Varun Beverages drops nearly 8% despite 20% revenue growth in Q2; margins, valuation weigh on sentiment

Shares of Varun Beverages Ltd (VBL) fell as much as 8.2% intraday on Tuesday after the PepsiCo bottling partner reported a strong set of earnings for the quarter ended June 30, 2026, with investors appearing concerned over margin compression despite robust volume growth and a healthy earnings beat.

The stock touched an intraday low of ₹426.55, down about 8.2% from the previous close, before recovering some losses.

The company reported a 20.4% year-on-year increase in revenue to ₹8,451.2 crore, while consolidated sales volumes rose 19.8% to 466.7 million cases, driven by 14.4% growth in India and 38.4% growth in international markets. Net profit increased 15.1% to ₹1,525.4 crore, while EBITDA rose 17.2% to ₹2,343 crore.

Margin pressure offsets strong growth

Despite the healthy topline performance, EBITDA margin declined 76 basis points to 27.7% as the recently acquired Twizza business in South Africa operated at lower margins.

The company said gross margins improved to 55%, aided by higher contribution from international operations and early procurement of key raw materials in India. However, higher transportation costs and consolidation of Twizza weighed on operating profitability. 

Expansion strategy remains intact

Chairman Ravi Jaipuria said the company delivered strong growth across markets while continuing to strengthen its long-term business.

“Consolidated sales volumes grew by 19.8% and, together with improved realizations, translated into a 20.4% increase in net revenue from operations,” Jaipuria said.

He added that VBL’s expanded manufacturing footprint, extensive distribution network and continued investments in chilling infrastructure supported growth in India, while the acquisition of Twizza strengthened its manufacturing and route-to-market capabilities in South Africa.

Long-term positives

During the quarter, Varun Beverages extended its exclusive bottling and trademark licence agreement with PepsiCo in India until 2049, while also removing restrictions that required it to operate solely as a special purpose vehicle for PepsiCo’s business.

The company also entered into a strategic alliance with Asahi Group Holdings to introduce the CALPIS beverage brand in India and signed an agreement to acquire the business of Devyani Food Industries (Kenya) Ltd, strengthening its presence in East Africa. 

The board also approved an interim dividend of ₹0.50 per share.