Varun Beverages: Frothy valuations belie weak fundamentals

Market for carbonated drinks, which make up 80% of its revenue, is giving way to healthier beverages

The Varun Beverages (Varun) scrip has fallen 17 per cent since its listing on the bourses on November 8 as against a 3.5 per cent fall in the S&P BSE Sensex during this period. Varun produces and distributes Pepsico's carbonated soft drinks and non-carbonated beverages in north and east India. The sharp fall in its stock price can be attributed to multiple factors such as rich IPO valuations, weak fundamentals and overall weak market sentiment post demonetisation. The stock's current valuations appear stretched and has few legs to stand on. "Varun Beverages does not seem a value buy as it