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Company Description

Sula Vineyards limited is India’s largest wine producer and seller as of March 31, 2022. They have been a consistent market leader in the Indian wine industry in terms of sales volume and value (on the basis of the total revenue from operations) since Fiscal 2009 crossing 50 per cent market share by value in the domestic 100 per cent grapes wine market in Fiscal 2012. Company has consistently gained market share (on the basis of their total revenue from operations) from 33 per cent in Fiscal 2009 in 100 per cent grapes wine category to 52 per cent in value in Fiscal 2022. Furthermore, they are the market leader across all four price segments, being ‘Elite’ (INR 950+), ‘Premium’ (INR 700-950), ‘Economy’ (INR 400- 700) and ‘Popular’ (<INR 400), with a higher share of approximately 61 per cent. by
value in the ‘Elite’ and ‘Premium’ categories in Fiscal 2022, as compared to their overall market share of 52 per cent. in the Indian wine industry. Furthermore, they are also recognized as the marketleader across wine variants, including red, white and sparkling wines. Sula Shiraz Cabernet is India’s largest selling wine by value in Fiscal 2021. Company’s gross billings of Sula Shiraz Cabernet amounted to ?918.26 million, ?475.64 million and ?319.73 million in
Fiscal 2022 and for the six months period ended September 30, 2021 and September 30, 2022, respectively

Their business can be broadly classified under two categories (i) the production of wine, the import of wines and spirits, and the distribution of wines and spirits (the “Wine Business”); and (ii) the sale of services from ownership and operation of wine tourism venues, including vineyard resorts and tasting rooms (the “Wine Tourism 195 Business”). However, since the Wine Tourism Business is incidental and complements the overall Wine Business, the Company’s chief operating decision makers (which includes their CEO, CFO, COO and members of the board) monitor and review the operating result of the Group as a single operating segment of manufacture, purchase and sale of alcoholic wines and spirits. Company distribute wines under a bouquet of popular brands. In addition to the flagship brand “Sula,” popular brands include “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia” with its flagship brand “Sula” being the “category creator” of wine in India. Currently, they produce 56 different labels of wine at four owned and two leased production facilities located in the Indian states of Maharashtra and Karnataka. Furthermore, they are among the top ten most followed vineyards in the world, with a large following on social media of approximately 118,000 followers on Instagram, approximately 123,000 likes on Facebook and approximately 14,000 followers on Twitter as on September 30, 2022

Wine market in India will remain concentrated with high barriers to entry due to the nature of the product in addition to the trade barriers prevalent in the alcoholic beverage market. Company had entered into long-term supply arrangements (of up to 12 years) with grape growers for approximately 2,290 acres as of September 30, 2022.

Valuation

Sula vineyards limited is an established market leader in the Indian wine industry with largest wine producer in India with the widest and innovative product offering supported by an efficient production mechanism largest wine distribution network and sales presence and secured supply of raw material with long term contracts exclusive to Sula and leader and pioneer of the wine tourism business in India.

At upper price band Sula vineyards limited is available at P/E 35.8x and market cap of ? 30,058 million post issue of equity shares and return on net worth of 11.45%.

We believe Sula vineyards limited IPO is fairly priced and recommend a “Subscribe- Long Term” rating to the IPO.

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