Sula Vineyards files IPO papers. 5 points on the wine makers
Sula Vineyards has filed IPO papers to sell its 2,55,46,186 shares to the public in the coming months. Here's a brief about Sula Vineyards if you have never heard of it.
A friend of a friend had been to Sula Vineyards at Nashik in Maharashtra recently and apparently, the trip lifted her spirits! She paid Rs 400 as an entry fee and walked through the scenic place and clicked a few snaps of the fancy art installations. She opted for a vineyard tour with wine tasting (for Rs 500) where she swirled and shooshed various types of wines. Since she was visiting during the weekend, she also stomped her feet for an additional 500 bucks. All in all, she claimed to have had a fun-tastic weekend. Her only complaint: It shuts down at 5.30pm.
This seems to be a normal experience of any person who spends one of their days at the Sula Vineyard.
1. About Sula Vineyards
Sula Vineyards is India’s largest winemaker given its large-scale popularity with the millennials and Gen X. Such is the popularity of the brand that if you ask a non-drinker, What do you know about wines? Their answer might start off with words like :
- Red liquid
- Fancy bottles and glasses and
- Sula Vineyard
2. About the IPO
Sula has filed draft IPO papers with the Securities and Exchange Board of India (SEBI) to raise capital through an Initial Public Offering (IPO). The Sula IPO will entirely be an offer for sale issue, which means the company's previous shareholders will sell their shares to the new shareholders (ie the public). Companies can also create new shares and sell those to the new shareholders if the previous shareholders do not wish to sell their stake, but Sula is not taking that route.
Sula will sell about 2,55,46,186 shares and the selling shareholders will receive all the proceeds. The date and price range per share of the IPO are yet to be finalised, but each share will have a face value of Rs 2.
3. The Business Model
Sula Vineyards is held by Belgian's Verlinvest. Sula is popular and widely accepted because it has dominated the domestic wine market with multiple wine brands like Sula, RASA, Dindori, The Source, Satori, Madera, and Dia across multiple price points. In total, the business boasts of producing 56 different labels of wine across 13 distinct brands. The wines are classified based on segments like 'Elite', 'Premium', 'Economy', and 'Popular'. They are also categorized based on price points, composition, taste and alcohol content.
4. How does Sula make money?
As per an ICRA report in January 2022, Sula is expected to make more revenues and better margins because:
1. It follows a premiumization strategy, which means that out of all its categories, it makes the most money from its highest-priced wines that fall in the 'Elite' and 'Premium' segments.
2. Apart from producing and selling wines, it has dealership agreements with international brands such as Le Grand Noir, Hardys, Beluga Vodka etc to distribute imported wine and other core spirits in India. This helps it derive another source of revenue from the hospitality sector and expand its superb distribution network, which already has six production facilities in Maharashtra and Karnataka.
5. Why is this exciting?
Sula is the first pure wine manufacturer that is aiming to finance money from the public. This only comes second to Officers Choice whiskey maker Allied Blenders & Distillers, which filed its IPO papers in June 2022.
Sula makes more than 50% of its revenues from Maharashtra and Karnataka and operates in a highly-regulated industry. The government has made state-specific policies and is encouraging the entry of foreign players via importing wine and liquor. This shows that India is in the midst of a mindset transition: The traditional Indian culture has always looked down on 'alcoholics' and 'madira' mostly always only looks good on TV but not in homes, because it symbolizes ''bad culture''. It will be exciting to see the journey of Sula on the stock market. Let's hope the investors can raise a toast to good returns!