Key Takeaways:
- Varun Beverages navigated unseasonal rains in fiscal Q2 while maintaining strong margins and expanding international operations.
- VBL share price could reach ₹662/share by December 2027 based on valuation model assumptions.
- This represents total returns of 49% from today’s price of ₹443/share, with 20% annualized returns over 2.2 years.
Varun Beverages Limited (VBL) is strengthening its position as one of PepsiCo’s largest bottlers globally through capacity expansion, international market growth, and operational efficiency improvements despite weather-related headwinds.
The company operates as PepsiCo’s franchisee across India and multiple international markets, including South Africa, Morocco, Zambia, Zimbabwe, and DRC, with a diversified portfolio spanning carbonated soft drinks (75% of volumes), packaged drinking water (18%), and non-carbonated beverages (7%).
Core offerings include Pepsi, Mountain Dew, 7UP, Aquafina water, Tropicana juices, Gatorade, Sting energy drinks, Nimbooz hydration drinks, and value-added dairy products, all delivered through a distribution network that reaches 4 million retail outlets.
VBL reported fiscal Q2 revenue of ₹70.2 billion, down 2.5% year-over-year. Despite a 3% volume decline driven by abnormally high, unseasonal rainfall in India (resulting in a 7.1% decline in India’s volume), it maintained EBITDA margins at 28.5%, up 82 basis points year-over-year.
Varun Beverages demonstrates resilience through strategic initiatives, as four new greenfield plants were commissioned in India (Prayagraj, Damtal, Buxar, and Mendipathar), operating at 70% capacity utilization with significant headroom for growth over the next two years.
International markets delivered 15.1% volume growth with strong performance in South Africa (16.1% growth). Favorable currency movements in African territories, combined with backward integration efforts, led to a 45% increase in EBITDA in international operations, despite a 23% increase in sales.
The snacks business is gaining traction as Morocco commenced commercial production of Cheetos in June 2025, while Zimbabwe’s snacks facility is expected to start production in October 2025. Distribution of snacks has already begun in Zambia and Zimbabwe.
VBL share price has delivered strong long-term returns to shareholders through consistent execution, strategic capacity additions, and international expansion across high-growth markets.
VBL stock went public in late 2016 and has since returned more than 1,7500% to shareholders. Here’s why the VBL share price could deliver attractive returns through 2027, as the company scales its newly commissioned capacity while expanding international operations and its product portfolio.
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What the Model Says for Varun Beverages Share Price
We analyzed Varun Beverages share price potential using valuation assumptions based on its capacity utilization runway, international expansion opportunities, and margin expansion capabilities through operational leverage.
Investors see a significant opportunity given VBL’s position as a large PepsiCo franchisee with exclusive territories, newly commissioned capacity providing 2+ years of growth runway, and international markets delivering strong growth with improving profitability.
The business model provides multiple growth paths through capacity utilization improvements in India (currently 70%), international market expansion (South Africa, Morocco, African markets), product portfolio diversification (snacks, value-added dairy, energy drinks), and distribution network expansion (targeting 4.3-4.4 million outlets).
Based on estimates of 13.6% annual revenue growth, 18.4% operating margins, and a P/E valuation of 46.5x, the model projects VBL stock could rise from ₹443/share to ₹662/share.
That represents a 49% total return, or 20% annualized return over 2.2 years.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Varun Beverages share price prediction:
1. Revenue Growth: 13.6%
Varun Beverages has historically delivered strong growth rates, with 24.7% growth over the past year and a 31% compound annual growth rate over the last three years.
Growth drivers include four newly commissioned greenfield plants, providing capacity headroom for over two years, international markets growing at 15%+ with South Africa accelerating, and expansion of the snacks business.
Management highlighted that low- or no-added-sugar products now contribute 56% of H1 2025 volumes, reflecting a successful adaptation to evolving consumer preferences.
We used a 13.6% forecast reflecting VBL’s balanced approach to sustainable growth while ramping up newly commissioned capacity and scaling international operations through both organic growth and strategic investments.
2. Operating Margins:18.4%
VBL achieved Q2 EBITDA margins of 28.5%, up 82 basis points year-over-year, despite commissioning four new greenfield plants with higher fixed overhead costs.
The company targets margin stability through operational efficiencies from newer plants (utilizing more efficient production lines), freight cost optimization from plants located closer to distributors, renewable energy adoption, reduced power costs, and backward integration in international markets, thereby improving input cost structures.
Management consistently aims for 21% EBITDA margins as a conservative target, while delivering higher margins through disciplined cost management.
The Indian business is now net debt-free following QIP proceeds, eliminating most finance costs.
3. Exit P/E Multiple: 46x
Varun Beverages trades at a current P/E of 46.5x, which is at the lower end of its historical range, with a 1-year average of 64.4x and a 5-year average of 54x.
The premium valuation reflects VBL’s strong market position as a major PepsiCo franchisee, consistent execution track record, and significant growth runway from capacity expansion and international markets.
Long-term competitive advantages, including exclusive franchise territories, extensive distribution infrastructure, integrated manufacturing capabilities, and a diversified product portfolio, should support premium valuations as the company captures growth opportunities.
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What Happens If Things Go Better or Worse?
Different scenarios for VBL stock through 2030 show varied outcomes based on execution and market conditions: (these are estimates, not guaranteed returns):
- Low Case: Prolonged weather disruptions and competitive pressures → 9% annual returns
- Mid Case: Successful capacity ramp and international scaling → 15% annual returns
- High Case: Strong execution with favorable weather and market share gains → 21% annual returns
Even in the conservative case, VBL stock offers solid returns, supported by a strong brand portfolio, exclusive franchise territories, and a diversified geographic presence, which reduces concentration risk.
The upside scenario could deliver exceptional performance if the company successfully ramps up newly commissioned capacity to 85%+ utilization, while international markets experience over 20% growth and the snacks business scales rapidly.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
