Varun Beverages shares zoom 18%; hit 52-week high on acquiring South Africa's BevCo

Shares of Varun Beverages surged as much as 17.78% in early trade to hit a 52-week high of ₹1,380.45 apiece on the BSE, a day after PepsiCo's largest franchise bottler in India acquired South Africa's The Beverage Company and its wholly-owned subsidiary ‘Bevco’ for ₹1,320 crore.

The company's share price opened at ₹1,172, up 15.19%, as against the previous closing price of ₹1,172. At 9:48 am, the share price of the company was trading 12.29% higher at ₹1,316. This is in line with the broader BSE Sensex, which was trading 0.57% or 409.89 points higher at 71,847.08.

The company's market capitalisation in the early trading session stood at ₹1,71,106.61 crore with more than 1.94 shares exchanging hands on the BSE, as against the two-week average of 0.71 lakh shares. The company hit a 52-week low of ₹550 on February 3, 2023.

In the past one month, three months and a year, the counter has given 25.70%, 45.34%  and 89.16% in returns, respectively. In the year-to-date period, the counter has given 97.98% in returns.

According to the company, the acquisition will enable Varun Beverages to expand its geographical footprint in Africa. The indicative time period for the completion of the acquisition is on or before July 31, 2024. The company says that the completion of the acquisition is subject to regulatory approval.

"Bevco is engaged in the business of manufacturing and distribution of licensed (PepsiCo Inc.)/own[1]branded non-alcoholic beverages in South Africa. Bevco has franchise rights from PepsiCo Inc. in South Africa, Lesotho and Eswatini. Further, it also has distribution rights for Namibia and Botswana. Bevco achieved sales volumes of 117mn 8oz cases in FY23," the company says in a regulatory filing.

To expand its portfolio across Africa, PepsiCo’s second-largest bottler in the world outside the US, also set up a subsidiary named VBL Mozambique, SA in Mozambique last month.

In the July to September quarter of CY23, the company’s profit after tax surged by 30% to ₹514.1 crore, as against ₹395.48 crore in the same period last year, driven by growth in revenue and improvement in margins. The company’s revenue from operations in the September quarter surged by 21.8% year-on-year to ₹3,870.52 crore as against ₹3,2483.05 crore in the same period last year.

Earlier this week, the company also signed a memorandum of understanding (MoU) with the Jharkhand government for setting up a manufacturing plant in Patratu district with a capital outlay of ₹450 crore.

According to analysts at research firm KR Choksey says that Varun Beverages is in a strong position to expand its distribution footprint and use its expertise in logistics and distribution to tap into the growth potential of the juice/ dairy/ sports drinks portfolio.

"Strong engagement with PepsiCo leaves open the possibility of expansion of the addressable market for VBL- with expansion into new geographies as well as new products," it adds.

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