India’s largest Wine Producer And Seller Sula Files DRHP For IPO

Mumbai-based Sula Vineyards, the country’s largest wine producer and seller and a market leader in the Indian wine industry in terms of sales volume and value since Fiscal 2009 has filed its Draft Red Herring Prospectus (DRHP) with the markets regulator, Securities and Exchange Board of India (SEBI), to raise funds through an initial public offering (IPO).

The issue with a face value of Rs 2 per equity share is a complete offer for sale (OFS) aggregating to 25,546,186 equity shares. 

The Offer is being made through the Book Building Process, wherein not more than 50% of the Offer shall be available for allocation to Qualified Institutional Buyers, not less than 15% of the Offer shall be available for allocation to Non-Institutional Bidders and not less than 35% of the Offer shall be available for allocation to Retail Individual Bidders.

Sula set up its first vineyard in 1996 and in the year 2000 was the first to introduce varietal wines in India with the launch of Sauvignon Blanc, Chenin Blanc, Zinfandel, Riesling, Red Sparkling, and dessert wine offerings. In Fiscal 2005 it launched the first wine tasting room in India at its winery in Nashik, Maharashtra followed by country’s first vineyard resort in 2008, and in the same year, the wine-maker launched the first wine-themed music festival in India, “SulaFest”, at its Nashik facility in 2008. “SulaFest” has been widely recognized as the largest wine music festival in India and one of the largest wine music festivals in Asia, based on attendance. In Fiscal 2017, it launched a wine tasting room at its “Domaine Sula” facility in Karnataka.

The Mumbai-based wine maker is one of the fastest growing alcoholic beverage companies in India as of March 31, 2021 and has grown at a CAGR of 13.7% between Fiscals 2011 and 2021 according to Technopak report as mentioned in the DRHP. On the basis of total revenue from operations, it has gained market share from 33% in Fiscal 2009 in 100% grapes wine category to 52% in value in Fiscal 2020 and further increased to 52.6% in Fiscal 2021. Its business can be broadly classified under production of wine, import & distribution of wines and spirits and sale of services from ownership and operation of wine tourism venues including vineyard resorts and tasting rooms.

Sula has been recognized as the market leader across wine variants, including red, white and sparkling wines. The company distribute wines under a bouquet of popular brands such as Sula, its flagship brand besides other popular brands namely RASA, Dindori, The Source, Satori, Madera & Dia. Currently, it produces 56 different labels of wine across 13 distinct brands at its four owned and two leased production facilities located in the Indian states of Maharashtra and Karnataka.

Maharashtra and Karnataka are the two key major grape-producing regions in India, accounting for 95% of total table grapes and 97% of total wine grapes produced in the country are also the top consuming states, contributing close to 57% of the overall wine market. Sula's wine processing units are also located in the west and southwest of India, with the flagship facility located in Nashik, Maharashtra, and our wine processing units located in Nashik and Dindori in Maharashtra, and Bengaluru and Basavakalyan in Karnataka.

Sula services close to 8,000 hotels, restaurants and caterers, and tie-ups with distributors in Maharashtra, Haryana, Delhi, Goa and Punjab with close to 13,000 retail touchpoints across the country in 2021.

Sula’s Shiraz Cabernet is India’s largest selling wine by value in Fiscal 2021, with its gross billings amounting to Rs 91.83 crore in FY22. Recently it won five silvery and four bronze at the “Decanter World Wine Awards, 2022 and its Brut Tropicale won a gold medal at the International Wine Challenge 2022.

The companies revenue from operations increased by 8.60% from Rs 417.96 crore in Fiscal 2021 to Rs 453.92 crore in Fiscal 2022, primarily due to increase in sales of manufactured goods under its brands, increase in selling price of wine in select brands and markets, increase in revenue due to increased focus on premiumisation, favourable response its wine tourism business and increase in revenue from other operating income (government grants). It clocked a profit of Rs 52.14 crore in the financial year FY22 against Rs 3.01 crore from the previous year.

The Indian alco-beverage market is the third largest market in the world after China and USA by volume in terms of actual alcohol content of alco-beverages in CY 2020. The country is one of the fastest growing alcoholic beverage markets growing from 1.3 liters per capita of recorded consumption in 2005 to 2.7 liters in 2010 and Wine is less than 100 ml when compared to the world average of close to 13%. The Indian alco-beverage sector is projected to grow by a CAGR of 8% in volume for the period between FY 2021 to FY 2025 due to positive demographic factors

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. The demand for wines in urban and semi-urban areas of India is on the rise.

In India, the harvest of wine grapes normally lasts four months, beginning in December and continuing through March. The basic procedure for making wine entails turning the sugar in grapes into alcohol through fermentation by yeast once the grapes have been transported to our wineries during this time. Between 1.5 to 3 weeks pass during the fermentation process, after which the wine is matured (if necessary), blended, stabilised, filtered, and bottled.

Kotak Mahindra Capital Company Limited, CLSA India Private Limited and IIFL Securities Limited are the book running lead managers and KFin Technologies Limited is the registrar to the offer. The equity shares are proposed to be listed on BSE and NSE.