Varun Beverages fixes record date for stock split; how many extra shares investors will get?

Varun Beverages, the second largest bottling company of PepsiCo's beverages, has fixed the record date for the stock split in the ratio of 1:2. However, on Tuesday, the large-cap stock witnessed selling pressure and ended lower by a little over a percent on BSE.

As per the regulatory filing, Varun Beverages' board of directors fixed June 15 as the record date to determine eligible shareholders entitled to the stock split.

The 1:2 ratio in the stock split would mean that every 1 existing equity share of Varun Beverages having a face value of ₹10 each will be subdivided into two equity shares having a face value of ₹5 each.

The company received approval for the stock split in a postal ballot on June 2, 2023.

On BSE, Varun Beverages' share price closed at ₹1686.75 apiece down by ₹18.80 or 1.10% on Tuesday.

Varun Beverages is among the top picks of Axis Securities for June month in the large-cap basket.

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In its June top picks report, the brokerage said, "We believe VBL is well-placed under the current market situation as a strong summer season is expected to drive overall beverage sales across regions."

Furthermore, the brokerage's note said, "The initial report on possible El-Nino (deficit rainfall) could delay the rural recovery which would lead the entire FMCG pack (ex-ITC) under wait-and-watch mode. Hence, in this current volatile market situation, we believe VBL provides better earning visibility than other FMCG peers in the near term."

Hence, the brokerage has set a target price of ₹1,860 apiece for Varun Beverages.

According to the brokerage, VBL’s strong presence in the North and East, coupled with strong traction from newly acquired territories (South and West) through distribution expansion and market share gains place VBL on a stronger footing.

Also, early data suggests a strong probability of El Nino, leading to a potentially warmer summer this year.

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Meanwhile, brokerage's note said, VBL seems to be well-placed to increase its lost market share. In CY23, it plans to increase the overall reach to 3.5 Mn outlets from ~3 Mn in CY22 and plans to add 40,000-50,000 visi-coolers annually going forward.

Additionally, the brokerage said, "the management highlighted that Sting’s overall realization is higher by 65% vs. average realization which we believe will give further fillip to the overall margins going forward as it expands Sting's portfolio."

It also needs to be noted that VBL has now turned its focus on expanding its Value-Added Dairy, Sports Drinks (Gatorade) and Juice segments. Currently, it is present in certain markets but plans to expand pan-India post commencement of two new facilities in Maharashtra and Uttar Pradesh in CY24.

In case of macro indicators, Axis Securities note highlighted that the soft drinks industry in India is expected to report healthy growth across categories on the back of better demographics, improving retail penetration across markets, better macroeconomics, and a rising trend of in-home consumption.