Varun Beverages, the second-largest Pepsi franchise globally, opened today at ₹635.50, down from its previous close of ₹1,569.15.
But guess what? – this is a positive development for the company!
Read on to find out why I say so!
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Answer? – The 2:5 VBL Stock Split
Yes, you get a straight answer instead of beating around the bush. This decline is because of the 2:5 stock split announced by Varum Beverages on 2nd September 2024, after approval from shareholders through the Postal Ballot on 30th August.
Now reread the numbers – it gives a whole new image, right? If not, don’t worry, let me walk you through the analysis.
What is a Stock Split? – The Varun Beverages Stock Split Explained
A stock split is when a company splits its number of shares into smaller portions. For example, in the case of Varun Beverages, the stock split ratio is 2:5, Which implies that every two shares will be split and converted into 5 shares. And their face value reduces from ₹5 to ₹2 each.
Stock split only affects the number of shares of the company and it shall not affect the overall company valuation because of this. Total raised capital remains unchanged after a stock split.
It is to be noted that Varun Beverages has previously made a stock split in June 2023 reducing the face value of their stock from ₹10 to ₹5.
WHY Stock Split? – The ultimate goal of Varun Beverages
As mentioned, a stock split is not gonna generate additional capital for a company. But,.. It’s gonna gradually increase the market valuation of your shares. The major aim of this Stock split is to make the shares more affordable to a wide range of investors.
Let’s jump back into numbers – A well-performing company’s share listed price has gone down from ₹1,569.15 to ₹635.50. Wouldn’t you wanna buy it? This strategy brings in new investors and a Stock split enhances the training volume and liquidity.
Financial Highlights of Varun Beverages
The below table shows the financial performance of VBL for the 2nd quarter of the current year.
|
Metric |
Q2 CY2024 |
Q2 CY2023 |
Change |
|---|---|---|---|
|
Revenue from Operations |
₹71,968.6 million |
₹56,114.0 million |
+28.3% YoY |
|
Consolidated Sales Volume |
401.6 million cases |
313.5 million cases |
+28.1% YoY |
|
EBITDA |
₹19,912.2 million |
₹15,110.2 million |
31.80% |
|
Gross Margins |
54.70% |
52.50% |
+222 bps |
|
EBITDA Margin |
27.70% |
27.00% |
+74 bps |
|
PAT (Profit After Tax) |
₹12,618.3 million |
₹10,054.2 million |
25.50% |
Based on the figures, we can conclude that the company does well financially. A constant growth pattern is observed.
Analysis of the post-stock price
VBL Stock price stands at ₹656.90 around 11:30 am today, the day’s high being ₹665.
This is a good sign as the share price has gone up by ₹29.24 since the start of the day.
Conclusion
So, what’s the final takeaway? While a 60% drop in Varun Beverages’ stock price might sound like a nightmare at first, the 2:5 stock split tells a completely different story. It’s a smart, strategic move to make the company’s shares more affordable and attract a broader range of investors. It’s like opening the doors wider for more people to join the party.
What’s even more exciting is that Varun Beverages is not just playing around with numbers. The company’s solid financial growth — from soaring revenues to healthy profit margins — shows that it’s in excellent shape. We’re talking about a 28.3% revenue jump year-on-year and a healthy 25.5% rise in profit after tax. These numbers aren’t just impressive; they’re the kind that makes investors feel good about where they’re putting their money.
And here’s the kicker — after the split, the stock price has already started to bounce back, rising by ₹29.24 by mid-day! That’s a clear sign of investor confidence.
So, don’t let the initial drop scare you. If anything, this stock split has made Varun Beverages even more appealing. The future looks bright, and this could be the perfect time to grab a piece of the action. After all, who wouldn’t want to invest in a company that’s fizzing with both potential and growth?
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Kalaivani Kandhakumar wrote this article.