Varun Beverages Strengthens South Africa Presence With Rs 413 Crore Investment In Subsidiary

Varun Beverages Ltd. said on Thursday that it has invested Rs 412.80 crore in its subsidiary Beverage Company Proprietary Ltd. based in South Africa through the subscription of ordinary shares. The subsidiary allotted 19.84 lakh shares to Varun Beverages on Thursday.

The company acquired the shares at a price of 453.47 South African Rand per share (Rs 2,077.95 per share), the company said through an exchange filing. The Beverage Company is engaged in the business of manufacturing and distribution of licensed and own-branded non-alcoholic beverages in South Africa. The subsidiary also has franchise rights from PepsiCo Inc. in South Africa, Lesotho, and Eswatini.

The subsidiary will use the investment to repay its existing debt and strengthen its balance sheet for business growth.

On Thursday, JM Financial Services has highlighted Varun Beverages as a formidable player in India's beverage sector, having expanded its share in PepsiCo's soft drinks volumes from less than 30% in 2011 to approximately 90% in 2024. The broking cited its strong geographic expansion and robust supply chain as drivers of growth.

The broking firm initiated coverage on the company with a 'buy' rating and a target price of Rs 725, indicating an 11% potential upside. This valuation is based on a premium multiple of 55 times the earnings per share value of Dec. 2026, reflecting Varun Beverage's growth prospects.

The report anticipates consolidated sales growth at a CAGR of 18.7% until fiscal 2026, driven by 16.6% volume growth. While margins may stabilise at current healthy levels, interest cost savings from debt repayment are expected to boost earnings CAGR to 29%.

Varun Beverages stock rose as much as 1.96% during the day to Rs 663.60 apiece on the NSE. The stock closed 0.33% lower at Rs 648.70 per share. This compares with a 1.88% advance in the benchmark Nifty 50. It has risen 31.19% in the last 12 months.

Out of 24 analysts tracking the company, 21 maintain a 'buy' rating and three recommend a 'hold,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 9.8%.