record high. In an interaction with CNBC-TV18 on Thursday, Jaipuria said that the latest acquisition will bring large volume addition to the company’s portfolio along with an expansion in margins.

“South Africa business should add ₹200-250 crore to the company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA),” Jaipuria said.

Additionally, the Gurugram-based company also signed a memorandum of understanding with the Jharkhand government on Tuesday to set up a manufacturing plant in the state by spending ₹450 crore.

While shares of Varun Beverages have surged as much as 95% this year, those of Kotak Mahindra Bank has returned less than 2%. The latter has also underperformed the banking stocks gauge – the Nifty Bank, which is up 11.3% so far in 2023.

Shares of Devyani International, another entity promoted by Jaipuria have gained close to 6% this year, after 10% returns in 2022. The company recently announced its foray into the Thailand QSR market with the acquisition of 274 KFC outlets there.

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Varun Beverages Africa market share can triple in 2-3 years, says management

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Varun Beverages can triple its market share in Africa in the next two to three years, said Ravi Kant Jaipuria, Chairman of PepsiCo’s largest franchise bottler, in an interaction with CNBC-TV18 on Thursday, December 21. On Tuesday, December 19, the firm announced its decision to buy The Beverage Company Ltd, South Africa, and its wholly-owned subsidiaries, collectively known as ‘Bevco’, for ₹1,320 crore.

“Wherever we have taken a new country or a new territory, we’ve been successful in growing the market share. Right now, against our main competitor, I think Pepsi’s share is only 2-3%. So there’s very little downside. There’s only upside, and I believe that it should triple or quadruple. This market share should not be a real challenge in the coming years,” said Jaipuria.

The management also sees an earnings before interest, taxes, depreciation, and amortization (EBITDA) addition of ₹250 crore in 2024 in the Africa business.

“South Africa business is about ₹1,600 crore top line at the moment within that 12% EBITDA, and we expect it to grow at a reasonably fast pace there. So I would say it’ll add about ₹200–250 crore additional to the EBITDA margins for the India business,” Jaipuria added.

For India, Jaipuria sees business continuing to grow in double digits with 22-23% margins. Varun Beverages has acquired the territories—east, west, and south—where the penetration of Pepsi is low, he further added.

On capacity addition, Jaipuria said, “Fortunately, this year we will have reasonably higher capacity also because in 2022, we ran out of capacity. So we have more than 45% capacity, which has been added for the year 2024.”

Varun Beverages Management also said that the capex can yield an additional ₹2,800 crore in revenue next year and closer to that in 2025 as well.

“Sting is still going quite strong,” said Jaipuria, while adding that the carbonated energy drink will become 15% of the mix. The company has also added two dairy plants where it can make Tropicana, which will give it growth and higher value penetration.

For more, watch the accompanying video

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Varun Beverages shares up 18x since IPO, but these investors missed the bus: CNBC-TV18 Edge

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s domestic mutual funds have most likely missed the rally seen in Varun Beverages shares. The stock of PepsiCo’s bottling partner is up 18x since its IPO, making it one of the most successful wealth creation stories of the last decade.

However, over the past seven quarters, India’s domestic funds have continued to reduce their stakes in the company. As of the September quarter, domestic funds together held a 2.2% stake in Varun Beverages with no fund holding more than 1% stake, according to data available on the exchanges.

Varun Beverages was listed in late 2016 and at the time of listing, domestic funds together had just over 1% stake in the company compared to the 8.2% stake that FPIs owned.

Domestic mutual funds first raised their stakes nearly a year after the stock was listed, as the March 2018 shareholding pattern showed that these funds together had a nearly 5% stake in the company, compared to 1% earlier. By then, the stock had already risen close to 50% in value.

From that point, until the next six quarters, domestic investors continued increasing their stakes in the stock, till the total stake reached a peak of 6.4% at the end of the June 2019 quarter. The March 2018-June 2019 period also saw the stock rise close to 50% in value. The company in 2019 had also announced its first bonus issue.

However, since then, domestic investors continued to gradually pare their stakes in the stock, trying to book the profits they made over time.

Domestic investors have now reduced their stakes in Varun Beverages for seven quarters in a row, starting March 2022 till the most recent September quarter. From that 6.4% peak, the domestic funds together currently own just over a 2% stake in the stock, with no fund, holding a stake above a percent.

During these seven quarters, the shares of Varun Beverages tripled in value and the company also announced another bonus issue of shares.

In contrast, the total FII stake has risen from 8% at the time of listing to the current level of 26.5%. FIIs have also increased their stakes in six out of the past seven quarters.

Some of the prominent FPIs that still hold a stake in the company include the Government Pension Fund and the Government of Singapore.

Shares of Varun Beverages are trading 10% higher at a record high of ₹1,287. The stock has nearly doubled so far in 2023.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow