Even though recession threats have slowed new listings this year, one of the very few enterprises attempting to go public is gauging investor sentiment in India’s expanding wine market. The small but rapidly expanding Indian wine market is reported to be dominated by Sula Vineyards Ltd., India’s largest Mumbai-based wine producer, and retailer, which has grown at a CAGR of 13.7% between FY11 and FY21.
The company finally, in July 2022, submitted it’s Draft Red Herring Prospectus (DRHP) to the Securities and Exchange Board of India (SEBI), the market regulator, to raise money through an IPO.
They revealed in a public announcement that the issue, with a face value of Rs 2 per equity share, will be solely in the form of an offer for sale (OFS), totaling 25,546,186 equity shares, with shareholders such as promoters, investors, and others participating.
Sula asserts to be the industry leader across wine variants, including red, white, and sparkling wine, and sells wines underneath a bouquet of famous brands, including “Sula”, its flagship brand, as well as “RASA”, “Dindori”, “The Source”, “Satori”, “Madera,” and “Dia.”
The company began its first vineyard in 1996, and with the introduction of “Sauvignon Blanc,” “Chenin Blanc,” “Zinfandel,” “Riesling“, “Red Sparkling,” and dessert wine offerings in 2000, it became the first to bring varietal wines to India.
Sula Vineyards Ltd. presently operates four owned and two leased wine production facilities in the Indian states of Maharashtra and Karnataka, where it produces 56 different wine labels under 13 unique brands.
From 33% in FY09 to 52% in value in FY20, then up to 52.6% in FY21, Sula has elevated its market share in the 100% grape wine category based on its total revenue from operations. The company’s operating revenue increased 8.60% from Rs 417.96 Cr. in FY21 to Rs 453.92 Cr. in FY22. Additionally, it made a profit of Rs 52.14 Cr. in FY22, up from Rs 3.01 Cr. in FY21.
According to Abhay Kewadkar, an independent alcoholic beverage specialist, when Sula entered the market, wine was seen as something aspirational among people over 45 years. By focusing on younger customers, they deftly altered that stance.
As part of its mission to popularize the drink among a developing nation with a booming middle class, the 26-year-old firm has set up tasting rooms and started the nation’s first wine-themed music festival, “SulaFest,” at its facility in Nashik, Maharashtra. Sula opened the nation’s first wine tasting room in FY05.
The winemaker wants to go public at a time when IPOs has declined globally, including in India. Plunges in high-flying tech unicorns like Zomato Ltd. and Paytm parent One 97 Communications Ltd. have recently burned young retail traders who helped drive the local stock market over the past couple of years, leaving them with nothing but regret.
The S&P BSE IPO Index, which tracks the efficacy of Indian shares, in the first two years, after listing, has gone down 24% this year after nearly tripling in the former two. Sula has not yet revealed a price for the intended sale of roughly one-third of its existing equity, which includes shares held by founder and Managing Director, Rajeev Samant.
For the fiscal year that ended on March 31, the business reported sales of $57 million, or about one-tenth as much as Zomato and Paytm, but except for the two tech companies, Sula is lucrative.
According to Sula’s draught prospectus, the wine will only make up 1% of the $33 billion global market for alcoholic beverages that India will account for in 2020. The enterprise forecasts total Indian wine sales of 3.4 million cases in 2025, an increase of 70% from the level in 2021, as it believes there is ample room for growth.
To increase the demand, Samant, a 55-year-old Stanford alumnus, has promoted wine tourism in Nashik, Sula’s production hub and considered India’s Napa Valley. Sula ranks among the top 10 most followed vineyards on Instagram globally, and the company also claims that social media has helped raise the beverage’s profile.
Even though Sula won’t make any money from the IPO itself, it believes that being listed will improve its credibility and exposure. Additionally, given that the company’s regional rivals include the unlisted Fratelli Wines and Grover Zampa Vineyards, it might have a ripple effect on the entire sector.
To conclude, as Ronak Soni, an analyst at Equirus Securities Pvt. said, as it’s a fast-growing segment, “this IPO will bring the wine segment into the limelight.”
Writer: Arpita Chatterjee
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