Sula Vineyards Limited IPO
i. Sula Vineyards id India’s largest wine producer and seller as of March 31, 2022. They has been a consistent market leader in the Indian wine industry in terms of sales volume and value.
ii. Sula’s business can be broadly classified under two categories
a. the production of wine, the import of wines and spirits, and the distribution of wines and spirits (the “Wine Business”); and
b. the sale of services from ownership and operation of wine tourism venues, including vineyard resorts and tasting rooms (the “Wine Tourism Business”).
iii. 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.
iv. The company distributes 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.
v. India is one of the fastest-growing alcoholic beverage markets in the world, growing from a small base of 1.3 litres per capita of recorded consumption in 2005 to 2.7 liters in 2010
i. High barriers to entry
ii. Established market leader in the Indian wine industry with the leading brand “Sula”
iii. Largest wine producer in India with the widest and most innovative product offering supported by an efficient production mechanism
Objects of the Sula Vineyards Limited IPO:
Sula Vineyards Limited IPO Details:
|Open Date:||Dec 12 2022|
|Close Date:||Dec 14 2022|
|Face Value:||₹ 2 Per Equity Share|
|Issue Type:||Book Built Issue|
|Issue Size:||960.35 Cr.|
|Lot Size:||42 Shares|
|Issue Price:||₹ 340-357 Per Equity Share|
|Listing Date:||Dec 22 2022|
Promoters And Management:
Financials of Sula Vineyards Limited IPO:
|Particulars (in crores)||Mar-22||Mar-21||Mar-20|
|Revenue from operations||453||417||521|
|Cost of Materials Consumed||114||66||109|
|Purchase of stock-in-trade||20||75||132|
|Changes in Inventories of Finished Goods||14||15||-14|
|Employee Benefit Expense||65||55||65|
|Selling, distribution and marketing expense||44||46||52|
|No. of Shares Outstanding||8.4||8.4||8.4|
Comparison With Peers:
|Name of the company||Revenue(in cr)||Profit(in cr)||EPS||P/E||CMP||MCap(in cr)|
|Sula Vineyards Limited||453||70||8.33||42||357||3000|
|United Spirits Limited||9,712||811||11.4||60.9||938||68,159|
|Radico Khaitan Limited||2,859||252||18.86||62.4||1089||14,563|
|United Breweries Limited||5,838||366||13.82||85.3||1,776||46,965|
Recommendation on Sula Vineyards Limited IPO:
Review and Recommendation of Sula Wines by Team InvestorZone is 4/10
1. Sula Wines earn revenue from by selling wines and income generated from tourism venues such as vineyard resorts and tasting rooms. In Fy22, 84% revenue comes by selling their own brand, 8% comes from Imported Wines, and 8% comes from Wine Tourism business. 2. Sula wines is the market leader in the category of Red Wines, White Wines and Sparkling Wines. They have more than 13k retailers in the India which sold Sula Wines. Currently, they have 52% market share. 3. As of September 30, 2022, they have a presence in 25 states and six union territories in India. They also entered the overseas markets in 2003, and currently offer wines in over 20 countries, including Spain, France, Japan, the United Kingdom and the United States 4. 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. The price range from ₹250 to ₹1,895 per 750 ml bottle. 5. The total consumption of Wines as a % of Alcohol is just 1% in India as compared to 13% worldwide. However, we don’t think it will increase in future as hardly anyone is interested in driving wine in India. 6. There is hardly any growth in the business in the last 3 years. The total revenue of Fy22 is 456 Crores and First 6MFY23 revenue is just 225 Crores. 7. Mcap = ~3000 Crores and P/E of 42x looks on higher side considering no growth and consumption of wines is very less in India, it is just 1% of total Alcohol market. In addition, India does not have a strong wine drinking culture unlike in European countries where it is paired with meals.