Mumbai based Sula Vineyards is coming up with an IPO that would open for subscription on 12th December 2022. Sula Vineyards Limited is the largest wine producer and seller in India. While its revenue has not grown much, the company had strong margin growth in the last 3 years. Should you invest in Sula Vineyards IPO? This article would provide IPO details, Dates, GMP, Listing Date and conclusion on whether this is good or bad for investment.
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About Sula Vineyards Limited
Company is India’s largest wine producer and seller as of March 31, 2022. They have been a consistent market leader in the Indian wine industry in terms of sales volume and value (based on the total revenue from operations) since Fiscal 2009 crossing 50% market share by value in the domestic 100% grape wine market in Fiscal 2012. They have consistently gained market share from 33% in fiscal 2009 in 100% grape wine category to 52% in value in Fiscal 2022.
Furthermore, they are the market leader across all four price segments, being ‘Elite’ (INR 950+), ‘Premium’ (INR 700-950), ‘Economy’ (INR 400-700) and ‘Popular’ (<INR 400), with a higher share of approximately 61% by value in the ‘Elite’ and ‘Premium’ categories in Fiscal 2022, as compared to overall market share of 52% in the Indian wine industry.
Its business can be 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
Sula Vineyards IPO dates and other details
| IPO Opening Date | 12-Dec-22 |
| IPO Closing Date | 14-Dec-22 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 2 per equity share |
| IPO Price band | Rs 340 to Rs 357 per equity share |
| Lot Size | 42 Shares |
| Min Order Quantity | 42 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 960.35 Crores |
Sula Vineyards Limited IPO RHP
What are the strengths of Sula Vineyards Limited?
1) The company is in the business where there are high barriers of entry
2) It is established market leader in the Indian wine industry with the leading brand “Sula”
3) Company is the largest wine producer in India with the widest and innovative product offering supported by an efficient production mechanism
4) It has the largest wine distribution network and sales presence
5) It has secured supply of raw material with long-term contracts exclusive to Sula
6) It is the leader and pioneer of the wine tourism business in India
7) Early adoption and focus on sustainability
8) It has experienced Board and qualified senior management team
What are the Objects of the IPO Offer?
Sula Vineyards IPO Size is Rs 960.35 crores which is entirely OFS. Under OFS, selling shareholders would sell their shares and the company would not get any money from this IPO proceeds.
Who are the promoters of Sula Vineyards Limited?
Rajeev Samant is the promoter of the company.
How is the company financial track record?
Here are the total assets, revenues, and profits of the company in the last 3 years and 5 months.
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Particulars | FY20 | FY21 | FY22 | 30-Sep-22 |
|---|---|---|---|---|
| Total Assets | 831.0 | 751.6 | 758.6 | 771.0 |
| Revenues | 523.2 | 421.5 | 456.7 | 225.8 |
| Profit After Tax | -15.9 | 3.0 | 52.1 | 30.5 |
| Profit % | -3.05% | 0.71% | 11.42% | 13.51% |
Why to invest in Sula Vineyards IPO?
Here are the positive factors in this company.
1) Sula Vineyards Ltd is the largest wine producer and seller in India. Company business has high entry barriers and it is an established market leader in the Indian wine industry.
2) Company had strong margin growth in the last 3 years. It generated a loss of 3% in FY20 Vs. 11.4% in FY22. Even for 6 months ended Sep-22, its margins have improved to 13.5%
3) Company EPS is increasing year on year.
Risk Factors of investing in Sula Vineyards IPO
1) Company revenues have fallen in FY21, however, recovered in FY22. One can attribute this fall due to covid pandemic.
2) Company IPO proceeds are only for Offer for Sale (OFS). Such IPO proceeds would go to selling shareholders and company would not get benefitted.
3) Company industry in which it operates is subject to a licensing and excise regime with changing laws, rules and regulations and legal uncertainties, including adverse application of corporate and tax laws.
4) Company benefit from high import duties imposed on imports of international wines in India, but these duties could be reduced or eliminated in the future, adversely affecting its Wine Business Adverse climatic conditions may impact the quality of wine grapes which are key raw materials.
5) Its revenue is dependent upon a limited number of customers (which includes state run corporations, wholesalers, and independent distributors). Any adverse developments to maintain such relationships could have an adverse effect on its business.
6) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Sula Vineyards IPO price Valuation
The Sula Vineyards Limited IPO price band is confirmed to be INR 340 to 357 per share.
If we consider FY2022 EPS of Rs 6.53, the P/E ratio works out to be 55x.
If we consider last 3 years weighted EPS of Rs 3.06, the P/E ratio works out to be 116x.
If we annualize 6 months ended Sep-22 EPS, the P/E ratio works out to be 48x.
Means company is asking for the issue price in P/E of 48x to 116x. There are listed peers like United Breweries at P/E 120x (Highest) and Radico Khaitan trading at P/E 53x (Lowest) and industry average P/E is 83x. Hence Sula Vineyards Ltd share price is fully priced.
Sula Vineyards dates – subscription, Allotment and Listing
| Offer Open | 12-Dec-22 |
| Offer close | 14-Dec-22 |
| Finalization of Allotment | 19-Dec-22 |
| Initiation of Refunds | 20-Dec-22 |
| Credit to Demat Account | 21-Dec-22 |
| IPO Shares Listing Date | 22-Dec-22 |
What is Sula Vineyards IPO GMP?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market.
IPO GMP IPOWatch – Nil
IPO GMP Chanakya – Nil
IPO GMP as per IPOCentral – Nil
IPO GMP IPO Bazar – Nil
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Sula Vineyards IPO Review – Should you invest or not?
Sula Vineyards Limited is the largest wine producer and seller in India. Company operates into the busy which has high entry barriers. It has generated strong margin growth in the last few years.
On the other side, its revenues have fallen in FY21 and still low in FY22 compared to FY20. The issue price is fully priced. Company has other internal and external risk factors which investors need to go through them and understand.
IPO looks good for medium to long term investment.
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