At a Glance

Varun Beverages, the largest Pepsi bottler outside the US, has delivered explosive sales and profit growth over the past five years. But with a P/E of 54, a sudden fall from ₹683 to ₹449, and rising capex intensity, the market is now asking: Has the fizz gone flat?

🍾 1. The Backstory: Bottling Billions with Pepsi

• Varun Beverages (VBL) isn’t just your local Mountain Dew supplier. It’s PepsiCo’s largest bottler in India and the second-largest in the world 🌍.
• Started in the ‘90s, went public in 2016, and since then… let’s just say, the stock chart was looking like it had too much sugar.
• It owns the rights to bottle and distribute Pepsi, 7UP, Slice, Sting, Tropicana, Aquafina, and more across 27 Indian states + international markets like Sri Lanka, Morocco, and Zambia.

📦 It’s a full-stack operator: manufacturing, bottling, warehousing, and distributing over 3,000 SKUs of beverages. Just imagine D-Mart, but only for soft drinks. And with PepsiCo bossing you around.

📊 2. Financial Fizz: A 5-Year Breakdown

🧠 TL;DR:

• Revenue tripled, PAT grew 7x, ROCE doubled, and debt got… scary, then better.
• Operating margins went from 19% → 24%, despite rising PET, sugar, and fuel costs.
• This is not a small FMCG story anymore. This is big capex + big logistics + thin winters kind of story.

🤖 3. Capex Calories: Why Cash Flow Is Gasping

Here’s the real tea… err, cola:

• 🏭 From FY22 to FY24, capex doubled every year. Meghalaya plant launched in May 2025, MP, UP, and Rajasthan expansions ongoing.
• 🥶 Cold Chain infra isn’t cheap — fridges, chillers, warehousing, EV delivery units — it all adds up.
• 🧾 Net cash from operations in FY24: ₹3,381 Cr
  🛠️ Net investing outflow: ₹(4,311) Cr
  📉 Net cash flow before financing = Negative

So, while profit is strong, free cash flow is under carbonation.

😬 4. What’s Going Wrong in 2025?

• The stock fell 35% from ₹683 (Feb 2024) to ₹449 now, despite rising profits. Why?
  • ❄️ Winter Demand Crash: Q4 and Q1 numbers show seasonal dependence hasn’t gone away.
  • 📉 EPS hit a wall: After peaking at ₹3.86 in Jun 2024, EPS has cooled off.
  • 🏃‍♂️ FII Exit: Foreign holding down from 27.5% → 22.9% in 3 quarters.
  • ⚠️ Promoter stake cut: From 63.9% in FY22 to 60.2% in FY25.

It’s giving “too hot to hold, too cold to dump” vibes.

📦 5. Business Model Moat or Just a Pepsi Boat?

✅ Pros:

• Largest bottler of Pepsi outside US
• Highest ROE (22–28%) in the beverages space
• Dominant in North & East India (~80% Pepsi volumes come from here)
• Expanding exports to Africa, MENA

❌ Cons:

• Entirely dependent on PepsiCo (no say in pricing)
• Highly seasonal (45% sales come in Q2)
• Low dividend yield (<0.25%)
• Priced like Nestlé but without its moat

📦 Is it FMCG or logistics or capital-intensive infra? That confusion is why the stock derated.

🧠 6. Valuation: Fizzed Out or Still Sweet?

Let’s try some Cold-Pressed Valuation Math™:

• TTM EPS = ₹8.47
• Current P/E = 53
• Historical P/E band = 35–60
• FCF yield = borderline zero
• ROCE = 25%, great but capex-heavy

🧮 Fair Value Range (EduCalculated™):

🎯 EduFair Value Range: ₹395 – ₹505
(Current price ₹449 is… okayish, but not a thirst trap.)

💬 7. EduView: Bottled Brilliance, But…

Varun Beverages has built a $20B empire of sugar, fizz, and glass bottles. But the question is:

“Should an outsourced bottler of a foreign cola brand with no pricing power trade at a P/E of 54?”

Answer: Not unless you’re selling in a heatwave… every quarter.

With slowing EPS growth, promoter stake cuts, and huge capital needs, this may be a hold-for-summer and dump-before-winter kind of stock.

Tags:

Varun Beverages, VBL Stock Analysis, PepsiCo India, FMCG, Soft Drinks, Beverages, QSR, 5 Year Stock Recap, EduInvesting

✍️ Written by Prashant | 📅 June 20, 2025