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Sula Vineyards to open IPO next week from Dec 12-14; GMP already at ₹70 per share

Sula Vineyards to open IPO next week from Dec 12-14; GMP already at ₹70 per share
  • Sula Vineyards to open its IPO next week from December 12 to December 14.
  • The Nashik-based company has set the price band of the IPO at ₹340- 357 per share.
  • The winemaker plans to raise ₹960 crore through a complete offer for sale by promoters and shareholders. The company will not receive any fund from the IPO.
  • The shares of the company are currently commanding a grey market premium, or GMP, of ₹70 per share.
Nashik-based Sula Vineyards, India’s largest wine producer and seller is all set to open its initial public offering (IPO) next week from December 12 to December 14. The price band of the IPO is ₹340-357 per share.

The winemaker plans to raise ₹960 crore through a complete offer for sale by promoters and shareholders. The company will not receive any funds from the IPO.

The shares of the company are currently commanding a grey market premium, or GMP, of ₹70 per share. GMP is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges.

Sula Vineyards distributes wines under a bouquet of brands such as Sula, RASA, Dindori, The Source, Satori, Madera and Dia. Currently, it produces 56 different labels of wine at four owned and two leased production facilities located in Maharashtra and Karnataka. Its flagship facility is located in Nashik, Maharashtra.

The company said in its draft red herring prospectus (DRHP) that it has consistently gained market share (on the basis of their total revenue from operations) from 33% in FY09 in 100% grapes wine category to 52.6% in FY21 in the Indian market.

Its business is classified under two categories -- the production, distribution and import of wines and other from wine tourism venues, including vineyard resorts and tasting rooms.

Presently, the majority of wine consumers are from the top urban centres with Mumbai, Bengaluru, Delhi NCR, Pune, and Hyderabad contributing more than 70% of the overall market.

“Our strategy is to increase our focus on the under penetrated markets in major metros like Chennai and Kolkata, the tourist markets of Kerala, Rajasthan and Goa, and other tier-1 and 2 cities across India,” said Sula Vineyards in its DRHP.

Currently, the winemaker exports its products in 20 countries including US, Spain, UK, France. However, speaking in an IPO conference on December 7, founder and CEO of Sula Vineyards, Rajeev Samant said that exports are not much of a priority at the moment.

“Interestingly, Indian wine has been winning more and more global accolades recently so I see some very strong interest ahead. Having said that, Sula's focus has always been domestic or more than 95% of our wine is sold right here in India. We see this as the most exciting growth market for wine for next decade and beyond. Therefore exports have not been much of a priority for us,” said Samant.

Farmer-friendly business model
Sula Vineyards have been providing farmers in Maharashtra and Karnataka with a regular source of income through contracts with wineries.

As of March 31, 2022, Sula Vineyards had long term supply arrangements (with a contract life of up to 12 years with an option for renewal) with approximately 500 contract farmers.

“Something like 95% of our grapes come from third party farmers and a lot of them are under contracts. And barely 5% of our grapes come from our owned and leased vineyards and have no aim to expand them. We have a small amount of vineyards where grapes for the most expensive wines are grown so that we can concentrate on quality. Our model is very farmer friendly and asset light,” said Rajeev Samant, founder and CEO of Sula Vineyards in a conference held on December 7.

The winemaker was severely impacted due to Covid-19 because of which it had delivered a loss of ₹15 crore in FY20.

“In the first half of calendar year 2020, Covid-19 spread to a majority of countries across the world, including India. The Covid-19 pandemic has had, and may continue to have, significant repercussions across local, national and global economies and financial markets,” said the company in DRHP.

Adverse climatic conditions faced by farmers while harvesting is among key risks that would impact the quality of grapes, which is the primary raw material. The company is reliant on these third-party sellers (farmers) to supply grapes for its business operations.

“Furthermore, the unavailability of raw materials can also be caused by other conditions, such as pandemics, seasonality, inflation and general economic and political conditions, all of which are beyond our control,” said the company.

However, in FY22 its profits surged to ₹52 crore as against ₹3 crore in FY21.
Particulars

Total income

Net profit

FY22

₹456 crore

₹52 crore

FY21

₹421 crore

₹3 crore

FY20

₹523 crore

-₹15 crore

Source: DRHP


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