Varun Beverages gains for 12th straight day, surges 7% to hit a new high

Since January 8, the stock has rallied 23 per cent as latest shareholding data reveals that FPIs' stake in VBL touched a new high of 19.35 per cent at the end of December 2019 Since Jquarter (Q3FY20).

Shares of Varun Beverages (VBL), PespiCo’s India franchise, were trading higher for the 12th straight day, up 7 per cent at Rs 853 on the National Stock Exchange (NSE) on Thursday. The stock was trading at its new all-time high level on the bourses.

Since January 8, the stock has rallied 23 per cent as latest shareholding pattern reveals that foreign portfolio investors' (FPIs) stake in VBL touched a new high of 19.35 per cent at the end of December 2019 quarter (Q3 FY20). In comparison, the benchmark Nifty 50 index has gained 1 per cent during the same period.

FPIs hiked their stake in VBL for the fifth straight quarter, since September 2018, when they had 12.7 per cent stake in the company. As on September 2019, FPIs held 19.17 per cent stake in the company, increased from 14.21 per cent at the end of June 2019 quarter.

In the past few quarters, VBL has reported strong growth in revenues led by healthy overall volume growth on the back of acquisition of south and west sub-territories from PepsiCo.

Meanwhile, rating agency CRISIL last week reaffirmed its rating on the long-term bank facilities and debt programme of the company. CRISIL has also withdrawn its rating on the non-convertible (NCD) debentures of Rs 300 crore since these are completely redeemed.

The upgrade reflects CRISIL's belief that the group's business and financial risk profiles will remain strong over the medium term. VBL's business profile is underpinned by its dominant share in PepsiCo's beverage portfolio in the country along with healthy growth in international territories.
 

Further, with healthy accretion from the recently integrated territories, VBL's financial risk profile is expected to remain robust. Consequently, debt to earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to come down to under 2.4 times as on December 31, 2019 (2.7 times as on December 31, 2018), CRISIL said in the rating rationale. 
 

Analysts at ICICI Securities believe strong organic growth in the last couple of quarters allays concerns regarding the soft drink industry in India. Additionally, the company’s focus on healthier options would help drive incremental volumes and margins. 

As volume growth picks up in new territories and the company participates in the manufacturing segment of Tropicana, the brokerage firm expects revenue and earnings CAGR of 20.2 per cent and 28.9 per cent in CY18-21E, respectively.