Varun Beverages jumped up 2% to Rs.840.80, very close to its 52-week high of Rs.849 but soon profit booking at this intra day high led to the stock slipping into the red; it is now down almost 1% at Rs.820.
The stock reacted positively to its announcement that it’s Board has approved its intent to enter into a binding agreement to acquire franchise rights from SMV Group in the State of Karnataka (13 districts), Maharashtra (14 districts) and Madhya Pradesh (3 districts), subject to the satisfactory completion of due diligence and other approvals including final approval of PepsiCo.
These rights had previously been franchised by PepsiCo to SMV Group.
Upon completion of these acquisitions, company will be a franchisee of PepsiCo products across 22 States and 2 Union Territories of India.
These are highly under-penetrated regions and provide huge opportunity for increasing volumes and gaining market share. The proposed acquisition is in line with the company’s strategy to expand into contiguous territories to garner better operating leverage and asset utilization through economies of scale.
As on date, VBL has been granted franchises for various PepsiCo products across 21 States and two Union Territories in India. VBL has also been granted the franchise for various PepsiCo products for the territories of Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe.