CLSA, maintaining a buy call on Varun Beverages, said valuations of franchise rights for South and West region from PepsiCo are in-line with expectations.
"Acquisition is expected to be EPS accretive once the target asset fully ramps up and the deal offers company the opportunity to consolidate its position," it added.
The research house said the regions are highly underpenetrated and hence would improve growth visibility for the company.
CLSA has a price target for the stock at Rs 985, implying a 27 percent potential upside from February 18 level.
PepsiCo India's bottling partner Varun Beverages on February 18 said its board has approved plans to acquire franchise rights of the beverages and snacks major in South and West regions.
Upon completion of the acquisition, 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.
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