Sula Vineyards IPO: 5 Things to Know

Indian IPO markets are buzzing. One after the other big companies are coming out with their offer. Hence, right now is important to watch out for the top 5 IPOs of 2023.

However, right now it's time to wake up, stretch and get ready for some good old wine tasting.

Yes, you heard it right, India's largest wine company, Sula Vineyards is coming out with its IPO, next week. The IPO will open for subscription on 12 December 2022.

Here are some key details about the company's IPO.

Issue period: 12 December 2022 to 14 December 2022

Issue size: Rs 960.35 crore (about Rs 9,603.5 million)

Type: Book Built IPO

Price band: Rs 340 to Rs 357 per equity share

Bid lot: 42 shares and multiples thereof

Application limit: Minimum one lot maximum thirteen lots

Face value: Rs 2 per equity share

Grey Market Premium (GMP): Rs 34

Please note, the GMP is as of 07 December 2022.

The company has reserved not less than 50% shares of the offer for qualified institutional buyers (QIB). It has reserved not less than 15% for non-institutional buyers (HNI). Hence not more than 35% of shares are available for retail individual investors.

Tentative IPO allotment date: 19 December 2022

Tentative listing date: 22 December 2022

Here are five key details of the IPO.

Sula Vineyards IPO: 5 Things to Know

#1 About the company

Incorporated in 2003, Sula Vineyards Limited is India's largest wine producer and seller as of 31 March 2022. The company also distribute wines under a bouquet of popular brands including RASA, Dindori, The Source, Satori, Madera & Dia with its flagship brand Sula being the category creator of wine in India.

The company earns its revenue mainly from the production of wine, the import of wines and spirits, and the distribution of wines and spirits.

Currently, the company produces 56 different labels of wine at four owned and two leased production facilities located in the Indian states of Maharashtra and Karnataka.

It also makes money from the wine tourism business.

#2 Financial position

Covid-19 had impacted businesses all over the world and Sula Vineyards was no exception to that. In the financial year 2021, its total revenue of the company fell by 19.45 YoY to Rs 4.2 billion (bn).

However, as the winds of Covid-19 subsided the company saw an increase in its revenue. The total revenue for financial year 2022 stood at Rs 4.5 bn, 8.3% YoY higher compared to previous year's total revenue.

Interestingly, the profit figures had a slightly different movement. While the revenue of the company took a hit in the financial year 2021, the company has reported an increase in net profit.

The rise in profits can be attributed to fall in expenses. In the past three years the company has managed to reduce its expenses considerably.

Even the return on net worth and basic earnings per share (EPS) have improved consistently in the past three years.

Financial Snapshot

#3 Peer comparison

As per the company's red herring prospectus (RHP), United Spirits, Radico Khaitan, and United Breweries are its listed peers.

Here's how they compare.

Peer Comparison

#4 Arguments in favour of the business

• The wine market in India is expected to remain concentrated, with high barriers to entry due to the nature of the product, as well as trade barriers prevalent in the alcoholic beverage market.
  
  Hence, having a big market share in such a market gives the company a competitive edge.
• It has a strong brand presence in the market. The "Sula" brand is recognized as the market leader across wine variants, including red, white, and sparkling wines.
• It has the largest market share by value in domestic wines, the largest wine distribution network and also the largest sales presence across India. It clearly dominates the market.
• The company has strong backward linkages. It has entered into long-term contracts with farmers (of up to 12 years) which form 90% of the annual wine grape requirements.
• It has also been actively working on developing a new business in India - wine tourism. It has been quite successful in doing this as a huge number of tourists visit the vineyards.

#5 Risk factors

• The wine industry is subject to a licensing and excise regime with changing laws, rules and regulations and legal uncertainties, including the adverse application of corporate and tax laws.
• It benefits from high import duties imposed on imports of international wines in India, but these duties could be reduced or eliminated in the future, adversely affecting its wine business.
• Adverse climatic conditions may impact the quality of wine grapes which is a key raw material for the company.
• Consumers' tastes and preferences may change and they may not prefer wine in the future. Failure to adapt our product offerings to changing market trends and consumer tastes, preferences and spending habits could cause sales to decline.
• It is heavily dependent on its top-line customers. The top five customers are 35-40% of the company's business.

To conclude

Sula Vineyards has been in operation for almost two decades now. During this span of time, the company has comfortably settled into the markets and spread its wings all over.

The company has also made quite a name for itself. Along with its main product - wine, its vineyards and resorts have become quite famous as well. Sula Vineyards has become the largest visited vineyard in India.

However, as with any other investment, you should carefully weigh out the pros and cons of the company before applying for the IPO.

Will the company have a successful debut on the bourses? Only time will tell.

Meanwhile, stay tuned to get further updates on this IPO and all upcoming IPOs in the market.

Happy Investing!

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