Varun Beverages India realisations improve as international growth supports earnings outlook

Investment View and Valuation

In its September 10, 2026 company update, Kotak Securities upgraded Varun Beverages (VBL) to BUY from ADD after the stock corrected by around 15–20 per cent, including a 25 per cent fall from mid-June. Kotak views the weakness as a buying opportunity, although it notes that near-term inflationary pressures have contributed to the correction.

The report sets a 12-month fair value of Rs 530 versus a current market price (CMP) of Rs 407.

India Business Growth Outlook

Kotak’s core positive view is that Varun Beverages’ India business is progressing well, particularly on realisations and profitability. The broker believes that concerns seen at the beginning of 2026 on these two metrics are being addressed.

Kotak expects VBL to deliver 15–15.5 per cent volume growth in 2026 despite a slightly weaker-than-expected summer. It forecasts India volume growth of 14 per cent in CY2026E, followed by 9 per cent each in CY2027E and CY2028E. The broker describes the expected 2026 growth as resilient, implying an 8.5 per cent two-year CAGR.

Competitive Pricing Environment

Competitive pricing pressure remains a relevant consideration. Kotak notes that Campa reduced the pack size of its Rs 10 SKU to 150 ml from about 200 ml. The broker interprets this development as indicating that pricing pressure may be easing for Varun Beverages.

International Growth and Additional Levers

International operations are an important additional growth driver in Kotak’s thesis. The broker states that the international business continues to deliver strong growth, supported by both organic and inorganic levers.

Kotak also identifies steady beverages performance and new optionalities as sources of further growth headroom. It therefore sees multiple growth levers beyond the India business.

Earnings Outlook and Valuation Metrics

Kotak expects Varun Beverages’ earnings to grow 11.6 per cent in CY2027E and 10.2 per cent in CY2028E. At the report-date share price, the stock traded at 37 times September 2027E P/E and 33 times September 2028E P/E.

The report does not provide a detailed fair-value methodology, but the stated Rs 530 fair value accompanies the BUY rating and is assessed with a 12-month holding period.

Key Risk to the Investment Case

The principal negative highlighted by Kotak is input-cost inflation. Specifically, crude and sugar inflation could weigh on profitability in Q4.

Accordingly, the investment case depends on the continued improvement in India realisations and profitability, sustained volume expansion despite weather-related demand variability, ongoing international growth, and the extent to which commodity-cost inflation affects margins.