Varun Beverages Limited (VBL), a key player in the beverage industry and one of the largest franchisees of PepsiCo worldwide, has reported a mixed bag of results for the second quarter, along with strategic moves to expand its manufacturing capabilities.

Volume Decline in India

VBL experienced a 7.1% drop in India volumes during Q2, according to its investor presentation. The company's sales volume in India decreased to 390 million units from 402 million units in the same quarter of the previous year, representing a 3% year-over-year decline. This decline was primarily attributed to abnormally high unseasonal rainfall throughout the quarter in India.

Financial Performance

Despite the volume decline, VBL managed to deliver a resilient financial performance:

• Revenue from operations decreased by 2.5% year-over-year to Rs. 70,173.70 million.
• EBITDA increased marginally by 0.4% to Rs. 19,987.70 million, with EBITDA margins improving by 82 basis points to 28.5%.
• Net profit after tax (PAT) grew by 5.0% to Rs. 13,254.90 million, driven by operational efficiencies and lower finance costs.

International Market Growth

While India volumes declined, VBL's international business showed strong growth:

• International volumes grew by 15.1%, with South Africa growing at 16.1%.
• Net realization per case improved by 6.6% in international markets.

Joint Venture for Visi-Cooler Manufacturing

In a strategic move, VBL announced the formation of an equal joint venture with Everest International Holdings Limited to establish White Peak Refrigeration Private Limited. This new entity will manufacture visi-coolers and other refrigeration equipment in India. The joint venture will have a paid-up share capital of Rs. 42.50 crore, with both VBL and Everest International holding 50% each.

Expansion and New Ventures

Varun Beverages continues to focus on growth and diversification:

• The company's Morocco subsidiary commenced commercial production of PepsiCo's snack product 'Cheetos', marking its entry into the snacks category.
• VBL enhanced its production capacity in South Africa by setting up a can line in Durban.
• The company is awaiting approval from the Competition Commission of South Africa for a land parcel purchase to further expand capacity and backward integration in Boksburg.

Management Commentary

Ravi Jaipuria, Chairman of Varun Beverages Limited, commented on the results: "We delivered a resilient performance during the quarter. In spite of unusually early onset of monsoon rains in the peak summer months in India, we could keep our realizations per case and EBITDA margins intact."

Dividend Announcement

The Board of Directors has approved a second interim dividend of Rs. 0.50 per share, resulting in a total cash outflow of approximately Rs. 1,691.00 million.

VBL remains optimistic about its future prospects, citing robust capacities, an expanding product portfolio, and a focused distribution network as key factors positioning the company to capture emerging opportunities and drive long-term value creation for stakeholders.

Varun Beverages Limited (VBL), one of PepsiCo's largest franchisee bottlers, has reported mixed financial results for the second quarter of 2025, with revenue decline offset by margin expansion and profit growth. The company also announced key developments and an interim dividend.

Financial Performance

For Q2 2025, VBL reported a 2.5% decline in revenue to Rs. 70,173.70 million, primarily due to a 3.0% drop in consolidated sales volume to 389.7 million cases. The volume decrease was mainly attributed to unseasonal rainfall in India, which led to a 7.1% fall in Indian volumes. However, international volumes grew by 15.1%.

Despite the revenue decline, the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased by 0.4% to Rs. 19,987.70 million. The EBITDA margin expanded by 82 basis points to 28.5%, indicating improved operational efficiency.

VBL's Profit After Tax (PAT) grew by 5.0% to Rs. 13,254.90 million for Q2 2025.

H1 2025 Performance

For the first half of 2025, VBL demonstrated stronger performance:

• Revenue grew by 9.3% to Rs. 125,843.10 million
• EBITDA increased by 9.5% to Rs. 32,627.40 million
• PAT rose by 13.6% to Rs. 20,568.50 million

Key Financial Metrics

All financial figures in million rupees

Interim Dividend

VBL's Board of Directors has approved a second interim dividend of Rs. 0.50 per share for the financial year 2025.

Expansion and New Ventures

VBL reported several key developments during the first half of 2025:

1. Commissioned new production facilities across four Indian locations:

   • Damtal, Himachal Pradesh
   • Prayagraj, Uttar Pradesh
   • Buxar, Bihar
   • Mendipathar, Meghalaya

2. Started commercial production of PepsiCo's snack product "Cheetos" in Morocco through its subsidiary, Varun Beverages Morocco SA.

3. Acquired a 50% stake in Everest Industrial Lanka (Private) Limited, a Sri Lankan company engaged in the production and distribution of commercial visi-coolers and related accessories.

These strategic moves demonstrate Varun Beverages' commitment to growth and operational efficiency, despite challenging market conditions. The company's expansion into new territories and product lines, coupled with its improved profitability and margin expansion, positions it well for future growth in the beverage industry.