Sunday, December 10, 2023

All You Want To Know


Varun Drinks is the second-largest bottling firm for PepsiCo drinks on the planet exterior the USA. It manufactures, sells, and distributes all key manufacturers for PepsiCo, like Sting, Mountain Dew, Mirinda, Tropicana, Aquafina, and so on.

It is likely one of the largest beverage firms in India and is now increasing into meals merchandise as effectively. The corporate has multiplied investor wealth during the last seven years that it has been listed. Let’s try to perceive the enterprise higher and assess its future efficiency.

Varun Drinks Overview

Varun Drinks Ltd (VBL) was integrated on 16th June 1995 as part of the RJ Corp group (a diversified enterprise conglomerate with pursuits in drinks, quick-service eating places, dairy, and healthcare). Varun Drinks is a key participant within the beverage trade.

The corporate produces and distributes a variety of carbonated tender drinks (CSDs) and a big number of non-carbonated drinks (NCBs), together with packaged consuming water. PepsiCo’s CSD manufacturers produced and bought by VBL embrace Pepsi, Pepsi Black, Mountain Dew, Sting, Seven-Up, Mirinda Orange, Nimbooz Masala Soda, and Evervess.

PepsiCo’s NCB manufacturers produced and bought by VBL embrace Tropicana Slice, Tropicana Juices (100% and Delight), Seven-Up Nimbooz, Gatorade, and packaged consuming water beneath the model Aquafina. As well as, VBL has additionally been granted the franchise for the Ole model of PepsiCo merchandise in Sri Lanka.

VBL has been related to PepsiCo because the Nineteen Nineties and has over two and half a long time, consolidated its enterprise affiliation with PepsiCo, growing the variety of PepsiCo licensed territories and sub-territories, producing and distributing a wider vary of PepsiCo drinks, introducing numerous SKUs of their portfolio, and increasing their distribution community.

VBL has franchises for numerous PepsiCo merchandise throughout 27 states and seven union territories (besides Jammu & Kashmir and Andhra Pradesh) in India. Though India is the biggest market, VBL is the franchise for numerous PepsiCo merchandise for Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe. VBL has 30 manufacturing crops in India and 6 manufacturing crops in worldwide geographies.

Varun Drinks Journey

Varun Drinks Ltd (VBL) has had an extended and illustrious historical past. Listed below are among the vital milestones within the firm:

Here’s a timeline of Varun Drinks’ historical past:

  • 1995: Varun Drinks Ltd was integrated as a Public Restricted firm
  • 1996: The Firm began manufacturing operations in Jaipur
  • 1999: The Firm began operations in Alwar, Jodhpur, and Kosi
  • 2004: DBL (Devyani Drinks Restricted) was merged with VBL by the Order of Delhi Excessive Court docket dated 6th Oct 2004
  • 2012: VBIL (Varun Drinks Worldwide Restricted) was merged with VBL by the Oder of Delhi Excessive Court docket dated 12th Mar 2013
  • 2013: Varun Drinks Ltd acquired the enterprise of producing and advertising of soppy drink drinks in Delhi
  • 2015: VBL acquired PepsiCo’s India enterprise of producing, advertising, promoting, and distributing tender drink drinks and syrup combine within the Indian States of Uttar Pradesh, Uttarakhand, Himachal Pradesh, Haryana, and the union territory of Chandigarh
  • 2015: VBL acquired PepsiCo’s India enterprise of producing, advertising, promoting, and distributing tender drink beverage and syrup combine in Bazpur, Jainpur, Satharia, and Panipat
  • 2015:  VBL acquired the enterprise of promoting and distributing tender drinks drinks and syrup combine in a single district endeavor located in Punjab
  • 2015: Varun Drinks (Zimbabwe) (Non-public) Ltd was integrated
  • 2016: VBL acquired all the Shareholding of Arctic Worldwide Non-public Ltd in Varun Drinks (Zambia) Ltd
  • 2016: VBL was listed on Indian Inventory Exchanges – NSE and BSE
  • 2017: Varun Drinks (Zambia) Ltd reached 90% from 60% after an elevated stake in Zambia Subsidiary
  • 2017: Concluded acquisition of PepsiCo India’s beforehand franchised territories of the State of Odisha and elements of Madhya Pradesh, together with two manufacturing models at Bargarh (Odisha) and Mandideep (MP)
  • 2018: Concluded acquisition of PepsiCo India’s beforehand franchised territory of the States of Chhattisgarh, Bihar, and Jharkhand, together with two manufacturing models at Cuttack (Odisha) and Jamshedpur (Jharkhand)
  • 2018: Entered right into a strategic partnership for promoting and distribution of the bigger Tropicana portfolio that features Tropicana Juices (100%, Delight, Necessities), Gatorade, and Quaker Worth-Added Dairy in territories throughout North and East India
  • 2018: Greenfield manufacturing facility was established in Zimbabwe
  • 2019: Concluded the acquisition of PepsiCo India’s beforehand franchised sub-territories of the State of Maharashtra (designated elements), Karnataka (designated elements), and Madhya Pradesh (designated elements).
  • 2019: Concluded the acquisition of West and South India sub-territories from PepsiCo
  • 2021: Integrated a brand new subsidiary – Varun Drinks RDC SAS, within the Democratic Republic of Congo
  • 2022: Entered into an settlement to distribute and promote Lays, Doritos, and Cheetos for PepsiCo within the territory of Morocco
  • 2022: Commenced industrial manufacturing of Kurkure Puffcorn on the Kosi, Uttar Pradesh manufacturing plant for PepsiCo.

Varun Drinks Administration Profile

Mr. Ravi Kant Jaipuria is the founding father of Varun Drinks Ltd and RJ Corp. He’s additionally the promoter and Chairman of the corporate. He has over three a long time of expertise conceptualizing, executing, growing, and increasing South Asia and Africa’s meals, drinks, and dairy enterprise. He’s the one Indian bottler who bought the PepsiCo “Worldwide Bottler of the Yr” award in 1997. Beneath his management, Varun Drinks Ltd skilled important progress and international growth.

Mr. Varun Jaipuria is the promoter and Government Vice Chairman of Varun Drinks Ltd. He joined the corporate in 2009. Varun has been instrumental within the complete improvement of the Firm’s enterprise, together with acquisitions and integration of acquired territories. Beneath his management, Varun Drinks was awarded PepsiCo’s Greatest Bottler in AMESA (Africa, Center East, and South Asia) sector in 2021 in recognition of the Firm’s operational excellence, governance practices, and sustainability initiatives.

Mr. Rajesh Chawla is the Chief Monetary officer of Varun Drinks Ltd. He began his profession at Varun Drinks in 2021 and has over 25+ years of expertise within the Finance sector. Earlier than becoming a member of VBL, he labored with reputed organizations like Whirlpool & SIS group. He’s additionally a professional Chartered Accountant.

Mr. Ravi Batra is the Chief Threat Officer and Group Firm Secretary of Varun Drinks Ltd. He’s additionally a member of the Institute of Firm Secretaries of India and the Institute of Chartered Secretaries of London. He has a wealthy expertise of 25 years within the subject of Company Governance, Itemizing Rules, FEMA, ESOPs, Coverage framework, POSH, Inspection, and Investigations. He heads the administration, compliance, and Secretarial capabilities within the firm. Beneath his management, VBL has received numerous awards for following the Greatest Company Governance practices.

Varun Drinks Shareholding Sample

image 68
Supply: BSE India

Varun Drinks Firm Evaluation

Varun Drinks is into the next enterprise segments:

In Drinks following manufacturers have been licensed to VBL:

  1. Carbonated Smooth Drinks – Pepsi, Mountain Dew, 7UP, and so on.
  2. Carbonated Juice-based Drink – 7UP Nimbooz Masala Soda
  3. Power Drink – Sting
  4. Fruit Pulp/ Juice Primarily based Drinks – Tropicana, Slice, Tropicana Delight, and so on.
  5. Membership Soda – Evervess, Duke’s
  6. Ice Tea – Lipton Ice Tea
  7. Sports activities Drink – Gatorade Sports activities Drink in several flavors
  8. Packaged Water – Aquafina, Aquavess

Dairy-Primarily based Drinks – Mango Shake, Chilly Espresso, Kesar Badam, and so on

image 69
Supply: VBL Investor Presentation Q1CY23

In Snacks following manufacturers have been licensed to VBL in sure geographies like Morocco: Lays, Kurkure, Cheetos, Doritos

image 70
Supply: VBL Annual Report CY22

Varun Drinks Basic Evaluation

As per the settlement with PepsiCo, the duties of each gamers are clearly pre-determined. VBL focuses on end-to-end execution, together with Under the Line (BTL) advertising, whereas PepsiCo presents model, concentrates, packaging R&D, and Above the Line (ATL) advertising help.

image 71
Supply: VBL Investor Presentation Q1CY23

VBL’s experience in sustainably scaling its present and new territories made it simpler for PepsiCo to aptly switch most of its India’s enterprise to them (VBL did 90%+ of the whole beverage quantity bought by PepsiCo in India in CY22 in comparison with 45%+ in CY17). Over time, VBL has expanded its operations in India organically and inorganically. By means of the in-organic route, they’ve acquired further and beforehand franchised territories from PepsiCo.

image 72
Supply: VBL Annual Stories CY17 to CY20

Income and Profitability

VBL grew its gross sales at a CAGR of ~27% from CY18 to CY22. The corporate has improved its EBITDA margin to 21.2% in CY22 towards 19.7% in 2018.

Revenue after tax has additionally jumped ~ five-fold from CY18 to CY22, pushed by excessive progress in income from operations, enchancment in margins, and transition to a decrease tax charge in India.

image 73
Supply: VBL Investor Presentation Q1CY23

Return on Capital Employed and Return on Fairness:

Bottling is a capital-intensive enterprise, on account of which VBL sees a steady complete asset turnover of ~1x. Nonetheless, the Firm can maintain an ROE larger than 15% on account of backward integration in manufacturing and packaging.

The corporate has persistently improved its ROCE and ROE to 32.9% and 17.10%, respectively, as proven within the chart beneath from the lows of CY20.

image 74
Supply: Capital IQ

Varun Drinks Share Worth Historical past

Varun Drinks had its IPO in Nov 2016, and since then, the corporate has delivered multibagger returns to its shareholders. It has delivered a five-year inventory value CAGR of 49% (INR 109 on 10th July 2018 to INR 825 on 10th July 2023).

Final month in June 2023, the corporate’s board accredited splitting its shares within the proportion of 1:2. The corporate determined to situation two fairness shares with a face worth of INR 5 every for one share with a face worth of INR 10 every.

image 75
Supply: TradingView

Varun Drinks Share Worth Goal Future Development Potential

Varun Drinks has delivered stellar progress during the last couple of years. Going ahead, there are sufficient new alternatives like:

  • Strengthening place in new territories: VBL continues to enhance its presence, product combine, and utilization ranges. The Firm is growing its penetration within the newly acquired territories on the again of a strong distribution community, diversifying its product portfolio with an growing deal with rural & semi-rural areas. Presently, VBL’s contribution to PepsiCo’s India gross sales Quantity is 90%+ (in 2017, it was ~45%).
  • Getting into into manufacturing, promoting, and distribution of meals merchandise: VBL bought right into a co-agreement to fabricate Kurkure Puffcorn, and in Q3 CY22, they commenced trial manufacturing of their Uttar-Pradesh plant for PepsiCo India Holdings Non-public Restricted. Other than this, within the testimony of a powerful relationship with PepsiCo, VBL entered into an settlement to distribute & promote Lays, Doritos, and Cheetos within the territory of Morocco from January 2023. If VBL can decode the manufacturing & distribution of the meals enterprise just like the beverage enterprise, it’s going to have an extended runway for progress.
  • Potential so as to add extra visi-coolers: Presently, out of ~3 million shops the place VBL is current (out of the addressable market of ~10-11 million), ~60% don’t have a visi-cooler due to the non-availability of electrical energy or a competitor has already arrange one in every of its visi-cooler. The corporate has a goal so as to add 40,000-50,000 visi-coolers yearly. Including visi-coolers will assist VBL acquire prospects’ consideration, elevating quantity progress. This creates a headroom for VBL to develop its quantity organically.

Key dangers:

  • There may be little room for additional inorganic progress in home markets: VBL handles greater than 90% of PepsiCo’s India enterprise. The Firm operates in all of the Indian states besides Jammu & Kashmir & Andhra Pradesh. Thus, there may be little room for inorganic progress inside India. VBL can solely deal with natural quantity progress by way of elevated penetration and profitable market share from opponents within the beverage trade.
  • Change in contractual settlement with PepsiCo: VBL’s whole enterprise relies upon totally on its relationship with PepsiCo;. In distinction, the franchise settlement was prolonged until 2039, any future modifications within the contractual association may have main repercussions on VBL’s enterprise dynamics.
  • Adjustments in way of life: An rising development of a wholesome way of life can impression the consumption of CSD drinks, which accounts for 70%+ quantity bought by VBL. A number of new ventures have been launched based mostly on flavored water, infused with pure flavors and free from synthetic components. It could progressively result in a discount within the consumption of CSD drinks in the long term.

*Disclaimer Observe: The securities quoted, if any, are for illustration solely and should not recommendatory. This text is for training functions solely and shall not be thought of as advice or funding recommendation by Analysis & Rating. We won’t be responsible for any losses which will happen. Funding in securities market are topic to market dangers. Learn all of the associated paperwork fastidiously earlier than investing. Registration granted by SEBI, membership of BASL, and certification from NISM on no account assure the efficiency of the middleman or present any assurance of returns to buyers.


Is Varun Beverage good to purchase for the long run?

Varun Drinks has created enormous wealth for long-term shareholders prior to now. The corporate constantly will increase its product portfolio, distribution community, and geographical attain and therefore ought to be capable of ship progress sooner or later. So, Varun Drinks could be a superb funding for long-term buyers if bought on the proper valuation and held for the long run.

What’s the face worth of Varun Drinks Ltd. share?

The face worth of Varun Drinks is INR 5 per share.

What’s the Market cap of Varun Drinks?

The market cap of Varun Drinks is INR 10,721 crores as of 11th July 2023.

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