IPO Note- Sula Vineyards Limited 09 December 2022

Sula Vineyards Limited (SVL) is India’s largest wine producer and seller. SVL’s business Rating SUBSCRIBE
can be broadly classified under 2 categories (i) the production of wine, the import of
wines and spirits, and the distribution of wines and spirits and (ii) the sale of services Issue Details
from ownership and operation of wine tourism venues, including vineyard resorts and
tasting rooms. SVL is the market leader across all 4 price segments, viz ‘Elite’ (₹ 950+), Issue Opens 12-Dec-22
‘Premium’ (₹ 700-950), ‘Economy’ (₹ 400-700) and ‘Popular’ (<₹ 400), with a higher Issue Closes 14-Dec-22
share of 61% by value in the ‘Elite’ and ‘Premium’ categories in FY22, as compared to Face Value (₹) 2
their overall market share of 52% in the Indian wine industry. SVL is also recognized as Price Band (₹) 340-357
the market leader across red, white and sparkling wines. Bid Lot 42
Issue Size at higher
High entry barriers in the wine business:- 960
price band (₹ Cr)
The wine market in India enjoys high entry barriers due to the nature of the product, as Market cap @ upper
well as trade barriers prevalent in the alcoholic beverage market. Some key factors wrt 3,006
price band (₹ cr)
to the barriers are: 1) Huge investment of capital and time for the development of
Listing NSE/BSE
vineyards. 2) Long term relationships with the farmers to ensure timely supply. 3) High
inventory business model and high dependence on the supply side for grapes, the major Kotak Mahindra
raw material. 4) State wise different alcohol policies wrt procurement, pricing, BRLMs Capital, CLSA India,
distribution and any restrictions on its use. 5) Advertising of alcohol both directly and IIFL Securities
indirectly is prohibited in India and can be advertised only at the point of sale making it Registrar KFin Tech Ltd
difficult for new entrants to penetrate the market.
Shareholding Pattern (%)
Largest wine producer and market leader in the otherwise under penetrated Indian
wine industry:- Pre Issue Post Issue
SVL has been a consistent market leader in the Indian wine industry in terms of sales Promoter 28.44 27.33
volume and value since FY09 with 33% market share by value in the domestic 100% Non Promoter 71.56 72.67
grape wine market to 52% market share in FY22. The contribution of wine to overall
alcohol consumption in India is less than 1% against the global average of close to 13%. Issue Structure (In cr no. of shares)
SVL aims to tap the potential of the under penetrated wine industry with its offering of
Issue size 2.69
the widest product range in the Indian wine market.
OFS 2.69
Break-up of net issue to public (%):
Key Risks:- 1) Alcohol business is subject to licensing, excise regime and constant
QIB's portion 50.0
changes in the various rules, regulations and approvals. 2) Adverse climatic conditions
Non-Institutional portion 15.0
may impact the yield and quality of wine grapes. 3) Any supply disruptions in the
Retail Portion 35.0
procurement of raw materials could adversely affect the business. Source: ABML Research, RHP

Decent financials & valuation – SUBSCRIBE

At the upper end of price band, SVL is available at TTM PE/ TTM PS of 36x/ 5.8x. We
Analyst Details
believe that the huge under penetration in the Indian wine industry coupled with rising
consumer aspirations and disposable incomes provides a huge growth opportunity. We
Sumeet Shah
ascribe a SUBSCRIBE rating to the issue.
022-6819 0514

Sumeet.Shah1@adityabirlacapital.com
Key Financials (₹ Cr) Mar-20 Mar-21 Mar-22
Revenue 521.6 418.0 453.9
EBITDA 50.5 64.5 116.1
EBITDA Margin (%) 9.7% 15.4% 25.6%
Net Profit -15.9 3.0 52.1

Source: ABML Research, RHP

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IPO Note- Sula Vineyards Limited 09 December 2022
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