Varun Beverages Ltd (VBL), the leading bottler for PepsiCo products in India and several international markets, reported an impressive 40.2% increase in its consolidated net profit for the fourth quarter of calendar year 2024 (Q4 CY24). The net profit rose to ₹185.14 crore for the quarter ending December 31, 2024, compared to ₹131.97 crore in the same period last year.
The company’s robust performance was driven by organic volume growth, strategic geographical expansion, and an improved product mix across its markets. Despite the strong financial results, Varun Beverages’ share price was trading 2.47% lower at ₹540 per share on the National Stock Exchange (NSE) by 12:52 PM following the earnings announcement.
Financial Highlights of Varun Beverages Q4 CY24
Varun Beverages’ revenue from operations witnessed a sharp rise of 39.78%, reaching ₹3,817.61 crore in Q4 CY24 compared to ₹2,730.98 crore in the corresponding quarter of the previous year.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter stood at ₹580 crore, marking a 39% increase from ₹418 crore in the same quarter last fiscal year. However, the EBITDA margin remained stable at 15.7%, indicating that while revenues and profits surged, operational efficiency stayed consistent.
| Financial Metrics | Q4 CY24 | Q4 CY23 | YoY Change |
|---|---|---|---|
| Net Profit | ₹185.14 crore | ₹131.97 crore | +40.2% |
| Revenue from Operations | ₹3,817.61 crore | ₹2,730.98 crore | +39.78% |
| EBITDA | ₹580 crore | ₹418 crore | +39% |
| EBITDA Margin | 15.7% | 15.7% | Flat |
Dividend Announcement
In a move that reflects the company’s strong financial health, the Board of Directors announced a dividend of ₹0.50 per share, subject to shareholder approval at the upcoming Annual General Meeting (AGM). The company has yet to announce the record date for this dividend.
This dividend announcement aligns with Varun Beverages’ ongoing commitment to reward its shareholders while reinvesting in business expansion and operational efficiency.
Geographical Expansion Fuels Growth
Commenting on the results, Ravi Jaipuria, Chairman of Varun Beverages, emphasized the company’s continued expansion into new international markets.
“We are pleased to conclude CY2024 on a strong note through adding geographical presence into South Africa along with distribution rights in Namibia, Botswana, Mozambique, and Madagascar. We also commenced greenfield operations in the Democratic Republic of Congo (DRC). The growth has been driven by organic volume growth and an improved product mix,” Jaipuria stated.
Varun Beverages has strategically expanded its footprint in Africa, tapping into new markets and leveraging existing operational expertise to maximize growth opportunities.
Volume Growth Highlights
The company reported significant volume growth across its domestic and international markets:
- India Volumes: Increased by 11.4% in Q4 CY24, reflecting strong demand in the domestic market.
- Consolidated Volumes: Rose by 23.2%, showcasing the effectiveness of the company’s international expansion strategy.
- South Africa: Sales volumes in South Africa grew by 12.5% in the very first year of operations, highlighting the potential of this new market.
Jaipuria noted that the company is diversifying its distribution channels, consciously reducing reliance on modern trade and focusing on expanding its general trade network to enhance market reach.
Strategic Acquisitions and Capital Raising
In addition to organic growth, Varun Beverages has made significant strides in expanding through strategic acquisitions:
- The company entered into a share purchase agreement to acquire PepsiCo’s businesses in Tanzania and Ghana. This acquisition will further strengthen Varun Beverages’ presence in the African continent and enhance its global distribution network.
Moreover, the company successfully raised ₹7,500 crore through a Qualified Institutional Placement (QIP) during the quarter. This capital will be used to fund ongoing and future expansion projects, including greenfield plants and backward integration facilities.
New Greenfield Production Plants and Backward Integration
In CY24, Varun Beverages commissioned three new greenfield production plants with backward integration in:
- Supa, Maharashtra
- Gorakhpur, Uttar Pradesh
- Khordha, Odisha
These new facilities are expected to significantly boost the company’s production capacity and improve supply chain efficiencies.
Additionally, the company expanded its backward integration facilities at:
- Guwahati plant in India
- Plants in Morocco, Zambia, and Zimbabwe
These backward integration initiatives are designed to reduce operational costs, enhance production efficiency, and ensure consistent quality across all markets.
Share Price Reaction
Despite the strong quarterly performance, Varun Beverages’ share price experienced a 2.47% decline post-earnings announcement. The stock was trading at ₹540 per share on the NSE by 12:52 PM on the day of the results.
This dip could be attributed to profit booking by investors or concerns over the company’s capital expenditure and debt levels following the ₹7,500 crore QIP. However, analysts remain optimistic about the company’s long-term growth potential given its robust financials and expansion strategy.
Outlook for 2025 and Beyond
Looking ahead, Varun Beverages is well-positioned to continue its growth trajectory through:
- Geographical Expansion: Further penetrating African markets and exploring new territories for growth.
- Product Diversification: Expanding its product portfolio to include new beverage categories tailored to regional tastes.
- Operational Efficiency: Leveraging backward integration to reduce costs and improve margins.
- Sustainable Practices: Focusing on environmentally sustainable operations and community engagement in all markets.
Analyst Views
Market analysts have expressed confidence in Varun Beverages’ growth strategy and financial resilience:
- Positive Outlook: Analysts highlight the company’s strong volume growth, strategic acquisitions, and expansion into high-potential markets as key drivers of future growth.
- Caution on Valuations: Some caution that the high capital expenditure and potential currency risks in international markets could affect profit margins in the short term.
Conclusion
Varun Beverages has delivered an outstanding performance in Q4 CY24, with net profit and revenue growing over 40% year-on-year. The company’s strategic expansion into Africa, coupled with its focus on organic growth and operational efficiency, positions it for sustained success in the coming years.
While the short-term dip in share price may raise questions among investors, the company’s strong fundamentals and growth potential make it a promising player in the global beverage market.
