About the Company:

Varun Beverages Ltd has been associated with PepsiCo since the 1990s and is a key player in beverage industry and second largest franchisees of PepsiCo in the world outside US. The company produces and distributes a wide range of carbonated soft drinks, non-carbonated drinks and packaged water sold under trademarks owned by PepsiCo. PepsiCo brands produced and sold by the company include Pepsi, Seven-up, Mirinda Orange, Mountain Dew, Tropicana Juices and many more. Apart from this Company also has its Own Brands such as Jive, Cooe, Reboost, Creambell, Aquaclear, Refreshh etc.

Company has 50 state-of-the-art production facilities out of which 38 are in India & 12 are in international territories. Company has robust supply chain with 130+ depots, 2,800+ primary distributors along with strong distribution infra of 10,000+ vehicles with 2,000+ EVs and 2,600+ owned vehicles.

The Company has established backward integration facilities for production of preforms, crowns, plastic closures, corrugated boxes, corrugated pads, plastic crates, and shrink-wrap films in certain facilities to ensure operational efficiencies and high-quality standards. It has 3 exclusives + 14 integrated plants for the same. The company also owns a 55% stake (35% indirectly & 20% directly) in Lunarmech Technologies Pvt. Ltd. which produces and sells PET bottle caps and crown caps.

The company uses around 66,000 MT of PET resin as packaging material for its finished products annually. It has engaged with GEM Enviro Management Pvt Ltd for phased implementation of 100% recycling of used PET bottles through collection from end users by placing dustbins in reverse vending machines, direct collection from Institutions, etc.

The company has recently acquired a 100% stake in the business conducted by The Beverage Company (Proprietary) Limited, South Africa along with its wholly-owned subsidiaries ("BevCo") for ~Rs. 13200 crs). Bevco has franchise rights from PepsiCo Inc. in South Africa, Lesotho and Eswatini. Further, it also has distribution rights for Namibia and Botswana. It has five manufacturing facilities - two in Johannesburg and one each in Durban, East London, and Cape town with a total installed capacity of ~ 3,600 BPM.

It has already incorporated a subsidiary company in Mozambique i.e. VBL Mozambique, SA. And Varun Beverages South Africa (PTY) LTD’ in Johannesburg, South Africa.

VBL has entered into an exclusive franchising agreement with Pepsi Co. to manufacture, distribute, and sell “Simba Munchiez” in Zimbabwe & Zambia. Estimated capex for the same will ~Rs. 60 crs. for an annual capacity of ~5,000 MT at each location of Zimbabwe and Zambia, expected to be operational by FY26.

VBL has spent ~Rs. 1200 crs. on capex of CY24, ~ Rs. 600 crs for capex of CY25, acquired BevCo for ~Rs. 1,163 crs. (payment for equity and loan taken over) and the net debt has increased only by ~Rs. 1,150 crs., balance being funded through internal accruals.

Fundamentals:

Financial Results:

Company’s Consolidated sales volume grew by 30.1% to 312.4 million cases in Q1 CY2025 from 240.2 million cases in Q1 CY2024 driven by strong organic volume growth of 15.5% in India and in-organic volume contributions from South Africa and DRC. Company generated Total sales volume of 1124 Mn cases out of which 821 Mn cases was from India and 303 from international.

Its EBITDA increased by 27.8% in Q1 CY2025 to Rs. 12,639.6 million from Rs. 9,887.6 million in Q1 CY2024 in-line with Net Revenue growth. Its EBITDA margins also improved in India by 111 bps on account of operational efficiencies from the robust volume growth.

Company’s PAT increased by 33.5% to Rs. 7,313.6 million in Q1 CY2025 from Rs. 5,479.8 million in Q1 CY2024 driven by robust volume growth and lower finance cost.

Recent Highlights:

1. Recently the company laid the foundation stone of its proposed manufacturing plant in Kandrori -Kangra, Himachal Pradesh for a capex of ~Rs 270/- crs.
2. VBL also commenced commercial production of carbonated soft drinks and packaged drinking water at Kinshasa, Democratic Republic of Congo. The plant has two CSD/Water PET lines with an installed capacity of 550 BPM each.
3. The company also signed MOU with the Government of Jharkhand for its proposed manufacturing plant in Patratu, Jharkhand for a capex of ~Rs. 450 crs.
4. It has also capitalised Rs. 2450 crs. for setting up greenfield production facilities at Supa (Maharashtra), Gorakhpur (UP) & Khordha (Odisha).
5. The company has also commissioned a new production facility at Bundi, Rajasthan, and at Jabalpur, MP as well as expanded its capacity at six existing locations.
6. Company has also completed Brownfield expansion in Morocco for Rs. 250 crs. including backward integration.

Conclusion:

Varun Beverages Limited (VBL) stands as a resilient and fast-growing player in India’s beverage sector, strategically aligned with the rising consumer demand for branded soft drinks and value-added beverages. With robust revenue growth, consistent margin expansion, and a wide distribution network fueled by its exclusive partnership with PepsiCo, VBL continues to demonstrate strong fundamentals and operational efficiency. The company's focus on rural penetration, capacity expansion, and premium product offerings positions it well for sustained long-term growth.

From a broader perspective, the Indian non-alcoholic beverage industry is poised for an upward trajectory, driven by favorable demographics, increasing urbanization, rising disposable incomes, and evolving consumption patterns. The sector is forecast to grow at a CAGR of 8–10% over the next 5 years, with value-added categories like juices, sports drinks, and low-sugar variants gaining significant momentum. Additionally, industry consolidation and innovations in packaging and sustainability will further shape competitive dynamics.

In this favorable macroeconomic and industry context, VBL’s strong execution capabilities, strategic alliances, and expanding international footprint offer a compelling investment proposition. While near-term input cost volatility and monsoon-dependent demand in certain regions remain watch points, the company’s long-term outlook remains firmly positive. Investors seeking exposure to India’s consumption-driven growth story may find Varun Beverages to be a fundamentally sound and growth-oriented opportunity.

HET ZAVERI
info@smartinvestment.in

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