Varun Beverages - Expanding Global Presence With Acquisition In South Africa: Motilal Oswal

Motilal Oswal Report

Varun Beverage Ltd. has acquired 100% equity stake in a South African beverage company, ‘The Beverage Company (Proprietary) Ltd.’, for a cash consideration of ~Rs 13.2 billion. Key highlights are as follows:

1. BevCo revenue for FY23 stood at ~Rs 16 billion with estimated Ebitda of Rs 1.9 billion (which accounts for ~10%/5% of the incremental revenue/Ebitda).

2. The acquisition is priced at an attractive valuation of enterprise value/sales of ~0.8 times/0.7 times on FY23/FY24E and EV/Ebitda of six times on FY24E (as per the acquisition guidelines of Varun Beverages).

3. BevCo clocked sales volume of ~117 million unit cases in FY23, with ~85% of sales coming from the company’s own brands (including ~15% from energy drink) and the rest from PepsiCo products.

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