Varun Beverages shares zoom 18% to hit one-year high as company set to acquire South Africa's BevCo

Shares of Varun Beverages Ltd rose sharply in Wednesday's trade to scale their one-year high level. The stock surged 17.79 per cent to hit a 52-week high of Rs 1,380.45. The company, which is PepsiCo's largest franchise bottler, has announced the acquisition of South Africa-based Beverage Company (Bevco) along with its wholly-owned subsidiaries at an enterprise value of Rs 1,320 crore. The move is aimed to expand geographical footprint in the African market.

Bevco holds franchise rights from PepsiCo in South Africa, Lesotho and Eswatini. It also has distribution rights for Namibia and Botswana. It also owns beverage brands such as Refreshhh, a high caffeine content drink, Reboost, an energy drink, Coo-ee, a carbonated drink in classic flavours and JIVE, which is a fizzy Lemonade.

Varun Beverages, in a BSE filing, said it expects to complete the transaction before July 31, 2024. Bevco had a net revenue of Rs 1,590 crore in FY23, the filing added.

Bevco has five manufacturing facilities – two in Johannesburg and one each in Durban, East London and Capetown and has an installed capacity of 3,600 BPM (bottles per minute).

"The acquisition will enable VBL to expand its geographical footprint in Africa," said VBL in a regulatory disclosure. South Africa is the largest soft drinks market in the African continent, which is expected to grow at a CAGR of 5.3 per cent for the next four years till 2027.

"The rising affluence of South African households has resulted in urbanization, coupled with longer workdays and emerging interest from female consumers, which has contributed to the growth in the Industry," said VBL.

In a separate filing, Varun Beverages informed that it has signed a Memorandum of Understanding (MOU) with the Jharkhand government for its proposed manufacturing plant in Patratu.

On technical setup, the counter was trading higher than the 5-day, 10-, 20-, 30-, 50-, 100-, 150- and 200-day simple moving averages (SMAs). The counter's 14-day relative strength index (RSI) came at 83.19. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 88.76 against a price-to-book (P/B) value of 22.73.

On BSE, 4.44 lakh shares were last seen changing hands today. The figure was way more than the two-week average volume of 71,000 shares. Turnover on the counter came at Rs 58.75 crore, commanding a market capitalisation (m-cap) of Rs 1,68,053.46 crore.

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