Varun Beverages turns volatile after tepid listing

The stock moved higher to Rs 472 on NSE in intra-day trade, bouncing back 13% from its intra-day low of Rs 417.

Varun Beverages (VBL) has moved higher to Rs 472 on the National Stock Exchange (NSE) in intra-day trade, bouncing back 13% from its intra-day low of Rs 417, after listing below issue price. Earlier, the stock listed at Rs 430, a 3.4% below its issue price of Rs 445 per share.

The stock fell by 7% from its intra-day high and was trading at Rs 441 at 12:17 pm. It recovered from that level and quoting at Rs 458, up 2.8% against its issue price at 12:44 pm.

The counter has seen huge trading volumes with a combined 18.12 million shares changed hands on the counter on BSE and NSE. LINK

The company had raised Rs 1,113 crore through initial public offer (IPO), would use the proceeds to partially repay debt taken to fuel expansion in recent years.

Varun is one of the largest franchisees of carbonated and non-carbonated beverages sold under brands owned by PepsiCo outside America. It accounts for 45% of PepsiCo’s volume in India, being sole bottler and distributor for Pepsi in a majority of northern and eastern India.

The company has investment from two major private equity players namely Standard Chartered Private Equity (Mauritius) II Ltd. and AION Investments II Singapore Pte. Ltd.

Soft drinks demand increase post winter season. VBL generates 45% of the annual sales volume in Apr-June period and 75% of the EBITDA in H1 (i.e. Jan-June period).

“Currently, VBL pays around 35-37% of the realization as tax (under various heads). With the implementation of GST and the anticipated max rate of 26%, the company is expected to benefit from the same. However, is additional tax such as sin tax is applied, then it might be neutral or negative for it,” Choice Broking said in IPO note.

Last week, the Goods and Services Tax (GST) GST Council fixed a four-tier tax structure ranging 5%-28%. Demerit goods such as tobacco, aerated drinks, pan masala, and luxury cars will be taxed at 28% with an additional cess.