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Salient features of the IPO:

• India's largest wine producer and seller, Sula Vineyards Ltd. (Sula), is coming up with an IPO to raise Rs. 960cr, which opens on 12th Dec. and closes on 14th Dec. 2022. The price band is Rs. 340 - 357 per share.

• The IPO consists only of OFS portion, thus the company will not receive any proceeds from the issue.

• Through this IPO, the promoter group is diluting 1.11% of the stake. Couple of private equity investors are fully exiting, while others investors are partially offloading their stake in the company.

Key competitive strengths:

• High barriers of entry

• Established market leader in the Indian wine sector with the leading brand “Sula”

• 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

• Secured supply of raw material with long-term contracts exclusive to Sula

• Leader and pioneer of the wine tourism business in India

• Early adoption and focus on sustainability

• Experienced board, qualified senior management team

Risk and concerns:

• Unfavorable government policies & regulations

• Continued poor per capita consumption of wine

• Difficulty in further penetrating into Tier-1 and 2 cities

• Adverse climatic conditions impacting the cultivations of grapes

• Delay in expanding the capacity

• Business seasonality

• Difficulty in maintaining current profitability

• Competition

Below are the key highlights of the company:

• The Indian alcoholic beverage market is the third largest in the world after China and Russia. The domestic market is predominantly a spirit’s market with more than 90% of alcohol consumed is in the form of spirits. The contribution of wine to overall alcohol consumption in India is less than 1% against the world average of around 13%. Moreover, India’s per capita consumption of wine is less than 100ml, which is lower in comparison to certain developed and developing economies. Thus considering the lower wine consumption levels, positive demographic factors and annually expanding target population, India seems to be one of the most attractive markets for the wine manufacturers.

In terms of value, the domestic wine market grew by 18.3% CAGR over FY14-21, while the Indian made foreign liquor market grew by 12.3% CAGR. Going forward, the India wine market is anticipated to grow by 20% CAGR over FY22-25, to reach a size of Rs. 3,785cr. Key drivers for the growth would be premiumization, wider acceptance of wine as a social drink and the growing perception of wine as a healthy alternative to spirits. The wine market is segmented into 100% grape-based wine and fortified mixed wines, while the former contributed more than 90% (by volume) to the market. The domestic 100% grape wine market which is estimated at Rs. 1,345cr in FY22 is likely to grow by 22% CAGR over FY22- 25 to reach a size of Rs. 2,550cr

The Indian wine market today is dominated by domestic wines, contributing 83% in terms of volume. The grape wine market is dominated by the top-three players contributing close to 80%. Incorporated in 2003, Sula is India’s largest wine producer & seller and has consistently been the market leader in the domestic wine market both in terms of sales volume as well as value. Its market share has improved from 33% in FY09, crossed 50% in FY12 and since then maintained the same. In FY22, the company had 52% market share in the domestic 100% grapes wine market.

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