PE fund AION fully exits Varun Beverages, walks away with handsome returns

AION, a joint venture between Apollo Global Management and ICICI Venture, had invested $90 million in Varun Beverages

Private equity fund AION has decided to completely exit the Ravi Jaipuria-promoted Varun Beverages, bottlers for beverage giant Pepsi.

This comes nearly three and a half year after it invested $90 million (Rs 625 crore according to Wednesday’s exchange rate) in the company.  

In a block deal, AION has sold its remaining 4.5 per cent stake in Varun at Rs 850 a share, a slight premium over the closing price on Tuesday of Rs 844.75 on the National Stock Exchange (NSE). According to sources, this translates to a 25 per cent annual return on equity in dollar terms or a two-fold return over the holding period on the invested equity.

When asked, Parth Gandhi, senior partner and managing director of AION, declined to comment on the transaction. 

The $90 million invested by AION (a joint venture between Apollo Global Management and ICICI Venture) in Varun was half in debt and half in convertible debentures. 

In 2016, Varun came up with a Rs 1,100-crore Initial Public Offer of equity, subscribed 1.8 times at Rs 445 a share. After the company was listed, AION sold its stake in various tranches. 

AION has invested in a number of Indian companies, the latest being Monett Ispat, the steel company it acquired as part of a consortium with JSW through the insolvency route, paying Rs 2,457 crore. This year, it also acquired the information technology and back-office operations of InterGlobe Technologies, the Rahul Bhatia company that runs IndiGo Airlines, for $230 million (Rs 1,600 crore). 

In 2016, it also bought — along with partners like former Genpact chief executive Pramod Bhasin and GE commercial finance business head Anil Chawla — the commercial lending and leasing business of GE Capital for $360 million. 

Varun Beverages is the flagship company of the Ravi Jaipuria group. This February, it cemented a long-term relationship with PepsiCo. The US company announced the bottling partner would acquire its franchise and distribution rights in the south and west regions, becoming the sole pan-Indian bottler for PepsiCo.

Under the deal, for which it has to pay PepsiCo Rs 1,850 crore, Varun acquired the franchise rights in seven states and five Union Territories. With this, the Jaipuria company would become the franchisee of Pepsi in 27 states and seven UTs, becoming responsible for its category creation and brand building, among other things.