Wine is still making its space in the Indian alcoholic beverage market which is dominated by beer. India’s largest wine manufacturer, Sula Vineyards commanding 52% market share in wines, announced an IPO for Rs 960.35 crore in December last year.
The IPO was issued for Rs 357 per share with bidding open from December 12 and closing on December 14, 2022. The shares were listed on the NSE with a 4.48% discount at Rs 341 per share.
Sula Vineyards is currently trading at Rs 366.8 with a 1.55% gain as of the March 6 market closing. The relatively new listing has surged by about 16% from its listing price as per data from Tradebrains. The company falls under the category of a small cap with a market cap of Rs 3,043.36 crore.
The wine manufacturer and seller have a PE (TTM) ratio of 58.62 and an ROE of 14.98%. Looking at the breakdown of the shareholding pattern, the promoters hold 27.33%, the public holds major 56.40%, FIIs hold 7.42% and DIIs hold 8.85%.
The stock is currently trading above the resistance level of R1- Rs 364.92, with the pivot at Rs 359.48. The R2 is 368.63 and R3 is Rs 374.07. The support levels are S1- 355.77, S2- 350.33 and S3-346.62.
The company has announced a net profit of Rs 39.28 crore with net sales of Rs 209.17 crore for the December 2022 quarter. The net profit margin for the quarter is 18.78%.
The company has a 3-year EBIDTA of 4.28 and a Current Ratio of 1.18.
Sula Vineyards produces 56 labels of wine from its four production units, two owned and two leased in Maharashtra and two in Karnataka as reported by Business Standard. The company also offers Wine and Dine in its restaurants and resort facilities in its vineyard, generating revenue from tourism.
The Pandemic had a decline in the activity of the wine company but business has caught up since. The company has increased the market share of its brand from 63.6% in FY20 to 83.9% in FY22 as reported by Business Standard.
Wine consumption is marginally low, at a mere 1% of consumption in the alcoholic beverages sector, but the demand is steadily increasing. A report by Statista forecasts that the alcohol market is expected to grow annually by 14.99% in 2023-2027. Sula is well placed in the Indian wine market to avail the benefit of the increasing demand.
While ‘Sula’ has the benefits of being the market leader with the largest wine distribution network, an established brand positioning and high barriers to entry in the business, the wine industry attracts excise tax and changes in regulations can have an impact on it. The grapes used in the production depend on climatic conditions and any hindrance will have an impact on the manufacture.
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