Why Varun Beverages, One Of Pepsico’s Largest Bottlers, Is Going Public
Varun Beverages Ltd., one of the largest bottlers of PepsiCo products outside of the United States, is looking to raise Rs 1,150 crore through its initial public offering. The issue will open on October 26 and close on October 28.
The company plans to use the proceeds of the offer to reduce debt by Rs 700 crore. Net debt as of December 31, 2015 stood at Rs 1,774 crore.
As part of the offer, the company will issue 1.5 crore fresh shares while promoters Ravi Kant Jaipuria and Sons and Varun Jaipuria will offload 50 lakh shares each, according to the draft red herring prospectus. The price band has been set at Rs 440-445 per share.
The PepsiCo bottler, which has a 44 percent market share in India, will operationalise its Zimbabwe plant this year and is looking to expand into new markets going forward, said Chairman Ravi Jaipuria.
While on the subject of expansion, Jaipuria said that the company's earnings before interest, tax, depreciation and amortisation will take care of further expansion plans.
In the first half of 2016, Varun Beverages' total revenue stood at Rs 2,539 crore, up 13 percent compared to the same period last year, while net profit stood at Rs 210 crore which grew 25 percent.
Way Forward for Indian Beverage Market
The Indian soft drink and bottled water market is expected to segments growth rate is expected to reduce going ahead, while the juices segment is expected to grow at a faster pace, according to the Euromonitor report which was cited in the red herring prospectus.
Soft drink market is expected to grow at a compounded annual growth rate of 14.4 percent from 2015-20 compared to 16.4 percent from 2010-15.
The bottled water segment is expected to grow at 17.6 percent from 2015-20, compared to 24 percent from 2010-15, while the juices segments growth rate is expected to increase to 20.1 percent.
The Euromonitor report further added that the country's per capita beverage consumption is expected to double to 18.4 litres by 2020 from 9.4 litres in 2015.
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