Beaten-down stocks Part 10: Correction in Varun Beverages opens entry way

Even as it invests in new greenfield plants and broadens its distribution network to capture demand, Varun Beverages is maintaining profitability through operational discipline and cost efficiency

Bottling and distribution major Varun Beverages has become a notable focus in the present market context. Its stock has dropped 27.7 per cent over the past year. Yet it combines relatively low valuations, steady earnings in recent quarters, and a return on net worth of 15.5 per cent. This mix provides investors with downside protection in a weak market while also offering room for potential gains once sentiment turns positive.

 

India’s equity market overall has lost ground after two successive years of strong double-digit growth. The benchmark BSE Sensex declined 4.8 per cent in the 12 months to September 2025, its weakest annual performance in more than a decade. This compares with a 28.1 per cent rise in the year to September 2024 and a 14.6 per cent increase in the year before that. As a result, the index has now recorded negative returns in three of the past six years ended September.

 

The latest decline has, however, eased valuations from the record highs of 2024. Several blue-chip counters are now available at more attractive levels, presenting opportunities for long-term investors. Still, caution is required as valuations across the broader market remain above long-period averages, making careful stock selection crucial. 

 

Why buy Varun Beverages?

 

• Resilient margins: Despite a 2.5 per cent year-on-year revenue decline in the June quarter due to a weak summer, operating profit margins touched an 8-year high, aided by lower expenses and currency tailwinds in its overseas business.
• PepsiCo’s key franchisee: As one of PepsiCo’s largest global bottlers, handling brands like Pepsi, Slice, and Gatorade, Varun Beverages is driving growth through capacity expansion and entry into new categories such as snacks.
• Global growth plans: International expansion is a priority, with a strong focus on South Africa and other high-potential regions, where the company is actively evaluating acquisition opportunities.
• Disciplined expansion: Even as it invests in new greenfield plants and broadens its distribution network to capture demand, the company is maintaining profitability through operational discipline and cost efficiency.

   

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