Revenue rose 20.43% YoY, but margin slipped as costs outpaced growth
Sequential margin improved 4.46 percentage points, while a lower tax rate partly cushioned higher interest costs and the year-on-year cost pressure.
Filed 28 Jul 2026, 16:43 IST · after market close · Varun Beverages Ltd (VBL)
Key takeaways
- Consolidated revenue grew 20.43% year on year, but expenses rose faster at 21.71%, narrowing operating margin by 0.76 percentage points.
- Sequential operating margin recovered 4.46 percentage points as revenue growth of 28.55% outpaced expense growth of 21.07%.
- Net profit rose 15.08% year on year, helped by a 0.62-percentage-point lower tax rate, while interest costs increased 55.73%.
Price around the results
Growth returned without matching operating leverage
Varun Beverages reported consolidated revenue growth of 20.43% year on year in Q1FY27, with management saying sales volumes grew 19.8% and improved realizations supported the increase. India volume growth was 14.4%, although management said April was approximately flat. The company told investors that high raw-material inflation in India and higher transportation and distribution costs affected profitability.
Margin recovery is strong sequentially but below last year
Operating margin improved 4.46 percentage points sequentially because revenue grew 28.55%, faster than expenses at 21.07%. Year on year, the reverse occurred: expenses grew 21.71% against revenue growth of 20.43%, leaving margin 0.76 percentage points lower. The presentation attributes a 76-basis-point decline in consolidated EBITDA margin to the consolidation of Twizza, which currently has lower margins.
Profit growth lagged revenue as financing costs rose
Net profit growth of 15.08% year on year trailed revenue growth because interest expense increased 55.73% and depreciation rose 33.61%. A 0.62-percentage-point reduction in the tax rate provided some offset, while other income accounted for 5.06% of profit before tax and was not the main earnings driver. The sequential comparison was better, with net profit up 73.59% as the tax rate fell 1.61 percentage points.
Expansion spending broadens the operating footprint
Management said the company incurred approximately Rs 9,500 million of net capitalised capex in H1 CY2026, including approximately Rs 2,000 million for brownfield expansion in India and a VAD beverage line at Supa. It also reported approximately Rs 4,900 million of capital work in progress, mainly for South Africa expansion and a CSD line in Kenya. The company said its USD 32 million acquisition of Devyani Food Industries Kenya provides existing go-to-market infrastructure for carbonated soft drinks and energy drinks, while its Asahi alliance will introduce CALPIS in India.
Margin remains well above reported FMCG peers
Varun Beverages' operating margin was 27.72%, or 11.6 percentage points above the 16.12% median for the nine FMCG peers that had reported the same quarter. The multi-quarter trend shows a recovery from 15.2% in Q3FY26 through 23.26% in Q4FY26, but the latest margin remains below 28.48% in Q1FY26. The results were filed after market close, so there is no reported stock reaction yet; after the previous five results, the stock rose four times, with a median absolute move of 1.94%.
Q1FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹8,451 cr | ₹6,574 cr | +28.55% | +20.43% |
| Other income | ₹100 cr | ₹40 cr | +152.91% | +31.76% |
| Expenses | ₹6,108 cr | ₹5,045 cr | +21.07% | +21.71% |
| Operating profit | ₹2,343 cr | ₹1,529 cr | +53.25% | +17.22% |
| Operating margin (%) | 27.72% | 23.26% | — | — |
| Interest | ₹57 cr | ₹49 cr | +17.31% | +55.73% |
| Depreciation | ₹409 cr | ₹357 cr | +14.64% | +33.61% |
| Profit before tax | ₹1,977 cr | ₹1,163 cr | +69.98% | +14.15% |
| Tax | ₹452 cr | ₹284 cr | +58.82% | +11.13% |
| Net profit | ₹1,525 cr | ₹879 cr | +73.59% | +15.08% |
| EPS (₹) | ₹4.50 | ₹2.58 | +74.42% | +15.68% |
Operating margin of 27.72% compares with a Fast Moving Consumer Goods sector median of 16.12% across 9 peers that have reported Q1FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Consolidated sales volumes grew 19.8% in the quarter, while improved realizations lifted net revenue from operations by 20.4%.
- India recorded 14.4% quarterly volume growth, despite April being approximately flat.
Guidance & outlook
- The company remains confident in long-term growth across its markets, supported by demographics, incomes and packaged beverage consumption.
Expansion
- The company incurred approximately Rs. 9,500 million of net capitalized capex during H1 CY2026.
- Approximately Rs. 2,000 million of H1 CY2026 capex funded brownfield expansions in India, including a VAD beverage line at Supa.
- As of June 30, 2026, approximately Rs. 4,900 million of CWIP was primarily for South Africa expansion and a CSD line in Kenya.
- VBL agreed to acquire the business of Devyani Food Industries (Kenya) Limited for USD 32 million.
- The Kenya acquisition provides existing go-to-market infrastructure for expansion into carbonated soft drinks and energy drinks.
New products
- VBL plans to launch CALPIS in India in Original and Mango variants.
New initiatives
- VBL entered a business alliance with Asahi Group Holdings to introduce and commercialize CALPIS in India through a franchise arrangement.
- The revised PepsiCo agreement provides greater flexibility to explore opportunities and benefit from scale and synergies.
Problems & risks
- The company faced a high-inflation raw-material environment in India.
- Consolidated EBITDA margins declined by 76 basis points because Twizza currently has lower margins.
- Higher transportation and distribution costs partly offset improved EBITDA margins in India.
- Twizza helped overcome capacity constraints in South Africa.
What to watch
- Whether operating margin moves back above the Q1FY26 level of 28.48%.
- Whether expense growth remains below revenue growth after the 21.71% versus 20.43% year-on-year gap.
- The effect of the approximately Rs 4,900 million of capital work in progress and the Kenya expansion on consolidated margins.