On Monday, shares of Varun Beverages Ltd rose for the fourteenth straight trading day to another record high of Rs 870 apiece. Since 8 January, the stock has rallied by over 25 percent.
Capital raising plans and expectation of strong quarterly results
On Friday, in a stock exchange filing, the company said that its board will meet on 7 February to approve the audited financial results for the quarter and financial year ended 31 December 2019. It also said that the board will also consider raising capital through Qualified Institutions Placement (QIP)in the meeting.
Varun Beverages follows a January-December financial year.
The company, that is engaged in manufacturing, selling, bottling and distribution of beverages of the Pepsi Co Brand, has been reporting strong growth in revenue and volume of business. Investors, including those overseas, expect the same in the December-ended results.
Increase in FPIs shareholding
The latest shareholding pattern reveals that foreign portfolio investors' (FPIs) stake in Varun Beverages touched a new high of 19.35 percent at the end of December 2019. It is the fifth straight quarterly increase in FPI stake in the company since September 2018 and has aided the increase in its share value.
Further, in mid-January, rating agency CRISIL reaffirmed its rating on the long-term bank facilities and debt programme of the company. It also withdrew ratings on NCDs (non-convertible debentures) of Rs 300 crore since these have been completely redeemed. The rating upgrade reflects the strong business and financial risk profile of the group.
For the September-ended quarter, Varun Beverages posted an 83.73 percent year-on-year increase in consolidated net profit at Rs 81.12 crore. Its India business had delivered an organic volume growth of 17.5 percent, while international business saw 27 percent growth.
With healthy accretion in the acquisition of sub-territories from PepsiCo, brokerages expect the company's financial risk profile to remain strong. Volume growth from pick up in new territories and participation in new manufacturing segments like Tropicana are also expected to increase earnings.
Additionally, farm subsidy announcements in the upcoming Union Budget that could potentially increase disposable rural income is also expected to benefit FMCGs such as Varun Beverages, that have significant penetration in these areas.