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Varun Beverages, the prominent bottler of PepsiCo products in India, experienced a significant surge in its share price on Tuesday, marking a positive shift after three consecutive days of decline. The boost in the stock's value coincides with the company's upcoming board meeting scheduled for Wednesday, where a proposal to raise funds through Qualified Institutions Placement (QIP) is expected to be discussed.
The stock, which had been trading at Rs 541.80 on BSE the previous day, closed the session on Tuesday at Rs 593.75, representing a substantial 9.58% gain. This upward trend contributed to an increased market capitalization for Varun Beverages, reaching Rs 1.90 lakh crore. The trading volume for the day amounted to 3.60 lakh shares, resulting in a turnover of Rs 20.58 crore.
Looking at the broader performance of the company's stock, Varun Beverages shares have delivered impressive returns in recent years, showcasing a multibagger performance with gains of 158.25% in two years and a remarkable 387.41% in three years. In terms of technical analysis, the relative strength index (RSI) currently stands at 27.6, indicating that the stock is neither in an overbought nor oversold zone. Moreover, the stock's price is positioned below the 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, and 150-day moving averages, but it does trade above the 200-day moving average.
On October 6th, Varun Beverages officially announced that its board of directors would convene on October 9th, 2024, to consider and approve crucial proposals. These proposals include raising funds through the issuance of equity shares via QIP and seeking shareholder approval through a postal ballot for the same. This move reflects the company's strategy to expand its operations and capitalize on its strong market position.
Adding to the positive sentiment surrounding Varun Beverages, global brokerage firm HSBC recently initiated coverage on the stock with a 'Buy' call and set a price target of Rs 780 per share. This optimistic assessment is based on the firm's belief in the company's significant market share and its presence in the Indian soft drink market, which remains relatively underexploited. Varun Beverages currently controls 90% of PepsiCo's bottling volume in India, making it the second-largest soft drink bottler in the country, with a 28% share in the carbonated soft drink (CSD) market. This significant market share contrasts with the fragmented Coca-Cola system, which holds a larger market share at 55% but is spread across multiple bottlers.
Varun Beverages' business model centers on being a beverage company that operates as a franchisee for PepsiCo. The company's portfolio encompasses a diverse range of products, including carbonated soft drinks (CSDs), non-carbonated beverages (NCBs), and packaged drinking water, all marketed under trademarks owned by PepsiCo. The company's strong market position, coupled with its commitment to expansion and the positive outlook from HSBC, suggests that Varun Beverages is well-positioned to capitalize on the opportunities within the Indian beverage market.
Source: Varun Beverages shares turn green a day ahead of board meet to raise funds