Varun Beverages shares in focus on acquiring two firms in Africa to expand manufacturing

VBL said the deals are subject to approval from PepsiCo Inc and tax clearance from Ghana and Tanzania's revenue authorities.

Shares of Varun Beverages will be in focus on November 13 after the PepsiCo bottler announced its acquisition of two African companies.

Varun Beverages has acquired full ownership of two African companies making and distributing Pepsi and other related brands of beverages housed under the franchise, the company said on November 12.

VBL has taken 100 percent control of SBC Tanzania and SBC Beverages Ghana, for Rs 1,304 crore and Rs 127.1 crore respectively.

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SBC Tanzania has five manufacturing facilities with a revenue of Rs 1,505.3 crore for FY24, while SBC Ghana has one manufacturing facility, delivering a revenue of Rs 32 crore last fiscal. Both these acquisitions will help VBL expand its geographical footprint in Africa, the company said. The deals are expected to be completed latest by March 2025.

VBL said the deals are subject to approval from PepsiCo Inc and tax clearance from Ghana and Tanzania's revenue authorities.

"There are opportunities outside India, particularly in Africa, which is the next horizon for growth. Looking ahead over the next 20 years, Africa appears very bullish," Ravi Jaipuria, chairperson of Varun Beverages told analysts in October during a concall.

The company also said it is planning to acquire the remaining 39.93 percent stake in a subsidiary - Lunarmech Technologies - for Rs 200 crore. Varun Beverages holds 60.07 percent in Lunarmech, and after the transaction, it will become a wholly-owned subsidiary of VBL.

Lunarmech makes plastic caps for PET bottles, and had clocked a revenue of Rs 183.4 crore in FY24, with manufacturing facilities in Jaipur and Jammu. Lunarmech's production was being used in-house by VBL.

Last month, HSBC reaffirmed its Buy rating, setting a target price of Rs 780 on the player. HSBC is optimistic about the company’s financial health and growth, driven by strategic initiatives.

This follows the Varun Beverages board's approval on October 9 to raise up to Rs 7,500 crore through a Qualified Institutions Placement (QIP). The funds raised will be used by one of the largest franchise bottlers for PepsiCo globally, for making investments in subsidiaries, joint ventures, or associates and to fund the growth of existing businesses, expand the product portfolio, enter new territories, and make strategic acquisitions, the company informed.

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