Varun Beverages Limited Q2 CY26 Earnings Call Summary

Revenue

Margin

Demand

Guidance

Tone

Event Participants

Executives

3 Raj Gandhi, Ravi Jaipuria, Varun Jaipuria

Analysts

8 Siddhesh Deshmukh, Jay Doshi, Naman, Percy Panthaki, Abneesh Roy, Nitin Shakdher, Anand Shah, Aditya Soman

Financials & KPIs

Metric	Reported	Commentary
Net Revenue from Operations (Q2)	₹8,451 crores (₹84,512 million)	+20.4% YoY, driven by 19.8% volume growth and 1.2% higher net realization per case
Net Revenue (H1 CY2026)	₹15,025 crores (₹150,254 million)	+19.4% YoY
Consolidated Sales Volume	466.7 million cases	+19.8% YoY; India +14.4%, International +38.4%
India Sales Volume	+14.4% YoY	Growing 20%+ from March onwards; April flat due to El Niño/weather impact
International Volume	+38.4% YoY	Includes 11.8 million cases from Twizza (South Africa); ex-Twizza growth >25%
Net Realization per Case	+1.2% YoY	Supported by better realizations in international territories
Gross Margin	50.0%	+44 bps YoY; aided by higher international mix, early raw material stocking, and LSN product savings
EBITDA	₹2,343 crores (₹23,430 million)	+17.2% YoY; margin 27.7%, down 76 bps YoY on Twizza consolidation (lower-margin business)
India EBITDA Margin	+38 bps YoY	Operational efficiencies from healthy volume growth; partly offset by higher transportation/distribution costs
PAT	₹1,525 crores (₹15,253 million)	+15.1% YoY; H1 PAT ₹2,404 crores (+16.9% YoY)
Depreciation	+33.6% YoY	New India plants commissioned last year (not in base quarter) + Twizza acquisition
Finance Costs	+55.8% YoY	Primarily on account of Twizza acquisition funding
Low-Sugar/No-Sugar Mix	~73% of consolidated volume	Portfolio largely converted to LSN; checks sugar cost inflation
Consolidated Net Debt	₹371 crores (₹3,713 million)	India entity net debt-free with surplus cash of ₹1,494 crores; debt from Twizza acquisition
H1 Net Capitalized CapEx	₹950 crores (₹9,500 million)	₹200 crores India brownfield (incl. VAD dairy line at Supa), ₹100 crores Zimbabwe snack plant, ₹400 crores market infrastructure (coolers, glass bottles, pallets, vehicles)
Capital Work in Progress	₹490 crores (₹4,900 million)	South Africa expansion and CSD line in Kenya
Interim Dividend	₹0.50/share (25% of face value)	Total cash outflow ~₹169 crores

Geographic & Segment Commentary

India: Q2 volume growth of 14.4%, with 20%+ growth from March through July except April (flat due to El Niño). EBITDA margin improved 38 bps YoY on operational efficiencies. VBL India remains net debt-free with surplus cash of ₹1,494 crores; brownfield expansion including a VAD dairy line at Supa is underway.
International (Africa): Volumes grew 38.4%, including 11.8 million cases from Twizza; ex-Twizza growth exceeded 25%. All markets grew except Zambia (small market); Zimbabwe has recovered following prior sugar tax headwinds. Twizza consolidation diluted consolidated EBITDA margin by 76 bps. Kenya acquisition (Devyani Food Industries) provides ready route-to-market for CSD/energy drinks expansion.
New Categories – VAD, Nimbooz, Energy Drinks: Value-added dairy grew >40% and Nimbooz >30% YoY, running at 3-4x overall business growth. Energy drinks saw a temporary volume dip from FSSAI labeling confusion ("energy" word removal within 90 days), with volumes shifting to CSD and recovering as new labels roll out. Low-sugar/no-sugar products constituted ~73% of consolidated volume.
Snacks/Food Distribution (Africa): Food distribution revenue grew ~50% YoY (₹146 vs ₹99 crore); a new snack manufacturing plant in Zimbabwe (₹100 crores CapEx) supports further scaling.

Company-Specific & Strategic Commentary

PepsiCo Agreement Extension to April 2049: Removed the earlier restriction requiring VBL to operate solely as the SPV for PepsiCo business, creating operational flexibility to pursue scale and synergy opportunities beyond the core cola partnership.
CALPIS/Asahi Strategic Alliance: Entry into India's value-added fermented dairy category; VBL is bullish on dairy and will leverage Asahi's systems, processes, and quality standards. CALPIS is the starting point; no decisions on further Asahi brands (Wonda, Wilkinson, Solo) yet.
Twizza Acquisition (South Africa): Inorganic CapEx of ₹1,131 crores; overcomes capacity constraints and strengthens manufacturing footprint and route-to-market capabilities in South Africa.
Kenya Expansion: Agreement to acquire Devyani Food Industries (Kenya) Limited, providing a ready GTM for entry into carbonated soft drinks and energy drinks in Kenya.
Market Infrastructure Investment: ₹400 crores deployed in H1 toward DC coolers, glass bottles, pallets, and vehicles, supporting chilling infrastructure and distribution depth.
Credit Rating: CRISIL reaffirmed long-term bank facility rating at AAA/Stable.

Guidance & Outlook

Metric	Guidance / Outlook	Commentary
India Volume Growth	20%+ (ongoing through peak season)	Management confident of high double-digit growth; July continuing at 20%+. April anomaly attributed to El Niño – weather remains the key swing factor.
International Growth	Continued strong expansion	All African markets firing except Zambia; Kenya GTM and South Africa capacity expansion (CWIP) to add further momentum.
EBITDA Margins	Maintain current levels	Management comfortable sustaining margins even under elevated geopolitical cost pressures; margins only improve if input costs normalize.
Raw Material Costs	Partial impact flows into Q3	Average-cost inventory method spreads higher-priced purchases; stock sufficient for Q3. Product pricing unchanged.
Energy Drink Volumes	Recovery underway	FSSAI directive (remove "energy" word within 90 days) resolved; new Sting labels driving volumes back to pre-regulation levels.

Risks & Constraints

Risk	Context
Raw Material Inflation (West Asian Crisis)	Sugar and transportation costs elevated; early stocking and average-cost inventory method mitigated Q2 impact, but the balance of higher-cost purchases flows into Q3 P&L. Management maintains pricing unchanged.
Weather / El Niño Seasonality	April was flat and May partially impacted; May historically contributed ~15% of annual business. Changing weather patterns make quarterly comparisons volatile – management flags monthly trends as the better gauge.
Competitive Intensity (Campa / INR 10 Price Point)	Campa expanding at INR 10 (reduced SKU to 150ml) and offering more grammage at INR 20; VBL responding with 400ml upsizing rather than entering the unprofitable INR 10 segment. Management believes Campa is recruiting new consumers and taking share from B brands.
Regulatory – FSSAI Energy Drink Directive	Temporary category disruption from "energy" word labeling confusion; volumes shifted to CSD during the transition. Resolved via 90-day compliance window; recovery in Sting volumes observed.
Twizza Integration & Margin Dilution	Consolidated EBITDA margin down 76 bps YoY from lower-margin Twizza; depreciation (+33.6%) and finance costs (+55.8%) elevated; consolidated net debt of ₹371 crores vs. India surplus cash of ₹1,494 crores.

Q&A Highlights

India Demand, Weather & Growth Sustainability

Question: India 2-year CAGR is ~3% and 3-year CAGR is single-digit this quarter – is low double-digit growth sustainable going forward? (Percy Panthaki, IIFL)
Answer: Quarter-level analysis is misleading given El Niño; May historically contributed ~15% of business but has been suppressed by weather. In months without weather impact, growth is high double-digit; July is trending 20%+ (Varun Jaipuria).
Question: What is the broader industry growth this quarter? (Anand Shah, Axis Capital)
Answer: With VBL at ~15% and Campa reportedly doubling, industry must be growing >20%; there is cannibalization of B brands/local brands happening (Varun Jaipuria).

INR 10 Price Point & Campa Competition

Question: Any scale-up at the INR 10 price point? Campa claims 50% of FY26 sales in the quarter; was April's weakness geographic? (Abneesh Roy, Nuvama)
Answer: INR 10 has not been scaled significantly – it is non-profitable and not sustainable long-term; VBL is achieving 20%+ growth without it. Campa is likely recruiting new consumers and eating B brands rather than VBL share (Varun Jaipuria).
Question: Campa cut INR 10 SKU from 200ml to 150ml; VBL upsized 250ml to 400ml at INR 20 – any change in share trends? (Jay Doshi, Kotak)
Answer: The 400ml pack strategy is driving consumer recruitment and working in most markets; VBL focuses on profitable growth rather than fighting at INR 10 (Varun Jaipuria).
Question: How much of volume growth is pack/grammage-related vs. units? (Abneesh Roy)
Answer: Everything is tracked on an 8-oz basis; realization per 8-oz case and gross margins have not declined, so value is being passed to consumers rather than the trade – that is the key indicator (Raj Gandhi).

Category Growth – VAD, Nimbooz, GST

Question: Growth by new categories and impact of GST changes? (Aditya Soman, CLSA)
Answer: VAD is growing >40% and Nimbooz >30%, both at 3-4x overall business growth; portfolio diversification has been a multi-year focus. GST impact was minimal but helped water and soda sustain old prices despite geopolitical inflation (Varun Jaipuria, Raj Gandhi).

Raw Materials & Margin Outlook

Question: Raw material supply after Q2? (Aditya Soman, CLSA)
Answer: Stock is sufficient for Q3; COGS uses average costing (not FIFO), so a reasonable portion of higher costs hit Q2 with the balance in Q3; pricing remains unchanged (Raj Gandhi, Varun Jaipuria).
Question: Up to what level of crude/input costs can margins be maintained? (Percy Panthaki, IIFL)
Answer: Margins are comfortably maintained even in a worst-case geopolitical year; when war-related costs subside, margins can only improve (Ravi Jaipuria).

Regulatory – Energy Drinks (FSSAI)

Question: Industry response to energy drink regulation and any impact on VBL? (Jay Doshi, Kotak)
Answer: Confusion caused a temporary dip; volumes shifted to CSD. FSSAI has given clear direction to remove "energy" wording within 90 days; new Sting labels are driving volumes back (Ravi Jaipuria, Varun Jaipuria).

International Business & Africa Expansion

Question: Is growth broad-based across international geographies? (Anand Shah, Axis Capital)
Answer: All countries except Zambia (small market) are growing fast; Zimbabwe is firing again post sugar tax. Food distribution business in Africa grew ~50% YoY (₹146 vs ₹99) (Varun Jaipuria).

New Ventures – CALPIS/Asahi & Alcobev

Question: Will the Asahi partnership extend to Wonda, Wilkinson, Solo, or RTD teas/coffees? (Nitin Shakdher, Green Capital)
Answer: VBL is very bullish on dairy; CALPIS is the starting point to build a solid portfolio and learn from Japanese systems and quality. Nothing decided beyond CALPIS (Ravi Jaipuria).
Question: ET article on group entering alcobev, hiring from Diageo, bidding for Bira – is VBL participating? (Abneesh Roy, Nuvama)
Answer: The group is exploring new categories and has hired senior talent for new ventures, but it is too early; not looking at Bira; the new hire is group-level, not alcohol-specific (Ravi Jaipuria).

Key Takeaway

Varun Beverages delivered a strong Q2 CY2026, with consolidated volumes up 19.8% to 466.7 million cases and net revenue up 20.4% to ₹8,451 crores; EBITDA grew 17.2% to ₹2,343 crores, though margin slipped 76 bps to 27.7% on Twizza consolidation. India volume growth was 14.4% despite a flat April, with 20%+ trends from March through July; international volumes grew 38.4% (ex-Twizza >25%). Strategic advances included extending the PepsiCo license to April 2049 without SPV restrictions, forming the CALPIS/Asahi alliance for fermented dairy, and agreeing to acquire Devyani Kenya for a ready route-to-market. VAD (>40% growth) and Nimbooz (>30%) led portfolio diversification, with low-sugar/no-sugar at 73% of volumes. Management remains confident of sustained 20%+ India growth, stable margins, and energy drink recovery post-FSSAI labeling clarity. Key watch points: geopolitical raw material inflation flowing into Q3, El Niño-driven seasonality shifts, and Campa-led competitive intensity at the INR 10 price point.