Varun Beverages Raises Rs 7,500 Crore Via QIP

Varun Beverages Ltd. closed the qualified institutional placement of shares to raise Rs 7,500 crore, according to an exchange filing on late Tuesday. The company allotted more than 13.27 crore shares at an issue price of Rs 565 per share, which is at a discount of 4.97% to the floor price of Rs 594.56, and a discount of 10.4% from Tuesday's closing of Rs 630.50 per share.

With the QIP allotment done, the paid-up equity share capital of the PepsiCo bottler consists of 3.38 crore of face value of Rs 2 each.

No allottee has been awarded shares more than 5% of the equity shares offered in the QIP, the company said in the filing.

Varun Beverages intends to use funds raised through the issue for its growth and expansion plans, as well as strengthen its balance sheet. The company intends to use the proceeds to make investments in subsidiaries, joint ventures or associates or to fund the growth of existing businesses. The funds will also help in pre-payment or repayment of debts the company added.

In September, HSBC Global Research initiated coverage on the company with a 'buy' rating and a target price of Rs 780 per share. 

The brokerage expects Varun Beverages to become the largest PepsiCo bottler in history, holding a 28% market share in carbonated soft drinks and entering the fast-growing energy drinks space by positioning Sting Energy as a disruptor. Sting is priced at a slight premium to soft drinks, but significantly lower than competitors like Red Bull and Monster, marking a unique approach in the energy drinks segment, it said.

Varun Beverages stock closed Tuesday's trade 2.65% higher at Rs 626 apiece on the NSE. compared to 0.28% rise in the benchmark Nifty 50. 

The stock has risen 51% in the last 12 months and 27.4% in the year to date basis. The relative strength index for the counter was at 63.66.

Of the 24 analysts tracking Varun Beverages, 21 have a 'buy' rating on the stock, and three recommend a 'hold', according to Bloomberg data. The average of 12-month analysts' price target stands at 705.22, implying a potential upside of 11.9%.