Here's why Varun Beverages Ltd (VBL) shares jumped 17% to hit all-time high today

Varun Beverages Ltd (VBL), PepsiCo's leading global franchise bottler, witnessed a significant surge in its share price, rising over 17% to reach a new all-time high of ₹1,380 on Wednesday morning. The development comes in light of VBL's ambitious move to acquire The Beverage Company Ltd (BevCo) in South Africa.

The proposed acquisition, valued at ZAR 3 billion (approximately ₹1,320 crore), has received approval from VBL's Board of Directors. However, it remains contingent on necessary approvals from entities such as PepsiCo Inc. and the Competition Commission South Africa.

BevCo, recognized for manufacturing and distributing licensed PepsiCo and proprietary non-alcoholic beverages, holds franchise rights from PepsiCo Inc. for South Africa, Lesotho, and Eswatini. Additionally, the company retains distribution rights for Namibia and Botswana.

The strategic move to acquire BevCo aligns with the growing affluence of South African households, leading to an increase in soft drink consumption. VBL aims to capitalize on this growth trend, particularly as South Africa stands as the largest soft drinks market in Africa.

As the largest PepsiCo bottler in India, VBL currently markets various PepsiCo products across 27 states and 7 union territories in the country.

Analysts have responded positively to this major acquisition. CLSA upgraded the stock's rating to "buy" with a price target of ₹1,419, emphasizing the significance of South Africa as the largest beverage market in Africa, where PepsiCo's share is currently limited.

Kotak Securities also maintained an "add" rating for the stock with a price target of ₹1,250, citing the acquisition as a substantial value-creation opportunity. Analysts expect VBL to concentrate on the PepsiCo portfolio, gaining market share from competitors like Coca-Cola and local brands.