Varun Beverages drops as Q2 margins disappoint
The company's consolidated net profit increased 15.1% year-on-year to Rs 1,525.36 crore in Q2 CY2026. Revenue from operations (net of excise/GST) rose 20.4% YoY to Rs 8,451.23 crore.
Consolidated sales volume increased 19.8% to 466.7 million cases, driven by volume growth of 14.4% in India and 38.4% in international markets. The Twizza acquisition contributed 11.8 million cases during the quarter.
EBITDA rose 17.2% YoY to Rs 2,343.04 crore from Rs 1,998.77 crore. However, EBITDA margin declined 76 basis points to 27.7%, mainly due to the consolidation of the lower-margin Twizza business. In India, EBITDA margin improved 38 basis points, supported by operating leverage from healthy volume growth.
Profit before tax increased 14.2% YoY to Rs 1,977.18 crore in Q2 CY2026.
Total expenses climbed 22.6% YoY to Rs 6,574.15 crore. Cost of materials consumed rose 28.4% to Rs 3,653.49 crore, employee benefits expense increased 24.3% to Rs 683.24 crore, finance costs jumped 55.8% to Rs 56.92 crore, depreciation and amortisation expense rose 33.6% to Rs 409.04 crore, while other expenses increased 26.7% to Rs 1,618.60 crore.
Gross margin improved 44 basis points to 55.0%, supported by a higher contribution from international operations. In India, early procurement of key raw materials and a higher mix of low-sugar and no-sugar beverages helped offset input cost inflation.
During the quarter, the company extended its exclusive bottling and trademark licence agreement with PepsiCo in India until April 2049 and removed the earlier restriction requiring Varun Beverages to operate solely as a special purpose vehicle for PepsiCo's business in India. It also entered into a strategic alliance with Asahi Group Holdings to introduce the CALPIS brand in India and signed an agreement to acquire the business of Devyani Food Industries (Kenya), expanding its presence in East Africa.
Chairman Ravi Jaipuria said strong volume growth across India and international markets, along with strategic initiatives and capacity expansion, positions the company for sustained long-term growth.
The board approved an interim dividend of Rs 0.50 per share, resulting in a total cash outflow of approximately Rs 169.10 crore.
Varun Beverages is one of PepsiCo's largest franchisees globally outside the US and manufactures, bottles and distributes a broad portfolio of carbonated soft drinks, juices, sports drinks and packaged drinking water under brands including Pepsi, Mountain Dew, Sting, Mirinda, Seven-Up, Slice, Tropicana, Gatorade and Aquafina. The company operates across 26 states and six Union Territories in India, with the domestic market contributing about 67% of its FY2025 revenue, and also has franchise and distribution rights across several international markets, including Nepal, Sri Lanka, Morocco, South Africa, Zambia and Zimbabwe.
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