 "varun beverages")
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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.
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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?
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- 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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