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* Company Background: Sula Vineyards is India’s largest wine producer and seller as of March 31, 2022. Their business can be broadly classified under two categories (i) the production, the import and distribution of wines and spirits. (ii) the sale of services (wine tourism). They distribute wines under a bouquet of popular brands including “RASA,” “Dindori”,“Satori”, “Madera” & “Dia” along with its flagship brand ‘Sula’. They produce 56 different labels of wine at four owned and two leased production facilities located in the Indian states of Maharashtra and Karnataka.

* High barriers of entry: The wine market in India will remain concentrated to certain players and have high barriers to entry due to the factors such as high investment of capital and time for Vineyards, high inventory business model, expertise knowledge and long gestation period.

* Established market leader with brand ‘Sula’: Since inception, the company has built a strong brand and network and has been a largest wine producer in India. Further its flagship brand ‘Sula’ is one of the category creators of wines in India and has also been recognized as the market leader across wine variants, including red, white and sparkling wines. Over the years, they have gained market share, leveraged their digital and social media presence as well as focused on increasing brand presence by engaging and reaching young consumers.

* Leader and pioneer of the wine tourism business in India: The company has been a pioneer of wine tourism in India, which has led to a strong D2C presence. They have helped to create a unique wine culture in India through a combination of resorts, tasting rooms and restaurants. Further, they offer curated experiences, such as wine tasting sessions, winery tours and gourmet dining options at their wineries, enabling them to build a stronger connection with customers.

* Outlook & strategies going forward: The company plans to focus on its own brands, premiumization and to increase awareness it would use digital media. Besides, it would continue to concentrate on expanding its Wine Tourism Business.

* Financials: Sula’s revenue saw a de-growth of 6.7% CAGR over FY20-22, due to impact of Covid led lockdown. However, the company posted profit of Rs 52.1cr in FY22 as compared to losses of Rs 15.9cr in FY20, as it focused on reducing the losses and improving margins. On the valuation front, it is trading at PE of ~55x FY22 which seems expensive.

* Key Risk: 1) Promoter shareholding is low (at 27.3% post IPO) 2) Valuation seems expensive. 3) Industry is subject to strict laws, regulations & licensing and change can impact sentiments

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