Varun Beverages Share Price Bounces Back 17 Per Cent From 52-Week Low In 4 Sessions - Know Why

Shares of Varun Beverages traded 16.94 per cent above their 52-week low levels at Rs 490.65 apiece on the NSE in early trade on March 7. The stock recently hit its 52-week low as it traded at Rs 419.55 apiece on March 3. Shares of the bottling and beverage distribution player have rebounded from their 52-week low in four sessions following March 3. Notably, the stock price of the beverage distributor witnessed a three-session fall between February 25 and March 3. Here’s a look at some of the key factors which contributed to the rebound seen in the beverage distributor’s shares:

IMD’s Heatwave Forecast

The Indian Meteorological Department has forecast that India is likely to see an above-normal number of heatwave days in the time period between March to May 2025. Typically soft-drink sales also rise along with a rise in temperatures.

The meteorological department added that people are also likely to witness an above-normal number of heatwaves in March as well. The heatwave-like conditions are likely to persist over most parts of the country except northeast India, extreme north India and southwestern and southern parts of peninsular India. The meteorological department declares a heatwave once the maximum temperature rises above 40°C in the plains and the temperature is 4.5 degrees Celsius higher than the normal temperature.

Brokerage firm Jefferies said in a note that March to June is a crucial period for Varun Beverages as it derives half of its India volumes in these months and expects double-digit volume growth in 2025.

Rampant Cola Wars

Reliance Industries backed Campa Cola is emerging as a strong contender in the Indian soft-drinks market. Notably, the brand has also deployed an aggressive pricing strategy and is increasing its distribution. Earlier in February, Campa Cola acquired the rights for the 'co-powered' sponsorship slot in this year's Indian Premier League(IPL) for both television and digital platforms, according to a report by the Economic Times.

The Reliance group company replaced Coca-Cola's Thums Up in holding the 'Co-powered', or 'co-presenting' slot. Notably the slot is the second most visible slot of IPL sponsorship after the title sponsorship. The development has sparked off a cola war as all three major brands are expected to compete with each other for market share.

The stock is likely to have gained from the intensifying cola war as it is the largest bottler of PepsiCo. The Reliance-backed brand currently retails 200 ml bottles priced at Rs 10 each as a part of its strategy. Both PepsiCo and Coca-Cola have reacted to the pricing strategy by launching 400 ml bottles priced at Rs 20.

Strong December Quarter Earnings

In the quarter that ended December 2024, Varun Beverages consolidated revenue from operations rose 39.78 per cent to Rs 3,817.6 crore from Rs 2,731 crore in the same period last year. The company’s net profit also grew by 36.08 per cent to Rs 195.64 crore as against Rs 143.76 crore.

Earlier in February Nuvama Institutional Equities said in a report that the company has become ‘net-debt’ free in Q4 CY24. The became net debt-free after it prepaid its debt by using proceeds from its Qualified Institutional Placement issue. The company becoming net debt-free is likely to help it in expanding its business by freeing up money for capital expenditure. Nuvama added that the company plans to launch new products before the summer season starts with plans such as ‘Sting Gold’ soon.

At the time of writing, shares of Varun Beverages Ltd traded flat with a negative bias at Rs 487.15 apiece down by 0.85 per cent on the NSE.