Varun Beverages Q2 FY26 Results (NSE: VBL)
Signal: Margin pressure
The read
Revenue +20.8% YoY driven by peak summer volumes but gross margin compressed 250bps YoY on raw material cost inflation, pulling OPM down 130bps. PAT still grew 15.1% YoY on operating scale and lower tax. Acquisitions (Twizza, Crickley) are expanding international footprint but adding debt – net debt jumped to ₹8.2 billion. EPS trajectory intact (+15.7% YoY). No operating leverage signal; margin pressure likely transient as Q4 typically sees better margins (23% reported in Q4 FY26). Key watch: raw material cost trajectory and integration of Twizza/Crickley.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹8,650.57 Cr | +20.8% | +28.7% |
| EBIT | ₹1,977.18 Cr | +14.2% | |
| Net profit | ₹1,525.36 Cr | +15.1% | |
| EPS | ₹4.5 | +15.7% | |
| EBIT margin | 22.9% |
P&L walk
Revenue growth of 20.8% YoY driven by volume (peak summer season) partially offset by raw material cost inflation – cost of materials consumed rose 250bps as % of revenue. EBITDA margin contracted 130bps YoY, but QoQ stable. PAT growth of 15.1% YoY lagged revenue due to margin pressure; other income +35% YoY provided minor cushion. EPS +15.7% YoY broadly tracked PAT. Capex moderated but acquisitions (Twizza, Crickley) added debt.
Segments
Single-segment (beverages) – no geographical or product segment split disclosed; geographical diversity through subsidiaries (India, Africa).
Key positives
- Revenue growth of 20.8% YoY to ₹86,506 Mn – peak seasonality + volume momentum.
- EPS grew 15.7% YoY to ₹4.50, broadly tracking PAT growth; no dilution.
- Other income +35.3% YoY (₹1,044 Mn vs ₹772 Mn) – cash treasury yield contributing.
- Revised PepsiCo bottling agreement extended to 2049, enabling diversification into own brands (CALPIS, Twizza).
- Receivable days improved to 17.0 from 19.9 (Dec 2025) – tighter working capital management.
Key concerns
- Gross margin contracted 250bps YoY (cost of materials consumed +28.4% vs revenue +20.8%) – raw material inflation not fully passed through.
- EBITDA margin (OPM) contracted 130bps YoY to 22.9% – first quarter of margin compression after 4 quarters of stability.
- Finance costs surged 55.8% YoY due to acquisition-related debt; net debt rose from ₹1,424 Mn to ₹8,156 Mn.
- Acquisitions (Twizza, Crickley) integration risks and provisional fair value adjustments; goodwill jumped 132% to ₹8,231 Mn.
Research and educational content only. Not investment advice.