VBL Share News – Varun Beverages Shares Plunge 6% Despite Strong Profit Growth and Revenue Surge
VBL Share News – Shares of Varun Beverages Ltd plunged 6% in Tuesday’s trade, even as the PepsiCo bottler reported a 25.5% rise in profit after tax (PAT) to Rs 1,261.83 crore for the June quarter, compared to Rs 1,005.42 crore in the same period last year. This profit growth was driven by volume increases and improved margins, according to Varun Beverages.
Revenue and Profit Growth
Varun Beverages, the largest franchisee of PepsiCo outside the US, saw its revenue from operations grow 28.3% year-on-year (YoY) to Rs 7,196.86 crore in Q2, compared to Rs 5,611.40 crore in the previous year. Analysts had expected the company to report a YoY net profit increase of 25-43%, with sales projected to rise by 25-35%.
Stock Market Reaction
Following these developments, Varun Beverages’ stock fell 6.4%, hitting a low of Rs 1,575.95 on the BSE.
Varun Beverages Stock Split
The Varun Beverages board has announced a sub-division of its existing shares. Each equity share with a face value of Rs 5, fully paid-up, will be split into shares with a face value of Rs 2 each, subject to shareholder approval via postal ballot. This move aims to increase retail participation, stated Ravi Jaipuria, Chairman of Varun Beverages.
The record date for the share split will be decided following shareholder approval.
Interim Dividend Announcement
Varun Beverages also declared an interim dividend of Rs 1.25 per share on the total issued, subscribed, and paid-up 129,94,48,412 shares with a nominal value of Rs 5 each. The interim dividend will be paid starting Tuesday, August 13, 2024, to shareholders listed in the company’s register or in the depositories’ list of beneficial owners as of Friday, August 9, 2024. The total cash outflow for this dividend will be Rs 162.43 crore.
Q2 Sales Volumes
The consolidated sales volume for Q2 CY2024 increased by 28.1% to 40.16 crore cases, up from 31.35 crore cases in Q2 CY2023. This includes 28 million cases from BevCo. India volumes grew by 22.9%, while international volumes, excluding BevCo, remained flat due to a portfolio transition to zero sugar in Zimbabwe.
Management Commentary
Ravi Jaipuria expressed optimism about the company’s performance, stating, “With strong performance in a key quarter, we are on track to deliver healthy double-digit growth this calendar year. India remains a high-demand market with massive growth potential, driven by a growing consumer class and a young population. To capitalize on this demand, we are focused on further strengthening our infrastructure, distribution network, and product portfolio.”
Jaipuria also highlighted the company’s expanded partnership with PepsiCo. Varun Beverages has secured an exclusive snacks franchising appointment to manufacture, distribute, and sell “Simba Munchiez” in Zimbabwe by October 2025 and in Zambia by April 2026. This follows a recent agreement to manufacture and package Cheetos in Morocco by May 2025. These new agreements complement the existing distribution of PepsiCo’s portfolio.
Additionally, Varun Beverages has started commercial production of carbonated soft drinks and packaged drinking water at its Greenfield facility in the Democratic Republic of Congo (DRC), representing a significant growth opportunity in an untapped market for PepsiCo.
Conclusion
Despite the recent decline in its stock price, Varun Beverages Ltd continues to demonstrate strong growth and expansion potential, driven by strategic partnerships and a focus on both domestic and international markets. The company’s robust financial performance and forward-looking initiatives indicate a promising future for stakeholders.
FAQ on Varun Beverages Ltd Update
Why did Varun Beverages Ltd’s stock fall despite reporting strong profit growth?
Varun Beverages Ltd’s stock fell 6% despite a notable 25.5% increase in profit after tax (PAT) due to market reactions and investor sentiment. Sometimes, stock prices can be influenced by factors beyond immediate financial performance, including broader market trends, investor expectations, and reactions to other company announcements such as stock splits or changes in dividend policies.
What were the key financial highlights for Varun Beverages Ltd in the June quarter?
For the June quarter, Varun Beverages Ltd reported a profit after tax (PAT) of Rs 1,261.83 crore, marking a 25.5% increase compared to Rs 1,005.42 crore in the same quarter last year. Revenue from operations grew 28.3% year-on-year (YoY) to Rs 7,196.86 crore. The company saw significant volume growth and improved margins during this period.
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