Sula Vineyards IPO opens for subscription today | 10 key things to know

Sula Vineyards, based in the grape growing region of Nashik, Maharashtra is planning a pure OFS

The country's largest wine producer Sula Vineyards is the first initial public offering getting launched in the month of December.

The public issue will open for subscription on December 12 and the closing date would be December 14, 2022.

The price band for the offer has been fixed at Rs 340 to Rs 357 per share.

The company intends to raise Rs 960.35 crore via maiden public issue of 2.69 crore shares at the upper end of the price band.

The public issue is entirely an offer for sale by promoter Rajeev Samant and several investors.

The promoter is going to sell 9.37 lakh shares via offer for sale, while investors Cofintra SA, Haystack Investments, Saama Capital III, SWIP Holdings, Verlinvest SA, and Verlinvest France SA will offload 2.19 crore shares via OFS.

Amongst above investors, Cofintra SA, Verlinvest SA, and Verlinvest France SA will exit the company by selling their entire shareholding.

Other selling shareholders are Dinesh G Vazirani, J A Moos, Karishma Singh, Major A V Phatak, Narain Girdhar Chanrai, Ruta M Samant, and Sanjay Naraindas Kirpalani.

Also read: Will Sula Vineyards leave investors in high spirits or high and dry?

The main objectives of the offer are to carry out this offer for sale, and achieve the benefits of listing equity shares on the stock exchanges.

The company will not receive any proceeds from the offer and all the money excluding issue expenses will go to selling shareholders.

Investors can bid for a minimum of 42 shares and in multiples of 42 shares thereafter. Retail investors can make a minimum investment of Rs 14,994 per lot and the maximum investment by them would be Rs 1,94,922 for 13 lots.

The company has reserved half its offer size for qualified institutional buyers, 15 percent for high networth individuals (non-institutional investors) and the remaining 35 percent for retail investors.

The anchor book is also a part of qualified institutional investors, through which Sula Vineyards already raised Rs 288.10 crore on December 9, 2022 ahead of its public issue opening.

Sula Vineyards is India’s largest wine producer and seller as of March 2022, as per Technopak. It has consistently gained market share (on the basis of its total revenue from operations) from 33 percent in FY09 in grapes wine category to 52 percent in value in FY22.

The company also serviced close to 8,000 hotels, restaurants and caterers, and experienced a significant rise in off-trade sales in the last 3 years with off-trade sales contributing 72.25 percent of its secondary sales during FY22, compared to 61.33 percent in FY20.

It has managed to build the largest distribution network among wine companies in India, with close to 13,000 retail touchpoints across the country in 2021. It also has a strong direct to consumer (D2C) selling channel primarily through wine tourism business facilities in Nashik (Maharashtra) and Bengaluru (Karnataka), with the highest number of D2C sales in the Indian wine industry in FY21.

Sula Vineyards recorded profit of Rs 52.14 crore for the financial year ended March 2022, up significantly from Rs 3.01 crore in previous year due to low base as FY21 was impacted by Covid. Revenue from operations during the same period increased from Rs 454 crore, from Rs 417.9 crore.

In the half year period ended September 2022 (FY23), profit stood at Rs 30.5 crore on revenue of Rs 224 crore, against profit of Rs 4.5 crore on profit of Rs 159 crore.

Rajeev Samant is the promoter, as well as Managing Director and Chief Executive Officer of the company. He and promoter group currently hold 28.44 percent stake in the company and the rest shareholding is held by the public.

Investor Verlinvest Asia Pte Ltd is the second largest shareholder in the company with 20.90 percent stake, followed by Cofintra SA and Verlinvest SA with 8.52 percent stake each.

Here are some key risks and concerns highlighted by brokerages (Canara Bank Securities, Anand Rathi)

a) The legal, regulatory and policy environment in which they operate is evolving and subject to change.

b) Any disruption caused by adverse climatic conditions could disrupt the supply of grapes, hence adversely and materially affect their business.

c) If suppliers for any particular packaging materials or consumables are unable or unwilling to meet their requirements or estimates fall short of the demand, they could suffer shortages or cost increases.

d) They may not be able to adjust the retail prices of their products as a result of state regulation.

e) Failure to adapt their product offerings to changing market trends and consumer tastes, preferences and spending habits could cause their sales to decline, and they may not be able to maintain their competitive position in the alcohol beverage and wine industries.

f) Their processing units, raw materials and business operations are primarily concentrated in western and south-western parts of India, and any significant social, political, economic or seasonal disruption, or natural calamities or civil disruptions in these regions could have an adverse effect on business, results of operations, future cash flows and financial condition.

Sula Vineyards will finalise the IPO share allotment by December 19. The refunds will be credited to bank accounts of unsuccessful investors by December 20, and eligible investors will get shares in their demat accounts by December 21.

Finally the listing of shares will take place on the BSE and NSE on December 22.

Its IPO shares currently traded with around 10 percent premium over upper end of price band in the grey market, an unofficial trading platform for IPO shares, analysts said. According to them, the issue being offer for sale and recent consolidation in equity markets may be key reasons for low premium.

Kotak Mahindra Capital Company, CLSA India, and IIFL Securities are the book running lead managers to the issue, while KFin Technologies is the registrar.