Varun Beverages Debuts On Bourses At 3.3% Discount To Issue Price
Tepid debut for Varun Beverages at the bourses
Varun Beverages, PepsiCo's largest franchise bottler, made its stock market debut at Rs 430 on the Bombay Stock Exchange, at a 3 percent discount to its issue price of Rs 445.
Varun Beverages is the 24th company to list on the exchanges this year. The company said it will use a part of the Rs 1,100 crore IPO proceeds to reduce its debt partially.
The company currently has a debt of Rs 2,300 crore which will be reduced by about Rs 670 crore, Ravi Kant Jaipuria, chairman of Varun Beverages told BloombergQuint.
He further added that the debt to equity ratio will come down to less than 1:1.
The company doesn’t want to embark on an expansion drive right now, though the management claims that a couple of hundred crore has been earmarked for capital expansion.
The GST Council’s decision to include aerated beverages in the highest tax bracket, has definitely come as rude shock for companies like Varun Beverages.
Jaipuria said, “We were hoping that the government would give us a break because the tax rate has been hiked for two consecutive years now, but looking at the GST rates, we might not be able to get a break.”
According to the Euromonitor report mentioned in the red herring prospectus, the Indian soft drink and bottled water market is expected to slowdown going ahead, while the juices segment is expected to grow at a faster pace. But Jaipuria remains hopeful about the prospects of the company.
“The carbonated industry had less growth because of the drought we had in the last two years, the rural market was not responding well. But with good monsoon growth will pick up, ” Jaipuria said.
The company accounts for 45 percent of PepsiCo’s volumes in India. Besides, the company is also looking to expand their international market.
The company has plans to launch the production facility in Zimbabwe. The plant, which is under construction, should be ready by April, Jaipuria said.
As of 10:05 a.m., shares of the company fell as much as 6.27 percent to Rs 417.10.