FMCG stock falls 7 % despite net profits increasing by 25% and the board deciding to consider a stock split.
The share price of this leading FMCG company engaged in the business of manufacturing, distribution, and sale of carbonated soft drinks saw its shares tumble by 7 percent to an intra-day low of Rs 1,566.85 apiece from its previous close despite the company’s net profits increased by 25 percent.
Share price movement:
With a market capitalization of Rs 2,06,722.75 crores, the shares of Varun Beverages Limited (VBL) tumbled around 6 percent trading at Rs 1,592.20 levels at 2:18 PM on Tuesday. The shares of this company generated an overall return of 98 percent over the past year and 27 percent over the past 6 months.
Results:
Reviewing the financials of Varun Beverages Limited from the revenue from operations increased by 66 percent from Rs 9,652 crores in H1 CY2023 to Rs 11,731.65 crores in H1 CY2024. Also during the same period, the net profit after tax of the firm increased by 25 percent from Rs 1,443.9 crores to Rs 1,809.81 crores.
Also, the revenue from operations increased by 28.6 percent from Rs 5,699.7 crores in Q2 CY2023 to Rs 7,333.6 crores in Q2 CY2024. For the same period, the net profit after tax generated by the firm increased by 25.5 percent from Rs 1,005.42 crores to Rs 1,261.83 crores.
Reports have mentioned that the profit growth was driven by volume growth and improved margins.
Stock Split:
In addition to the results published by Varun Beverages Limited, the board of directors of the firm has also considered a stock split such that each equity share having a face value of Rs 5 will be split into such number of equity shares having face value of Rs 2 each. The record date for splitting the existing equity shares will be set after the company’s shareholders approve the plan, as per the filings.
That means the share with a face value of Rs 5, will now be spilt into a numbers such that the face value per share will be reduced down to Rs 2.
Dividend announced:
Additionally the filings also mention that VBL will pay an interim dividend of Rs 1.25 per equity share on and from Tuesday, August 13, 2024. This dividend will be distributed on a total of 12,99,44,812 equity shares, each with a nominal value of Rs 5. As of FY24, the dividend yield of VBL stood at 0.16 percent.
Ratios:
In terms of return ratios for the year 2024, it has reported a return on equity (ROE) of 35 percent and a return on capital employed (ROCE) of 29 percent. It has also reported a debt-to-equity ratio of 0.78 times for the same period.
Recent agreements and Capex plans:
Recently, Varun Beverages has signed an agreement with Pepsico in order to expand its product range and geographical reach in the countries of Zambia and Zimbabwe to set up a manufacturing capacity of 5,000 metric tonnes per annum (MTPA) with a total spend of around Rs 60 crores. Additionally, the company has plans for a capacity expansion of Rs 4,000 million for its DRC unit.
Recent Acquisitions:
In March 2024, Varun Beverages Limited completed the strategic acquisition of South African beverage company Bevco Ltd for an EV valuation of Rs 1,320 crores to enhance its presence in the African market, a region that has a huge demand for soft drinks.
Shareholding Pattern:
During the period of June 2024, the firm’s shareholding pattern stood at 62.67 percent for promoters, 7.46 percent for the public, 25.32 percent for foreign institutional investors, and 4.55 percent for domestic institutional investors.
About the Company:
Incorporated in the year 1995, Varun Beverages Limited (VBL) is a leading bottler of PepsiCo products in India, With an extensive brand portfolio including Pepsi,7 Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Sting, and many more. The firm falls under the sector of FMCG.
Written By Zahal
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