Varun Beverages Limited: Stellar Financial Performance in Q1 CY2025

Varun Beverages Limited (VBL), a key player in the beverage industry (BSE: 540180, NSE: VBL), announced its financial results for the first quarter ended March 31, 2025, on April 30, 2025. The company reported robust growth across key metrics, showcasing its strong operational performance and strategic focus. Below is a detailed breakdown of the financial highlights for Q1 CY2025 compared to Q1 CY2024.

Key Financial Highlights for Q1 CY2025

• Revenue Growth:
  • Revenue from operations (net of excise/GST) surged by 28.9% year-over-year (YoY), reaching Rs. 55,669.4 million in Q1 CY2025, compared to Rs. 43,173.1 million in Q1 CY2024.
  • Consolidated sales volume grew by 30.1%, rising to 314.2 million cases in Q1 CY2025 from 240.2 million cases in Q1 CY2024.
    • This growth was driven by strong organic volume increases of 15.5% in India and in-organic contributions from South Africa and the Democratic Republic of Congo (DRC).
  • Net realization per case increased by 1.6% in India but remained flat in international markets (excluding South Africa).
  • South Africa saw a decline of 0.9% in net realization per case due to challenges in the South African market. However, South Africa achieved a 141 million case volume in the trailing four quarters, reflecting a ~13% growth over the same period last year.
• Gross Margins and Product Mix:
  • Gross margins stood at 54.6%, a decline of 171 basis points compared to Q1 CY2024.
    • This decline was attributed to a lower margin profile of owned brands in the South African market and a higher mix of carbonated soft drinks (CSD) in India.
  • In Q1 CY2025, the product mix included:
    • CSD: 75%
    • Non-Carbonated Beverages (NCB): 7%
    • Packaged Drinking Water: 18%
  • Notably, the share of low-sugar/no-sugar products increased significantly, contributing to ~59% of consolidated sales volumes in Q1 CY2025.
• EBITDA Performance:
  • EBITDA rose by 27.8% YoY to Rs. 12,639.6 million in Q1 CY2025, up from Rs. 9,887.6 million in Q1 CY2024.
  • This growth aligns with the strong net revenue increase, reflecting operational efficiency despite margin pressures.
• Profit After Tax (PAT):
  • PAT increased by 33.5% YoY, reaching Rs. 7,313.6 million in Q1 CY2025, compared to Rs. 5,478.1 million in Q1 CY2024.
  • The significant PAT growth highlights VBL’s ability to manage costs effectively while scaling operations.

Strategic Insights and Market Performance

• Regional Performance:
  • India remains a strong growth driver with a 15.5% organic volume increase, supported by rising demand and effective market strategies.
  • South Africa and DRC contributed through in-organic growth, although South Africa faced challenges with net realization due to market dynamics.
  • International markets (excluding South Africa) maintained flat net realization, indicating stable pricing strategies in those regions.
• Focus on Health-Conscious Products:
  • The increased share of low-sugar/no-sugar products (59% of sales volumes) reflects VBL’s alignment with evolving consumer preferences for healthier beverage options.
  • This strategic shift positions the company well for long-term growth in the health-conscious beverage segment.
• Operational Efficiency:
  • Despite a decline in gross margins, VBL maintained strong EBITDA growth, indicating effective cost management and operational scalability.
  • The company’s ability to grow PAT by 33.5% YoY further underscores its financial resilience and strategic execution.

Varun Beverages Limited delivered an impressive performance in Q1 CY2025, with significant growth in revenue (28.9% YoY), EBITDA (27.8% YoY), and PAT (33.5% YoY). The company’s focus on expanding sales volumes, particularly in India and through in-organic growth in South Africa and DRC, has paid off, despite challenges like margin pressures and regional market dynamics. Additionally, VBL’s emphasis on low-sugar/no-sugar products aligns with global trends toward healthier beverages, setting a positive tone for future growth. As VBL continues to strengthen its market position, investors and stakeholders can look forward to sustained momentum in the coming quarters.