- Motilal Oswal maintains a BUY call with a target price of INR 550, implying a 45x CY27 EPS multiple.
- Revenue, EBITDA and profit after tax (PAT) are projected to grow at 13‑16% CAGR through FY27.
- The company’s overseas push is positioned as the next growth engine, outpacing a maturing Indian market.
- Comparable peers (Tata Consumer, Adani) are only beginning to scale internationally, leaving Varun a first‑mover advantage.
- Historical analogues, such as PepsiCo’s 1990s emerging‑market surge, suggest a multi‑year upside tail.
You’ve been missing the biggest growth catalyst in Varun Beverages – its overseas expansion.
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Why Varun Beverages’ International Expansion Outpaces Domestic FMCG Growth
India’s beverage segment is now entering a saturation phase. Competition from multinational giants and seasonal demand swings have compressed margins. In contrast, Varun’s entry into high‑growth markets such as Africa, the Middle East, and South‑East Asia offers a revenue runway that dwarfs domestic prospects. The firm’s franchise model—leveraging its bottling expertise for global brands—allows rapid scale without heavy capital outlay.
Sector Trends: The FMCG Landscape in India vs Emerging Markets
Domestic fast‑moving consumer goods (FMCG) growth has slowed to around 6‑7% YoY, driven by price‑sensitive consumers and tighter regulatory scrutiny. Emerging economies, however, are still expanding at double‑digit rates, buoyed by rising urbanisation, expanding middle classes, and improving retail infrastructure. CAGR (compound annual growth rate) is the metric analysts use to smooth out yearly volatility, and Varun’s projected 13% revenue CAGR for FY25‑27 aligns closely with the broader emerging‑market FMCG trend.
Competitor Lens: How Tata Consumer and Adani’s Beverage Ventures Are Positioning
Tata Consumer, a subsidiary of the Tata Group, has recently acquired a minority stake in a South‑Asian tea brand, signalling a cautious foray into overseas markets. However, its focus remains heavily weighted toward packaged foods, leaving its beverage exposure modest. Adani, traditionally an infrastructure powerhouse, launched a beverage arm in 2022 and is still in a nascent stage of distribution network development. Both peers lack the entrenched bottling infrastructure that Varun already possesses, meaning Varun can capture market share faster and with lower incremental costs.
Historical Parallel: PepsiCo’s 1990s Emerging‑Market Surge
When PepsiCo accelerated its push into Latin America and Eastern Europe in the early 1990s, its earnings grew at a 14% CAGR over a five‑year horizon, vastly outperforming its US‑only growth. The catalyst was a similar playbook: use existing bottling expertise, partner with local distributors, and tailor product mixes to regional tastes. The long‑term effect was a permanent uplift in global market share. Varun’s current trajectory mirrors that playbook, suggesting a comparable upside if execution holds.
Valuation Mechanics: Dissecting the 45x CY27E EPS Multiple
Motilal Oswal values Varun at 45 times its projected FY27 earnings per share (EPS). While this multiple appears lofty, it reflects two core premises: (1) a high‑growth premium for the international expansion narrative, and (2) the expectation that operating leverage will improve as fixed bottling costs spread over a larger volume base. EBITDA (earnings before interest, taxes, depreciation, and amortisation) is forecast to rise at a 13% CAGR, indicating that profit conversion is tightening. Moreover, a PAT (profit after tax) CAGR of 16% signals that net margins are expanding faster than revenue, justifying a premium valuation.
Investor Playbook: Bull and Bear Scenarios
Bull Case: Successful market entry in three new geographies by FY26, coupled with a 2‑point margin uplift from scale efficiencies, pushes earnings above the 45x target, delivering a total return of 30‑35% over the next 18 months.
Bear Case: Regulatory hurdles or currency headwinds stall overseas rollout, while domestic competition erodes market share. In this scenario, earnings fall short of forecasts, the multiple compresses to 30x, and the stock underperforms the broader FMCG index.
Investors should weigh these pathways against their risk tolerance, but the upside potential embedded in Varun’s global expansion remains compelling for a portfolio seeking growth beyond India’s crowded beverage arena.