Varun Beverages is India’s largest PepsiCo Bottler with near monopoly of Indian market post acquisition of additional territory (South and West) from other PepsiCo bottlers. It also has franchise rights for 5 other smaller countries (3 in Africa, Nepal and Sri Lanka) which are shaping up well. Increased penetration of Pepsi products in the rural markets has been extremely beneficial to the company. Issues with PepsiCo are a risk factor but recent extension of franchise agreement from 2022 to 2039 offers comfort. We have an over weight rating on the stock due to its potential to steadily grow its volumes over the long term due to improved rural distribution. Impact of covid pandemic is gradually receding and we expect the volumes to come back strongly as travel, commute and out of home dining resume post lockdowns
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