Varun Beverages Ltd – Something for Everyone – Pervade Investing

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Varun Beverages Ltd.
CMP : 818

Varun beverages Ltd. is India’s bottling partner for Pepsi co. VBL is the second largest franchisee in the world outside of US under RJ corp group. VBL market share is increase 26% in 2011 to ~51% in 2018. VBL having a 20 manufacturing facilities across all over India and 5 manufacturing facility outside of India(Nepal,Sri lanka, Morroco, Zambia, Zimbabwe).

Currently VBL gets nod to acquire Pepsi co franchisee rights for southern and western India. After this they will be a franchisee of Pepsi co rights in 27 states and 7 Union territories. They are having a strong brands in carbonated beverages like 7up,Pepsi,Tropicana,Mirinda and water brands name Aquafina. The India Portfolio contributes nearly 75% of market share. The Promotor hold is around 73%.

Financials

Usually the business is seasonal. The demand uptick is in summer and down tick in Winter. If we look Y-o-Y basis, Revenue is growing with the CAGR of 16% and Profit is growing 48% CAGR since six years. The margins are at 22% . These numbers are creating a space for investment.

Source : Capital Mind

Key Factors

  1. The Consumption of Soft-Drinks stood at 44 bottles per capita in India in 2016, in USA it was 1496 bottles, Mexico was at 1489 bottles. It shows that they have a huge opportunity to grow in specially India which contributes nearly 75% of Revenue.
  2. In Emerging market like India, Consumption story will play out very well.
  3. Government Focus on Rural India will provide a electricity and hence refrigeration and hence cold drinks consumption will tend to increase.
Also Read on FinMedium:  Market Update for 14/07/2020: – Street-fluence

Key risks

Sugar prices, VBL Facing 20% de growth in sri lanka.

So from above all factors makes VBL an interesting Consumption theme.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Varun Beverages Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.



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Adish Vakharia
Adish believes in identifying future opportunities, studying well about the sectors, and developing a circle of competence.
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