Bhoomika Singh
The initial public offer (IPO) of Sula Vineyards reaches National Stock Exchange (NSE) today. The public issue will remain open for bidding till 14th December 2022.
Incorporated in 2003, Sula Vineyards Limited is India’s largest wine producer and seller as of March 31, 2022. The company also distribute wines under a bouquet of popular brands including “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia” with its flagship brand “Sula” being the “category creator” of wine in India.
Here’s an analysis of the IPO opening and company by Angle One, a registered member of NSE of India Limited, Bombay Stock Exchange Limited and Metropolitan Stock Exchange Limited. It is also registered as a depository participant with CDSL and a portfolio manager and investment advisor with SEBI.
The company’s business is broadly classified under two 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 from ownership and operation of wine tourism venues, including vineyard resorts and tasting rooms.
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Issue details:
- The IPO is completely made up of an offer for sale of Rs. 960 crores
- Present-Equity Paid up Capital: 15.72 crores
- Post-Equity Paid up Capital: 15.72 crore
- Price Band: Rs. 340 – Rs. 35
- Lot Size: 42 shares and in multiple thereafter
- Post-issue market cap: Rs. 2,863 crores – Rs. 3,006 crores
Positives: (a) Experienced board and qualified senior management
(b) Secured supply of raw materials with long-term contracts exclusive to Sula
(c) Established market leader in the Indian Wine industry with the leading brand “Sula” combined with leader and pioneer of wine tourism business in India.
Investment concerns: (a) Company benefits from high import duties imposed on imports of international wines in India, these duties could be reduced or eliminated in the future.
(b) Adverse climatic conditions may impact the quality of wine grapes which is the key raw material.
(c) A company may not be able to adjust the retail prices of its products as a result of state regulation.
Outlook & Valuation: In terms of valuations, the post-issue P/E works out to 52.5x FY22 EPS (at the upper end of the issue price band) which is less than its indirect peers like United Spirits, United Breweries Ltd and Radico Khaitan Ltd. Further, SVL has a niche offering in which peers don’t have much expertise.
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However, its financials are not much attractive at this juncture considering the 10% YoY growth in net sales and along with the fact that it has recently turned profitable. Considering all the factors, we believe this valuation is at reasonable levels. Thus, we recommend a NEUTRAL rating on the issue.
Objectives of the Offer: The Objects of the offer are to carry out the offer for the sale of up to 26,900,530 equity shares, aggregating to 960.35 cr by selling shareholders and to achieve the benefits of listing the equity shares on the stock exchanges.
