Varun Beverages shares: VBL stock plunges 8% after Q2 results; here's why

Shares of Varun Beverages Ltd fell 8 per cent in Tuesday's trade after one of the largest franchisee of
PepsiCo in the world (outside USA) reported a 15.1 per cent rise in profit after tax at Rs 1,525.36 crore for the June quarter compared with Rs 1,325.49 crore in the corresponding quarter of last year. Net revenue from operations grew 20.4 per cent to Rs 8,451.23 crore in the June quarter compared with Rs 7,017.37 crore in the same quarter last year. The Q2 results missed Street estimates.

Varun Beverages said its realisation per case,  beverages improved 1.2 per cent at the consolidated level with improved realisations in international territories.

Following the results, the stock fell 7.63 per cent to hit a low of Rs 429 on BSE. With this, the stock is down 15 per cent for the one-month period.

Q2 volumes up 19.8%

Varun Beverages said its consolidated sales volume rose 19.8 per cent YoY to 46.67 crore cases in Q2  from 38.97 crore cases a year earlier, driven by 14.4 per cent volume growth in India and 38.4 per cent growth in its international markets.

In India, the company said it recorded healthy volume growth in the twenties from March onwards, following the onset of the summer season, except in April when volumes were largely flat. This resulted in an overall 14.4 per cent volume growth for the quarter.

International volumes included 1.18 crore cases contributed by Twizza in South Africa, which the company acquired during the quarter.

Ebitda margin falls 76 bps

Ebitda rose 17.2 per cent YoY to Rs 2,343 crore in Q2 CY2026 from Rs 1,999 crore a year earlier. However, the Ebitda margin declined 76 basis points YoY to 27.7 per cent, primarily due to the consolidation of the lower-margin Twizza business in South Africa.

In India, the Ebitda margin improved 38 basis points YoY, driven by operating efficiencies from healthy volume growth. The gains were partly offset by higher other expenses, mainly transportation and distribution costs.

Exclusive PepsiCo bottling licence

Ravi Jaipuria, Chairman at Varun Beverages said his company has extended exclusive bottling and trademark licence agreement with PepsiCo in India until April 2049 and removed the earlier restriction requiring VBL to operate solely as an SPV for PepsiCo's business, strengthening our long-term partnership and creating greater operational flexibility to pursue opportunities that can deliver scale, and synergies.

"Looking ahead, we remain confident in the long-term growth potential across our markets, supported by favourable demographics, rising disposable incomes and increasing consumption of packaged beverages. With adequate capacities, a growing and diversified portfolio, strong partnerships and an extensive distribution network, we are well positioned to deliver sustained and profitable growth and create long-term value for all our stakeholders," he said.

Depreciation cost up 33.6%

Depreciation increased 33.6 per cent YoY, reflecting the commissioning of new plants in India over the past year, which were not part of the base quarter, as well as the acquisition of Twizza.

Finance costs climbed 55.8 per cent YoY, largely due to the Twizza acquisition. Meanwhile, income earned on surplus cash in India was accounted for under other income.

VBL has been granted franchises for various PepsiCo products across 26 States and 6 Union Territories in India. India is the largest market and contributed 67 per cent of revenues from operations. VBL has also been granted the franchise for various PepsiCo products for the territories of Nepal, Sri Lanka, Morocco, Zambia, Zimbabwe, South Africa, Lesotho, Eswatini & DRC and distribution rights for Namibia, Botswana, Mozambique and Madagascar.