India: Ravi Jaipuria to take Varun Beverages public in $149m IPO

Photo: Mint

Varun Beverages Ltd, the second largest PepsiCo. Inc. bottler in the world, has started preparations for an initial public offering (IPO), seeking to raise funds to expand to expand at home and overseas, three people aware of the development said.

The company, the flagship firm of Delhi-based billionaire Ravi Jaipuria, may raise at least Rs.1,000 crore($148.7 million)  through the IPO, expected to hit the market in early 2017, said one of the three persons, all of whom spoke on condition of anonymity.

Varun Beverages is a distributor of PepsiCo. products in north and east India and the largest bottler for the US-based beverage maker in South Asia, with operations in India, Nepal and Sri Lanka. Globally, it’s the second largest bottler of PepsiCo. beverages, behind only Tingyi Holdings Corp. of China.

“Varun has hired a couple of banks recently and work on the IPO has been started. The company is also in talks to hire a couple of more banks,” said a second person.

Varun Beverages is a unit of Jaipuria’s holding company RJ Corp., which has diverse business interests ranging from beverages, dairy products and fast-food restaurants to education and hospitality.

The group was initially contemplating a listing of the holding company, but has now decided to go ahead with separate listings for its businesses, the second person said, adding that Varun Beverages contributes over half of the group’s sales.

The company is looking at utilizing funds from the IPO to fund the expansion of its bottling business, especially in overseas markets such as North Africa, this person said.

Private equity investors in Varun Beverages have no intention of selling even a part of their stakes in the IPO, he added.

Standard Chartered Private Equity and Aion Capital Partners are investors in Varun Beverages. Standard Charted invested $48 million and $32 million in the firm in 2011 and 2012, respectively.

Aion Capital Partners, a joint venture between private equity firms Apollo Global Management and ICICI Venture, invested $90 million in Varun Beverages in October last year through a mix of primary capital infusion and purchase of shares from Standard Chartered Private Equity.

While announcing the Aion investment, Varun Beverages said it would use the funds for acquisitions and expansion of its current facilities.

These fund-raising efforts are in line with its partner PepsiCo.’s plans to expand its India business.

In November 2013, PepsiCo. said the company and its bottling partners plan to more than double their production capacity in India by 2020. PepsiCo said that it would invest Rs.33,000 crore in the country by 2020.

According to data from Varun Beverages’ filings with the registrar of companies (RoC), in calendar year 2014, the firm posted standalone revenue of Rs.2,063 crore, up from Rs.1,779 crore in the previous year.

It reported a profit of Rs.43.3 crore in 2014 against a loss of Rs.8.5 crore in the previous year.

Jaipuria, in a telephone call, declined comment on the IPO plan. Parth Gandhi, managing director at Aion Capital Partners, did not respond to e-mails seeking comment. Standard Chartered Private Equity declined comment.

Varun Beverages holds bottling and distribution franchise rights to PepsiCo. beverages in a number of territories across India, Nepal, Sri Lanka and Africa.

It manages several PepsiCo. bottling plants across India—in Haryana, western Uttar Pradesh, Rajasthan, the Northeast, Goa and the National Capital Region centred around Delhi. It also owns bottling plants in overseas markets such as Nepal, Sri Lanka and Morocco.

In November 2014, PepsiCo sold its entire company-owned bottling operations in North India to Varun Beverages.

The sale was aimed at saving costs through increased operational and supply-chain efficiencies for PepsiCo. India Holdings Pvt. Ltd.

PepsiCo. India reported a loss of Rs.177 crore in financial year 2014-15, down from Rs.280 crore the previous year, RoC data shows. It reported revenue of Rs.8,130 crore in 2014-15, a 13% increase over the previous year.

The market for fizzy drinks has seen growth slow to single digits lately. Sales of fizzy drinks grew 8.42% by volume and 10.82% by value in 2015, according to market research firm Euromonitor.

“There is a trend to move towards healthy drinks, products that are more organic and natural. And therefore, there has been a dip in the growth rates of fizzy drinks sales. Also, there is a strong seasonal impact on sales of these drinks,” said Dhanraj Bhagat, partner at Grant Thornton India Llp.

Still, given the relatively higher pricing of natural and health products and a growing and largely young population, consumption of fizzy drinks will continue to grow, Bhagat said.

Also read:

After apparel, accessories PepsiCo to market smartphones in China

India: Rakyan Beverages raises $4.5m Series B from Sequoia, Saama Capital & DSG Consumer

India: Pepsi bottler Varun Beverages gets $90m from AION Capital

This story was first published on Livemint

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.