Shares of Varun Beverages Ltd turned ex-date for stock split on Thursday morning, leading to adjustments in its share price. The stock, which closed at Rs 1,569.15 on Wednesday opened at Rs 635.50 apiece on NSE, reflecting a plunge of 59.50 per cent. That said, it not due to any adverse corporate event but a corporate action, wherein the VBL stock with face value of Rs 5 has been split into shares with face value of Rs 2 each.
The second largest franchisee of PepsiCo, outside the US, had on September 2 also fixed September 12 as the record date for determining entitlement of equity shareholders for the purpose of sub-division of existing shares of the company. Every two VBL shares that investors held of face value of Rs 5 each will become five shares of face value of Rs 2 each.
Varun Beverages had in fact in June 2023 split the VBL stock from face value of Rs 10 each to shares with face value of Rs 5 each. A stock split increases liquidity on the counter, as already owned stocks are split into shares with smaller face values in the proportion of split ratio. The corporate action has no impact on share capital and reserves. If one visits BSE and NSE websites, the VBL stock prices in fact have been adjusted.
On NSE, the scrip climbed 4.83 per cent to hit a high of Rs 657.95 on NSE, following the corporate action. Investors, who might be seeing a 60 per cent fall in VBL shares on their trading apps could, thus, be seeing the unadjusted VBL price.
Varun Beverages is among Axis Securities' top September stock picks. The stock is up 4.53 per cent this month. The company accounts for 90 per cent of PepsiCo’s beverage sales volume in India and is present in 27 States and seven UT. It is also the exclusive bottler for PepsiCo in Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe.
Axis Securities believes that VBL may continue its strong growth momentum on account of successful strategic acquisition of the Beverage Company, thereby consolidating its presence in South Africa and DRC. It sees VBL's continued focus on expansion in distribution reach, mainly in rural areas; and commissioning of multiple green field and brownfield facilities across geographies, thus saving significant transportation costs.
"We believe these investments are poised to support the company’s long-term growth objectives and profitability," it said while suggesting a target of Rs 1,800. Varun Beverages manufactures carbonated soft drinks including Pepsi, Mountain Dew, Seven Up, and Mirinda. It also manufactures non-carbonated beverages such as Tropicana Slice and Tropicana Frutz and bottled water Aquafina.
Axis Securities noted that Varun Beverages Morocco SA, a wholly-owned subsidiary, has entered into an Exclusive Snacks agreement to manufacture and package Cheetos in Morocco by May 2025.
"It has also entered into the new territory of DRC, thereby expecting to start commercial production at the Greenfield plant from the next quarter. The management believes that the forthcoming Capex of Rs 400 crore for the DRC unit will enhance its capacity and expansion strategy in the African territory," the brokerage said.