Varun Beverages shares fall 3% after Q3 results as margins contract despite 14% profit growth

The stock has declined 18.2 percent so far in 2026, underperforming the Nifty 50, which has fallen 11.7 percent during the same period. The company's market capitalisation stood at Rs 1.36 lakh crore. Varun Beverages reported a consolidated net profit of Rs 830.59 crore for the July-September quarter, up 13.5 percent from Rs 731.51 crore in the corresponding quarter last year. Revenue from operations rose 33.2 percent year-on-year to Rs 6,607.56 crore from Rs 4,960.69 crore, driven by robust sales volume growth across its domestic and international businesses.

Consolidated sales volumes increased 28.7 percent to 354.4 million cases from 275.3 million cases a year earlier. India volumes grew 22.5 percent, while international territories registered a stronger 39.9 percent increase. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 25.1 percent to Rs 1,426.71 crore from Rs 1,140.41 crore in the year-ago quarter. However, EBITDA margin contracted 140 basis points to 21.6 percent, compared with 23 percent a year earlier, as higher input costs offset some of the benefits from strong volume growth.

Varun Beverages said its gross margin declined 334 basis points to 53.1 percent during the quarter, primarily due to higher packaging material costs, including preforms, shrink films, closures and cans, driven by geopolitical disruptions. Margins were also affected by a 104 percent increase in sales of non-beverage products such as preforms and caps in India. These products carry higher costs of goods sold and reduced domestic gross margins by approximately 100 basis points.

Sugar prices increased around 16 percent during the quarter. However, the company said this impact was largely offset by a sharp increase in the share of low-sugar and no-sugar products in India, from 44 percent in Q3 CY2025 to 88 percent in Q3 CY2026. Depreciation and finance costs rose 34.5 percent and 53.5 percent, respectively, primarily due to the acquisition of Twizza in South Africa and associated debt funding.

Other income declined 18.8 percent year-on-year. Varun Beverages outlook Commenting on the company's outlook, Executive Vice Chairman Varun Jaipuria said the focus would remain on growth across existing markets, supported by investments made in recent years. "Looking ahead, our focus will remain on driving growth across our existing markets, supported by the investments we have made over recent years.

Alongside this, we will selectively pursue opportunities to broaden our business, while maintaining a clear emphasis on profitability and long-term value creation,” Jaipuria said.