With a market capitalization of Rs 2,02,863 crores, The shares of this leading FMCG company generated a return of 970 percent over the last 5 years.
Varun Beverages Limited is the second largest franchisee (outside the US) of PepsiCo that is engaged in the process of manufacturing, distribution, and sale of carbonated soft drinks, fruit juice-based beverages, bottled drinking water, and sports & energy drinks. Varun Beverages is also the PepsiCo bottler in Nepal, Sri Lanka, Mozambique, Zambia, and Zimbabwe.
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.
In India, VBL handles more than 90 percent of PepsiCo’s beverage sales volume, overseeing the production, promotion, and distribution of various PepsiCo products, including bottled drinking water, energy drinks, sports drinks, carbonated soft drinks, and juice-based beverages.
On Monday, Varun Beverages Limited (VBL) shares opened in green at Rs 1,560.05 apiece. The shares have gained 90 percent in the last 12 months.
Agreements: 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 their DRC unit.
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In March 2024, Varun Beverages Limited has 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.
Additionally, Varun Beverages Limited (VBL) established a new subsidiary named VBL Mozambique, SA in Mozambique, South Africa to enhance VBL’s distribution capabilities for beverages in the region.
Production capacity: In 2024,Varun Beverages Limited (VBL) commissioned three new greenfield production facilities in India. The first facility, in Supa, Maharashtra, was commissioned in January 2024 with an investment of Rs 1,000 crores. The second, in Odisha, was commissioned on April 30, 2024, with an investment of Rs 700 crore. The third, in Uttar Pradesh, was commissioned on April 13, 2024, with an investment of Rs 1,100 crore.
These strategic expansions significantly enhance VBL’s production capacity across key regions in India totaling to 47 production units out of which 36 are in India.
Target: The brokerage firm Motilal Oswal has recommended a buy call on Varun Beverages with a target price of Rs 1,900 per share, demonstrating an upside potential of 22 percent from the current price.
The analysts at Motilal Oswal expect a compounded annual growth rate for revenues, EBITDA, and PAT to be 21 percent, 22 percent, and 29 percent respectively over the calendar year 2023 to 2026.
As of 2024, VBL has entered into an exclusive agreement with Premier Nutrition Trading L.L.C., a subsidiary of PepsiCo, for the manufacturing and packaging of Cheetos in Morocco.
Varun Beverages Limited management has plans to expand its production capacity to enhance their international presence by FY25 and FY26.
Financials: Examining the financials of Varun Beverages Limited on a QoQ basis, the revenues jumped by 11 percent from Rs 3,893 crores in Q4FY23 to Rs 4,317 crores in Q4FY24. In the same time frame, the net profits increased from Rs 439 crores to Rs 548 crores, demonstrating a 22 percent increase.
Ratios: In terms of return ratios for the year 2024, it has reported a return on equity (ROE) of 35.2 percent and a return on capital employed (ROCE) of 27.26 percent. It has also reported a debt-to-equity ratio of 0.75 times for the same period.
Shareholding Pattern: As of June 2024 firm’s shareholding pattern stood at 62.66 percent for promoters, 7.46 percent for the public, 25.32 percent for foreign institutional investors, and 4.55 percent for domestic institutional investors.
Written By Zahal
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