Varun Beverages eyes up to Rs1,400 cr from IPO in October

The world’s second largest PepsiCo Inc. bottler, Varun Beverages Ltd, disclosed that it plans to raise as much as Rs1,400 crore via an initial share sale and plans to execute the process by next month end. Ravi Jaipuria, chairman of RJ Corp, the parent of Varun Beverages is of the view that they have just finished their road shows, meeting with investors all over the world and the response has been pretty good. The company as per reports filed its draft share sale documents with the capital markets regulator in June.

Once the IPO is executed, the non-promoter holding, which includes private equity investors and the public, will be 25-26 per cent in the PepsiCo bottler. Varun Beverages will utilize the money raised to get over its debt, said Raj Gandhi, president and group chief finance officer. At present, the debt-to-equity ratio is about 2, which will reduce to 1 after the IPO.

Varun Beverages, a distributor of PepsiCo products in north and east India is the largest bottler for the US-based beverage maker in South Asia. It operates in India, Nepal and Sri Lanka. On a global issue, it’s the second largest bottler of PepsiCo beverages, behind Tingyi Holdings Corp. of China. The IPO will include sale of 15 million new shares and an offer for sale of as many as 10 million shares by the Jaipuria family.

The Varun Beverages IPO is happening at a time when several consumer sector companies are looking to tap the primary markets in order to raise funds or provide an exit to their private equity investors. For the last 18 months, 38 companies have raised almost Rs25,500 crore, data from primary market tracker Prime Database show.

The company has bank debt amounting to Rs1,450 crore and Rs623 crore of deferred payment obligation towards PepsiCo Inc. for territory acquisition in north India in 2015. For the six months to June, Varun Beverages noted a profit of Rs. 209 crore on revenue of Rs. 2,530 crore. The first half of the year is generally better than the second half on the back of higher consumption of cold drinks during the summer.

Investors are ready to bet on the India consumption story and are looking to invest in consumer stocks, but the interest is not across all sectors of consumer sector. Investors sought, consumer stories with different business models, robust financials and strong growth potentials.

On Thursday, Avenue Supermarts Ltd, which owns and runs hypermarkets and supermarkets retail chain D-Mart, filed share sale documents with the markets regulator. D-Mart has planned to raise around Rs. 1,870 crore to pare debt and open new stores.

Also, home lighting and electrical solutions firm HPL Electric and Power Ltd’s Rs. 361 crore IPO was subscribed almost 8 times.

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