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    Varun Beverages

    VBLGood
    Fast Moving Consumer Goods·29 Oct 2025
    Management Summary

    Varun Beverages delivered a muted Q3 with domestic volumes flat due to prolonged rainfall, but international operations grew 9% led by South Africa. The key strategic developments were the Carlsberg distribution agreement for southern Africa and MOA alteration to include alcoholic beverages. Nimbooz and value-added dairy showed strong momentum. Management remains confident of double-digit growth once weather normalizes, noting double-digit October growth.

    Highlights

    8

    • Q3 consolidated volumes grew 2.4% to 273.8 million cases; India flat, international up 9%

    • Revenue up 1.9% YoY to Rs 48,967 million; net realization per case marginally lower at Rs 178.84

    • EBITDA at Rs 11,474 million, marginally lower; margin at 23.4% vs 24% in Q3 CY2024

    • PAT grew 18.5% to Rs 7,452 million driven by lower finance costs and Rs 100 crore forex gain

    • Nimbooz grew 50%+; value-added dairy grew ~100% though from small base

    • South Africa growing mid-double digits; market share at 17-18%

    • Carlsberg beer distribution agreement for southern Africa announced; test marketing to begin

    • MOA altered to include alcoholic beverages, dairy, snacks and other food categories

    Concerns

    1

    • Prolonged rainfall across India keeping domestic volumes flat

    What Changed1

    vs Q3 FY26

    Guidance items4 → 2 (-2)

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue48,967 Mn+1.9%YoY
    2. 02Volumes273.8 Mn+2.4%YoY
    3. 03EBITDA11,474 Mn
    4. 04EBITDA Margin23.4%
    5. 05PAT7,452 Mn+18.5%YoY

    Segment breakdown

    Volume Mix (Q3)
    74% CSD22% Packaged Drinking Water4% NCB
    Key Growth Categories
    50% Nimbooz Growth100% Value-Added Dairy Growth17.5% South Africa Market Share
    List

    Guidance & targets

    2
    CategoryTargetPriority
    Growth
    India Volume Growth
    Double digit when weather normalizes
    		High
    Growth
    International Revenue Growth
    Mid-teens
    		High

    Risks & concerns

    7
    RiskSeverity

    Prolonged rainfall across India keeping domestic volumes flat

    India volumes flat in Q3 despite 2.4% consolidated growth. Weather disruption extended beyond normal monsoon season into October. — Management acknowledged

    high

    Competition at Rs 10 price point (Campa/Reliance)

    Management sees competition as healthy and market-expanding. Prepared to respond if market share erodes but currently attributes weakness to weather. — Analyst downplayed

    medium

    DRC operations underperforming due to initial execution errors

    DRC had errors that affected recent performance. Now bouncing back but still expected to take longer to reach profitability. — Management acknowledged

    medium

    Entry into alcoholic beverages adds complexity and capital allocation uncertainty

    Starting with import-distribution model in Africa, no large upfront CAPEX. Test marketing approach before committing to manufacturing. — Analyst downplayed

    low

    Areas of Evasion(3)

    • Specific subsidiary financials
    • Exact market size for beer in Africa
    • Concentrate pricing details

    Q&A highlights

    3

    “If we see that our market share is being taken, we will come to the party. At present, we see it's the weather which is only making the issue”

    Competition (Reliance/Campa) aggressive at Rs 10; VBL prepared but waiting to see if market share erodes before responding

    asked by Vivek Maheshwari (Jefferies)

    1 min read4 chapters

    Detailed Narrative

    01

    Weather Impact Dominates India Performance

    India volumes remained flat in Q3 due to prolonged rainfall across the country, extending into what is normally the post-monsoon recovery period. Despite this, EBITDA margins held at 23.4% showing operational resilience. Gross margins improved 119bps to 56.7% from backward integration benefits, though some costs shifted from raw materials to employee and manufacturing overheads.

    02

    Strategic Diversification into Alcoholic Beverages

    VBL announced exclusive Carlsberg distribution agreement for southern African markets (Zambia, Zimbabwe, DRC, South Africa). The strategy leverages existing distribution infrastructure - same trucks, people, and route-to-market can handle beer. Starting with import-distribution model before committing to manufacturing. Africa's beer markets are as large as or larger than soft drinks. MOA altered to include alcoholic beverages for future flexibility.

    03

    Growth Categories: Nimbooz and Value-Added Dairy

    Nimbooz hydration brand grew 50%+ and value-added dairy grew ~100%, both from small bases. New energy drink Ad Rush (Rs 60 mid-price point) launched in 4 cities to fill gap between Sting and premium energy drinks. GST 2.0 transition smooth with rate reductions benefiting ~25% of India portfolio. Low/no sugar products reached 56% of consolidated volumes.

    04

    International Operations Gaining Scale

    International volumes grew 9% led by South Africa (mid-double digits growth, 17-18% market share). Zimbabwe recovered from sugar tax impact with double-digit growth resuming from September. DRC corrected initial operational errors and bouncing back. Snacks business at ~Rs 300 crore annual run rate with Morocco manufacturing operational and Zimbabwe to start by year-end.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.