Stocks to buy today: Shriram Finance, Varun Beverages; check target price | Markets News

Ravi Singh

4 hours ago

Stocks to Buy: Recommendations by Shrikant Chouhan of Kotak Securities

Shriram Finance – Add

CMP – ₹935

FV – ₹990

Resistance – ₹960/990

Support – ₹915/885

Shriram Finance is India’s largest retail-focused non-banking financial company (NBFC) with a dominant presence in used commercial vehicles (CV) financing and deep penetration across underbanked and self-employed customer segments. The company benefits from a granular, relationship-led franchise built over decades, enabling it to underwrite customers with informal income profiles while maintaining strong asset quality through tight collections and localised risk assessment.

The company’s core portfolio comprises used commercial vehicle loans, passenger vehicle loans, Micro, Small and Medium Enterprises of India (MSME) loans, personal loans, gold loans, and consumer finance. Used CV financing remains the largest contributor, offering structurally higher yields due to limited formal competition and superior risk-adjusted returns. Increasing diversification into MSME and personal loans provides incremental growth while moderating cyclicality.

Shriram Finance has a pan-India presence with a stronghold in South India, complemented by expanding traction in western and northern states. Its extensive branch network and feet-on-street model allow superior sourcing, collections, and customer retention, particularly in semi-urban and rural markets where large banks have limited reach.

The company continues to deliver steady asset under management (AUM) growth supported by healthy disbursements and stable credit demand. Asset quality remains resilient, with gross non-performing asset (GNPA) and net non-performing asset (NNPA) ratios trending down and credit costs normalising post-Covid. Strong yields, improving operating leverage, and disciplined cost control have supported robust return on assets (RoA) and return on equity (RoE), placing Shriram Finance among the most profitable large NBFCs. Capital adequacy remains comfortable, providing headroom for growth without balance sheet stress.

The strategic investment by Mitsubishi UFJ Financial Group (MUFG) is a key positive. Beyond capital support, the partnership enhances governance standards, risk management practices, and access to global funding pools. MUFG’s long-term orientation and expertise in retail and SME finance strengthen Shriram Finance’s credibility with global investors and lenders, potentially lowering funding costs over time and supporting sustained balance sheet expansion.

With improving asset quality, stable margins, and the strategic backing of MUFG, Shriram Finance is well-positioned to compound earnings across cycles. The company offers a compelling play on India’s underpenetrated retail credit market with strong execution visibility and improving institutional confidence.

VBL – Add

CMP – ₹487

FV – ₹550

Resistance – ₹500/520

Support – ₹475/460

Varun Beverages (VBL) is responsible for over 90 per cent of PepsiCo’s sales volume in India. Its portfolio includes iconic brands such as Pepsi, Mountain Dew, 7UP, Mirinda, Sting, Tropicana, and Aquafina. A key factor in VBL’s success is its backward integration model, where it manufactures its own preforms, crowns, and corrugated boxes, significantly boosting operational efficiency and margins.

VBL is aggressively diversifying its geographic risk away from the Indian monsoon-dependent cycle by expanding into Africa. VBL recently approved the 100 per cent acquisition of South Africa’s Twizza for approximately ₹1,119 crore. This move is expected to double VBL’s market share in South Africa to roughly 20 per cent by 2027. In late 2024 and 2025, VBL entered or expanded in Tanzania, Ghana, and the DRC. It also established a new subsidiary in Kenya (Nov 2025). It is partnering with Carlsberg to pilot beer sales in Africa. Operationalising snack manufacturing (Cheetos/Lay’s) in Morocco and Zambia.

New growth engines include: (1) an exclusive distribution tie-up with Carlsberg for beer in select African markets, (2) its intent to enter the Alcobev segment in India and (3) foray into the Kenyan beverages market. These new growth engines, coupled with the PepsiCo snacks opportunity in Africa, are medium-term value creation levers Twizza would contribute 4 per cent/5 per cent/3 per cent to VBL’s consolidated revenues/volumes/Ebitda (Earnings before interest, tax, depreciation and amortisation). South Africa (BevCo + Twizza) would account for about 17%/50% of consolidated/overseas volumes. We expect this acquisition to be marginally earnings per share (EPS)-accretive from Year 1.

Following a massive ₹7,500 crore fundraise via qualified institutional placement (QIP), VBL has moved from a 1.0 times Debt/Equity ratio to being virtually net debt-free, providing a “war chest” for further acquisitions. The primary risks are the intense competition in India (e.g., Reliance’s Campa Cola) and erratic weather patterns that directly impact summer consumption. VBL indicated that it is open to respond to Campa with ₹10 stock keeping unit (SKU), if needed, to defend its share. We expect a stronger competitive response from PepsiCo/Coca Cola in CY2026/27E amid Campa’s significant capacity ramp-up.

(Disclaimer: This article is by Shrikant Chouhan, head of equity research, Kotak Securities. Views expressed are his own.)

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