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PepsiCo bottler Varun Beverages climbs after weak debut


Varun Beverages Ltd, the largest bottler for PepsiCo in India, made a tepid debut on the stock markets on Tuesday with its shares listing at a 3.37% discount to the issue price.

Shares of the Ravi Jaipuria-controlled company began trading at Rs 430 apiece on the BSE, compared with the initial public offering price of Rs 445. But the shares gained subsequently to close up 3.8% at Rs 461.90, giving the company a market value of Rs 8,404 crore ($1.26 billion). The benchmark Sensex ended 0.5% higher after staying flat in morning trade.

The weak debut came after the company’s IPO barely scraped through last month. Although the IPO was fully subscribed on the second day of the issue, it was covered less than two times at the end of the offering.

The IPO comprised a fresh issue of shares and the sale of shares by the company’s promoters. The firm raised about Rs 667.5 crore ($100 million) through the fresh issue of 15 million shares while the promoters sold around 10 million shares for almost Rs 445 crore.

Ahead of the IPO, the firm had raised Rs 27 crore ($49 million) from a clutch of anchor investors by selling shares at the upper end of the Rs 440-445 price band. The investors included a bunch of mutual funds besides foreign portfolio investors and Abu Dhabi Investment Authority, the sovereign fund of the emirate of Abu Dhabi.

Varun Beverages had filed its draft red herring prospectus in June and got regulatory approval for the issue in September. Kotak Mahindra Capital, Axis Capital, CLSA and YES Securities were the bankers to the issue.

The firm counts AION Global, the special situation investment firm jointly run by Apollo Global and ICICI Venture, and Standard Chartered Private Equity as investors. StanChart PE originally invested in 2011 while AION Global came in last year. AION Global bought some securities held by StanChart PE and pumped in Rs 300 crore afresh through subscription to non-convertible debentures in the company.

Both PE firms retained their stake in the IPO. After the issue, StanChart PE will have a 7.5% stake in the firm while AION will hold 4%.

Varun Beverages is one of the largest franchisees in the world (outside the US) of carbonated as well as non-carbonated beverages sold under brands owned by PepsiCo. It produces and distributes products such as Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Tropicana Slice, Nimbooz as well as packaged drinking water under the brand Aquafina. In addition, it has the franchise for Ole brand of PepsiCo products in Sri Lanka.

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Standard Chartered Private Equity Fund is a private equity fund managed by Standard Chartered Private Equity Advisory India Pvt. Ltd. It provides growth, management buyouts and mezzanine capital to companies operating in Greater China, African, India, Korea and South East Asia. The firm seeks to invest in media, food and beverages, manufacturing, infrastructure, energy, information technology, hotels and resorts, construction, technology, financial and Pharmaceutical sectors. It seeks to invest typically between $10 million and $100 million in its portfolio companies.

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