Varun Beverages international volume growth and portfolio expansion support outlook

Investment View and Valuation

Motilal Oswal Financial Services Limited (MOFSL), in its July 28, 2026 report on Varun Beverages (VBL), retained its Buy rating after a quarter of healthy volume growth, although earnings were below its estimates. MOFSL’s positive outlook is supported by the scaling of international operations across geographies, strengthening domestic and global distribution, expansion of the snacks business following the operationalisation of Morocco and Zimbabwe in the second half of CY25, and a broader beverage portfolio.

MOFSL forecasts CY25–CY27 revenue, EBITDA and adjusted profit CAGR of 15 per cent, 15 per cent and 17 per cent, respectively. It reduced its CY26E and CY27E revenue and EBITDA estimates by 2 per cent and adjusted profit estimates by 4 per cent.

The target price of Rs 560 is based on 45 times CY27E earnings per share, representing a 10 per cent discount to the one-year forward five-year average price-to-earnings multiple.

2QCY26 Financial Performance

In 2QCY26, Varun Beverages’ consolidated revenue increased 21 per cent year on year to Rs 8,450 crore, broadly in line with MOFSL’s estimate. Consolidated sales volume rose 20 per cent year on year to 467 million cases, supported by 14.4 per cent growth in India and 38.4 per cent growth in international markets. Net realisation per case improved 1.2 per cent to Rs 175, helped by higher realisation in international territories. The overall beverage mix comprised 75 per cent carbonated soft drinks, 7 per cent juice and 18 per cent water.

Consolidated EBITDA rose 17 per cent year on year to about Rs 2,340 crore, but EBITDA margin declined about 80 basis points year on year to 27.7 per cent, below MOFSL’s 28.5 per cent estimate. EBITDA per case declined 2 per cent year on year to Rs 50.2. Adjusted profit after tax was Rs 1,521 crore, 7 per cent below MOFSL’s estimate.

Higher depreciation, which increased 33.6 per cent year on year, reflected new Indian plants commissioned in the prior year and the Twizza acquisition in South Africa. Finance cost rose 55.8 per cent year on year due to the Twizza acquisition. Gross debt stood at Rs 2,940 crore at the end of 2QCY26, compared with Rs 2,020 crore at March 2026.

India and International Business Performance

For 1HCY26, consolidated revenue, EBITDA and adjusted profit grew 19 per cent, 19 per cent and 18 per cent year on year to Rs 15,000 crore, Rs 3,900 crore and Rs 2,400 crore, respectively. Consolidated volume grew 18 per cent.

Portfolio Expansion and Management Commentary

Management highlighted diversification into juice, value-added dairy and hydration. Nimbooz and value-added dairy portfolios grew about 30 per cent and 40 per cent year on year, respectively, in 2QCY26.

The energy portfolio experienced a temporary June–July slowdown following regulation on the use of the term “energy”. Management said volumes initially moved to carbonated soft drinks and recovered after label updates and regulatory clarity.

VBL entered an alliance with Asahi Group Holdings to introduce the CALPIS brand in India, initially offering Original and Mango variants in concentrate and ready-to-drink formats.

Management said early raw-material stocking and lower sugar consumption supported gross margins despite inflation. No-sugar and low-sugar products represented 73 per cent of volumes, and much of the 3QCY26 raw-material requirements had been secured.

Key Factors to Monitor

• Input-cost volatility.
• Regulatory effects on the energy portfolio.
• International margin performance.
• Zimbabwe’s recovery.
• Integration and ramp-up of newer operations.