HIKE IN GST RATES ON CAFFEINATED DRINKS WOULD HAVE MINIMAL IMPACT 
PepsiCo India's bottling partner Varun Beverages on Monday said its board has approved plans to acquire franchise rights of the beverages and snacks major in South and West regions.
The board has approved the company's intent to enter into a binding agreement with PepsiCo India Holdings to acquire franchise rights in the two regions for a national bottling, sales and distribution footprint in seven states and five UTs, Varun Beverages Ltd (VBL) said in a regulatory filing.
Upon completion of these acquisitions, VBL will be a franchise of PepsiCo beverages business across 27 states and seven Union Territories (UTs), it added.
"The proposed acquisitions are in line with the company's strategy to expand into contiguous territories and will help to acquire greater scale, operational productivity and efficiency leading to higher revenues and profitable growth," it said.
VBL, however, did not disclose financial details of the proposed acquisitions.
Commenting on the development, VBL Chairman Ravi Jaipuria said: "Our franchising agreement, subject to receipt of necessary statutory approvals, in South and West regions will enable VBL to acquire a national bottling and sales footprint."
He further said the development would help the company acquire greater scale, operational productivity and efficiency leading to higher revenues and profitable growth.
"This comes as a welcome force multiplier to our efforts to aggressively expand our beverage business across geographies," Jaipuria added.
PepsiCo India President & CEO Ahmed ElSheikh said the move was aimed at unlocking "the full potential of PepsiCo's operating model in India".
"With this agreement, VBL will acquire a national bottling, sales and distribution footprint. The move will profitably drive synergies of scale, operational productivity and efficiency across all facets of PepsiCo's beverage business," he added.
ElSheikh further said PepsiCo will retain responsibility for category creation, brand building and development of the beverage portfolio in line with its vision of driving sustainable, responsible and profitable growth.
Last year in January, VBL had entered into a pact with PepsiCo to sell and distribute the latter's entire Tropicana range of juices along with Gatorade and Quaker Value-Added Dairy in North and East India.
VBL already held manufacturing, sales and distribution rights for Tropicana Slice and Tropicana Frutz in the two regions.
PepsiCo had then stated that North and East regions together accounted for 80 per cent of the juice market in India and VBL's contiguous reach would help it more than double the distribution reach in these states
In the regulatory filing, VBL also said its board will meet on February 26 to consider raising of capital through Qualified Institutions Placement without disclosing the amount to be raised.
Pepsi Co India's bottling partner Varun BeveragesNSE 0.06 % on Monday said the recent hike in GST rates for caffeinated drinks would have a "minimal" effect on the company.
The GST Council headed by Union Finance Minister Nirmala Sitharaman in its meeting on Friday decided to charge caffeinated beverages with 28 per cent tax plus a 12 per cent compensation cess in place of the current tax rate of 18 per cent.
"With regard to the increase in GST rates for caffeinated drinks, the effect on Varun Beverages is expected to be minimal as the incremental volumes that will come under the higher GST bracket was approximately 0.7 million cases out of 340 million cases of sales volume based upon CY 2018," the company said in a regulatory filing.
According to Varun Beverages, the corresponding volume of the first half (January-June) of the calender year 2019 is 0.6 million cases out of 285.8 million cases.
The company has also welcomed the reduction in corporate tax rates and said this provides an impetus to drive economic growth rates.