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Informist, Saturday, Oct. 25, 2025

By Avishek Rakshit

KOLKATA – Although the early onset of the monsoon and protracted rains brought cheer to the rural economy, which is bullish on crop output and the resultant higher income, the rains failed to enthral companies such as Varun Beverages, which earn more during long and intense summers.

As temperatures across India remained cooler due to the incessant downpour, the demand for aerated drinks, commonly referred to as carbonated soft drinks remained low. This led to lower sales during July and August, although there was an uptick in demand for such drinks in September.

One of the largest global franchisees of US-based PepsiCo, Inc., which primarily sells PepsiCo licensed products in India and parts of Africa, Varun Beverages is expected to report a 5.3% on-year increase in its net profit for the September quarter at INR 6.5 billion. The company's revenue is expected to fall 1% on year to 48.8 billion. Both consensus estimates are based on the average of estimates from eight brokerages.

On a sequential basis, the net profit is likely to fall 50% and the revenue is expected to fall 32%. The company, which also sells non-carbonated beverages, including packaged drinking water sold under trademarks owned by PepsiCo, will declare its results for the September quarter on Wednesday. It follows the calendar year as its financial year.

The highest estimate for the company's net profit is just a tad below INR 7 billion by YES Securities (India) Ltd. and the lowest estimate of INR 5.8 billion is by Emkay Global Financial Services Ltd. The highest estimate for revenue is from JM Financial Institutional Securities Pvt. Ltd. at just over INR 50 billion and the lowest is from Emkay at INR 45.5 billion.

Nuvama Wealth Management Ltd., which said that there was an uptick in demand for soft drinks in north India in September, expects the company's sales volume in India to decline 2% on year, while the revenue is likely to fall 4% on year. However, sales volume in Africa is likely to increase 8% on year, effectively leading to a consolidated volume growth of 1% on year. India accounts for 73% of the company's sales volume and of the remaining 27%, the major portion comes from Africa. The political disturbance in Nepal, which accounts for 3% of the company's sales, also hit its sales volumes in the September quarter.

Post the cut in goods and services tax rates, Varun Beverages has cut prices by 5-10%. Nuvama expects almost 20% of Varun Beverages' domestic business in value terms and 30% business in sales volume terms to benefit from the GST rate cut.

Kotak Securities Ltd. estimates only 0.3% on-year growth in consolidated volumes at 268 million cases, owing to a 2.5% on-year fall in the domestic market and 5.9% on-year growth in its global sales volume. Kotak Securities, however, noted that net sales realisations may grow 1.5% on year, which may lead to a 1.8% on-year consolidated revenue growth.

Varun Beverages is expected to report an EBITDA of INR 11.5 billion in the September quarter, according to the average of seven estimates. YES Securities' estimate for EBITDA is the highest at INR 12.3 billion and Emkay's estimate of INR 10.7 billion is the lowest.

Kotak Securities expects Varun Beverages to report a decline in its gross margins by 10 basis points on year to 55.4%, largely due to adverse operating leverage. Nuvama estimates the gross margin to decline by 54 basis points on year to 55%, while the EBITDA margin may expand by 104 basis points on year to 25% due to operating efficiencies.

On Friday, shares of Varun Beverages ended at INR 461.40 on the National Stock Exchange, down 0.9% from the previous close. The shares are down 10% since the company announced its June quarter earnings in July.

Of the 15 research reports on the company available with Informist, 13 have a 'buy' rating on the stock at an average target price of INR 613. One brokerage each has a 'hold' and a 'sell' rating on the stock.

Following are the Jul-Sept earnings estimates for Varun Beverages from eight brokerages in descending order of the estimate of net profit in INR million:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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