IFC to invest $85M in Varun Beverages

International Finance Corp (IFC), the private sector investment arm of the World Bank, is investing $85 million (Rs 510 crore) in Varun Beverages Ltd, the largest bottler for PepsiCo in South Asia.

The capital to be raised by IFC is a part of the larger fundraising effort to support a $300 million investment plan for organic and inorganic growth opportunities, over the next one year. This would cover an expansion of the Pepsi bottling and distribution franchise business by Varun Beverages in India, Nepal, Sri Lanka, Morocco, Zambia and Mozambique.

The project is proposed to be financed through a combination of equity investment by IFC, internal accruals and additional equity and debt to be raised by the company, according to a disclosure note by IFC.

Varun Beverages, sponsored by RJ Corp, holds bottling and distribution franchise rights from PepsiCo for a number of territories across India, Nepal, Sri Lanka and Africa. It manages nine PepsiCo bottling plants across India—Haryana, Western UP, Rajasthan, the North East, Goa and Delhi-NCR—and three bottling plants overseas— Nepal, Sri Lanka and Morocco.

The company employs over 4,200 people, which is expected to almost double to 8,000 over next few years as it expands its operations in South Asia and Africa.

Varun Beverages is a privately held firm which is 33.93 per cent owned by RJ Corp, 33.03 per cent held by RK Jaipuria HUF and family and 33.02 per cent controlled by Varun Jaipuria.

RJ Corp, controlled by Ravi Jaipuria, is the largest independent third-party bottler and distributor of Pepsi in India generating approximately 28 per cent of Pepsi’s overall sales in the country.

For IFC, this would be among a few large-size equity transactions in India. It typically invests with sub $50 million; its deals which have been around $100 million mark include its bet on Polycab a few years ago besides separate investments in Religare Enterprises and in its group firm Fortis Healthcare last year.

In rupee terms it’s arguably the second-largest equity investment in an Indian firm by IFC behind Fortis.

(Edited by Joby Puthuparampil Johnson)

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