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Fizz On The Street: Hindustan Coca-Cola Beverages Gears Up For Mega IPO

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22 May 20246 mins readBy MOFSL

Hindustan Coca-Cola Beverages Pvt Ltd (HCCB), the Indian bottling arm of the world’s most popular and most consumed drink Coca-cola, is all set to hit the capital markets with its much-awaited initial public offering (IPO). The highly anticipated IPO is only behind Varun Beverages, which currently holds the bottling rights for Pepsi in India. Hindustan Coca-cola’s entry in capital markets displays strong competition as well as a higher potential for investors who are waiting to bottle up fundamentally strong stocks. But wait? Is the excitement worth the investment? Or are there any blocks to look for? Let’s decode the IPO further and understand it in detail! 

 

A Mega IPO of worth ₹5,000-6,000 crores! 

HCCB is planning to raise around ₹5,000-6,000 crore through its IPO, which is expected to be one of the biggest public issues in the Indian markets this financial year. The IPO includes a fresh issue of shares as well as an offer for sale (OFS) from existing shareholders. The company aims to use the proceeds from the fresh issue for funding capital expenditure needs, potential acquisitions, and general corporate purposes.

 

From JV to Major Bottler: HCCB's Journey

HCCB traces its roots back to 1997 when it was set up as a joint venture between Coca-Cola and several Indian bottlers. Over the years, the company has become one of the largest bottlers for Coca-Cola products in the country. HCCB currently runs 15 bottling plants across India, serving a vast consumer base with carbonated drinks, juices and packaged water. And recently in Dec 2023 signed a MoU with Govt. of Gujarat for an investment of ₹3000 crores.

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Strong Financials driving growth

HCCB has consistently delivered strong financial results, driven by robust volume growth and operational efficiencies. In FY 23, the company reported revenue of around ₹12,000 crores, with an impressive EBITDA margin over 20% and booked overall profit of ₹800 crores. HCCB's powerful brand portfolio, vast distribution network and rural focus have fuelled its growth.

 

Tough Competition in Beverages Market

The Indian beverages market is highly competitive, with players like PepsiCo, Parle Agro and local brands battling for market share. However, HCCB's association with iconic Coca-Cola and ability to leverage its parent's global expertise gives it an edge.

 

IPO Details to be Finalized Soon

While the exact IPO details such as the issue size, price band and IPO dates are yet to be finalized, experts expect a strong investor response given HCCB's robust financials, growth potential and the attractive beverages sector.

 

What does the future hold?

The Indian beverages market is set for robust growth in coming years, driven by rising incomes, changing tastes and urbanization. HCCB is well-placed to capitalize on these trends through its brand portfolio, distribution expansion, and focus on innovation and new products. Planned capex and acquisitions should further boost its growth.

Overall, market sentiment seems quite bullish on this IPO, considering HCCB's fundamental strengths like brand recognition, stellar financials, extensive reach and robust growth prospects. If you want a slice of India's high-growth beverage boom in your portfolio, this IPO could be a rather appetizing investment opportunity to consider.

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Final thoughts

This IPO presents a compelling opportunity as HCCB is backed by the immensely popular and iconic Coca-Cola brand, along with their super famous and yummy drinks that are a household favourite. Fundamentally, the company has displayed consistent growth that has helped it to secure a niche place amongst the competitors . But HCCB's biggest asset is their beast of a distribution network spanning 15 bottling plants across India. This allows them to get their beverages to consumers everywhere - big cities or small rural areas, which is clutching as rural incomes and beverage demand is set to explode. HCCB's product line up with juices and packaged drinks is bang on trend, catering to evolving consumer tastes and preferences. By investing, you get exposure to India's booming packaged beverages market that's only going to grow like wildfire.

 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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