Varun Beverages Share Price: Should you buy FMCG stock after Rs 1100 cr stake approval in Twizza? Check out analysts view

VBL Share Price Target: FMCG major Varun Beverages Ltd (VBL) has seen its shares underperform in recent periods, declining over 20 per cent year-on-year and around 25 per cent year-to-date, while gaining about 3 per cent over the past six months. The stock came into focus on Monday after VBL’s board approved the Rs 1,118.7 crore acquisition of South Africa-based beverage maker Twizza through its local subsidiary, The Beverage Company Proprietary Limited (BevCo). Following the announcement, the large-cap FMCG stock rose as much as 2.21 per cent in early trade.

This raises a key question for investors: Should one buy at current levels or book profits in PepsiCo’s largest franchise bottler? Analysts at global brokerage Citi have reiterated a ‘buy’ rating on Varun Beverages, citing a potential upside of 44 per cent from current market prices.

The brokerage highlighted VBL’s strategic move to acquire Twizza, a South Africa-based manufacturer of non-alcoholic beverages. Twizza sold 71 million cases of soft drinks in FY25 (ended June), accounting for 20 per cent of Varun Beverages’ international volumes and 6 per cent of its consolidated volumes during the period.

According to Citi, the acquisition is expected to scale Varun Beverages’ soft drinks business in Africa, primarily by improving BevCo’s reach in South Africa. The brokerage also noted that the backward integration involved in the deal aligns well with VBL’s strategy of maximising operational efficiencies.

The brokerage has recommended the FMCG stock with a target of Rs 675, implying an upside potential of over Rs 205, translating to a nearly 44 per cent upside from Friday's closing.

VBL’s Rs 1,118.7 crore acquisition details

Varun Beverages Ltd, PepsiCo’s largest franchise bottler, on Sunday announced that it will fully acquire South Africa-based Twizza through its subsidiary, The Beverage Company Proprietary Limited (BevCo).

Twizza is engaged in the manufacturing and distribution of own-branded non-alcoholic beverages and operates three manufacturing facilities in Cape Town, Queenstown and Middelburg, with a combined annual production capacity of 100 million cases.

The acquisition will be executed at an enterprise value of ZAR 2,095 million (around Rs 1,118.7 crore) and will be paid entirely in cash, the company said in a regulatory filing. The board has approved the purchase of 100 per cent share capital of Twizza, subject to regulatory and other customary approvals.

Varun Beverages said the transaction is expected to be completed on or before June 30, 2026, after which Twizza will become a step-down subsidiary of the company.

For the financial year ended March 31, 2025, Twizza reported a turnover of ZAR 1,689 million (around Rs 9,010 crore). The company also has backward integration facilities across all plants, including five preform lines and one closure line, which VBL believes will help improve operational efficiency.

The acquisition is expected to strengthen BevCo’s footprint in South Africa, further enhancing Varun Beverages’ manufacturing and distribution network in the region.

Expanding African presence

The Twizza deal builds on Varun Beverages’ recent expansion across Africa. In March 2024, the company acquired The Beverage Company (South Africa) along with its wholly owned subsidiaries, consolidating its presence in South Africa, Lesotho and Eswatini, while also gaining distribution rights in Namibia, Botswana, Mozambique and Madagascar.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)