At a Glance
Varun Beverages, PepsiCo’s global BFF, popped open its Q1 FY26 numbers with a revenue of ₹5,305 crore and a net profit of ₹1,160 crore. Margins fizzed to 31% OPM, and ROE remains a refreshing 20%. But growth was flat: sales dipped 8.5% QoQ, profit barely moved. The stock, trading at ₹505, P/E 67.5, still demands premium pricing like a cold Pepsi at an IPL match.
Introduction
Varun Beverages is not just a bottler; it’s PepsiCo’s knight in shining aluminium. Handling over 90% of Pepsi’s India volumes and expanding globally, it has grown like crazy over the past decade (CAGR 40% profit!). But after years of hyper-growth, Q1 FY26 shows carbonation slowing.
The company is diversifying with snacks, visi-cooler JVs, and more distribution muscle. However, investor worries linger: promoter stake is slipping (down to 59.8%), valuations are bubbly, and sales dipped this quarter. Is this just a seasonal hiccup or the start of a flatter growth curve?
Business Model (WTF Do They Even Do?)
Varun Beverages manufactures, bottles, and distributes PepsiCo products – from Pepsi, 7UP, Mountain Dew to Tropicana, Sting, and Aquafina. It also sells its own brands (Creambell, Reboost) and now forays into snacks. The company thrives on distribution dominance – 3 million outlets, hundreds of plants, and a network Pepsi itself would envy.
This is a volume game – high capex, high seasonality, but enormous scale advantages. Unlike other FMCG players, Varun’s growth depends heavily on summer demand and global expansions.
Financials Overview
Q1 FY26 Snapshot:
- Revenue: ₹5,305 crore (+13% YoY, -8.5% QoQ)
- EBITDA: ₹1,641 crore (OPM 31%)
- Net Profit: ₹1,160 crore (+0.9% QoQ)
- EPS: ₹3.43
Past 5 years show 40% profit CAGR. OPM improved from 18% (FY20) to 26%+ (FY25). Debt is down, but P/E at 67 makes investors pay up.
Valuation
The stock is expensive, but growth justifies some of it.
- P/E Method:
EPS FY25 = ₹7.57, apply fair P/E 45 → ₹341 - EV/EBITDA Method:
EBITDA FY25 = ₹3,776 crore, apply EV/EBITDA 25 → EV ₹94,400 crore → Per share ≈ ₹470 - DCF (quick):
Growth 15%, WACC 10% → Fair Value ≈ ₹500
Fair Value Range: ₹470–₹520
What’s Cooking – News, Triggers, Drama
- JV for visi-coolers (₹42.5 Cr) – supply chain boost.
- Snack biz scaling – chasing PepsiCo’s global model.
- New plants – capacity ramp-up.
- Promoter stake drop – FII/DIIs increasing.
- Seasonal impact – weak Q1 sales due to extended rains.
Balance Sheet
| Assets | ₹ Cr |
|---|---|
| Total Assets | 21,266 |
| Net Worth | 18,065 |
| Borrowings | 445 |
| Liabilities | 2,756 |
Auditor Roast: Almost debt-free now, strong reserves, but asset-heavy like every bottler.
Cash Flow – Sab Number Game Hai
| Year | Ops | Investing | Financing |
|---|---|---|---|
| FY23 | ₹1,559 Cr | -₹1,509 Cr | -₹26 Cr |
| FY24 | ₹1,953 Cr | -₹2,770 Cr | ₹819 Cr |
| FY25 | ₹2,967 Cr | -₹3,687 Cr | ₹2,729 Cr |
Comment: Cash flow strong, but expansion guzzles cash like a thirsty cricketer in May.
Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 20.1% |
| ROCE | 23.8% |
| P/E | 67.5 |
| PAT Margin | 18.4% |
| D/E | 0.02 |
Takeaway: Ratios are fit and toned; only the P/E is obese.
P&L Breakdown – Show Me the Money
| Year | Revenue | EBITDA | PAT |
|---|---|---|---|
| FY23 | ₹12,633 Cr | ₹3,061 Cr | ₹1,775 Cr |
| FY24 | ₹14,349 Cr | ₹3,764 Cr | ₹2,320 Cr |
| FY25 | ₹14,458 Cr | ₹3,776 Cr | ₹2,539 Cr |
Comment: Growth slowing but margins holding strong.
Peer Comparison
| Company | Revenue (₹Cr) | PAT (₹Cr) | P/E |
|---|---|---|---|
| Varun Beverages | 14,458 | 2,539 | 68 |
| Valencia Nutrition | 9 | 1 | 104 |
| Orient Beverages | 164 | 3 | 16 |
Comment: VBL is a beast compared to peers, but priced for perfection.
Miscellaneous – Shareholding, Promoters
- Promoter Holding: 59.8% (falling slowly)
- FII/DII: FIIs 21.9%, DIIs 10.5%
- Public: 7.8%
Institutions love it, promoters trimming slowly – a red flag or just estate planning?
EduInvesting Verdict™
Varun Beverages continues to fizz with strong margins and a dominant market position. However, growth is slowing, promoter stake is dropping, and valuation is sky-high. Expansion into snacks and coolers may add fuel, but investors should watch sales trends.
SWOT
- Strengths: PepsiCo dominance, strong margins, low debt.
- Weaknesses: High valuation, seasonal dependency.
- Opportunities: Global expansions, snacks, visi-coolers.
- Threats: Weather disruptions, raw material inflation.
Final Word: A high-quality FMCG play with a premium tag. Great for long-term sippers, risky for short-term traders.
Written by EduInvesting Team | 29 July 2025SEO Tags: Varun Beverages, PepsiCo Franchise, Q1 FY26 Results
