Synopsis:
Varun Beverages delivered a strong Q2 performance with 26 percent revenue growth and an 81.3 percent jump in net profit on a quarter-on-quarter basis, despite weak volume growth. The company also announced a 25 percent interim dividend during the quarter.
A famous beverage stock edged higher by 6 percent after posting a strong sequential performance for the June quarter, with profitability rising sharply despite muted volume growth. While year-on-year revenue fell marginally, higher realization per case, international market strength, and disciplined cost control supported margin expansion.
The stock in focus is Varun Beverages Ltd which has a market capitalization of Rs 1.74 lakh crore. The stock opened at Rs 486.10 and climbed to an intraday high of Rs 514.80, compared to its previous close of Rs 486.75, marking an intraday gain of nearly 5.8 percent during the session.
What’s the News?
Quarter-on-Quarter, Varun Beverages reported a strong uptick in financial performance. Revenue rose from Rs. 5,567 crore in Q1 CY2025 to Rs. 7,017 crore in Q2 CY2025, marking a growth of 26 percent.
Profit before tax jumped by 77.1 percent from Rs. 978 crore to Rs. 1,732 crore, while net profit surged from Rs. 731 crore to Rs. 1,325 crore, an increase of 81.3 percent. The company reported an operating profit margin of 28 percent for the quarter.
Year-on-Year, the company posted a marginal revenue decline of 2.5 percent, with revenue falling from Rs. 7,197 crore in Q2 CY2024 to Rs. 7,017 crore. However, PBT rose by 4.1 percent from Rs. 1,663 crore to Rs. 1,732 crore, and net profit improved by 5.0 percent from Rs. 1,262 crore to Rs. 1,325 crore. EBITDA margins increased by 82 bps in Q2 CY2025 to 28.5% from 27.7% in Q2 CY2024
In line with its dividend policy, the Board of Directors have approved an interim dividend @ 25 percent of face value i.e. Rs. 0.50 per share, translating into a total cash outflow of approximately Rs. 169.1 crore.
Comments from the Management
Commenting on the performance for Q2 CY2025, Mr. Ravi Jaipuria, Chairman, Varun Beverages Limited, said, “We delivered a resilient performance during the quarter. In-spite of unusually early onset of monsoon rains in the peak summer months in India, we could keep our realizations per case and EBITDA margins intact.
Due to growth in international markets supported by strong positive currency movement in Africa territories, Company ended the quarter with a positive PAT, in-spite of 3 percent decline in consolidated sales volumes.”
On capacity expansion in South Africa:
“We have enhanced capacity by setting up a can line in Durban, one of our existing production facilities. We are awaiting approval from the Competition Commission of South Africa for land parcel purchase adjoining our production facility in Boksburg to further enhance capacity & backward integration.”
On long-term outlook and dividend:
“With robust capacities now operational, an expanding product portfolio, and a sharply focused distribution network, we are well-positioned to capture emerging opportunities and drive sustainable, long-term value creation for all stakeholders.”
Operational Highlights
During the quarter, consolidated sales volumes declined by 3.0 percent to 389.7 million cases. Domestic volume dropped 7.1 percent, but this was partially offset by a 15.1 percent rise in international volumes, led by 16.1 percent growth in South Africa.
Realization per case improved marginally by 0.5 percent, primarily driven by a 6.6 percent increase in international markets. Gross margins remained steady at 54.5 percent, while EBITDA margins improved to 28.5 percent from 27.7 percent a year ago, despite higher fixed overheads from new capacity additions.
Key Developments
The company commenced commercial production across four new greenfield facilities in India-Prayagraj (UP), Damtal (HP), Buxar (Bihar), and Mendipathar (Meghalaya), adding significant capacity across CSD, JBD, and water lines.
In Morocco, the company began manufacturing PepsiCo’s snack brand ‘Cheetos’, expanding its presence in the high-potential snack segment. It also acquired 50 percent equity in Everest Industrial Lanka (Private) Limited, a Sri Lanka-based commercial cooler manufacturer, strengthening its backward integration strategy.
Financial Snapshot
The company remained net debt-free in the quarter with free cash of Rs. 514.9 crore. CRISIL reaffirmed its long-term bank loan rating at CRISIL AAA/Stable, reflecting strong financial discipline.
Working capital days remained stable at around 35 days. With ongoing equity infusion, the company raised its stake in Zambia from 90 percent to 95 percent, further reinforcing its control over key African subsidiaries.
About the Company
Varun Beverages Ltd is one of the largest PepsiCo franchisees outside the US, manufacturing and distributing carbonated and non-carbonated beverages including Pepsi, Mountain Dew, Tropicana, Slice, Aquafina, and Sting.
The company operates across 26 states and 6 union territories in India and has international operations in South Asia and multiple African countries. India accounted for around 72 percent of its revenues in FY2024. Over the years, VBL has expanded its footprint both in terms of geography and product offerings, making it a key growth engine in the beverage ecosystem.
Written By Manan Gangwar
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