While recession fears have stymied new listings this year, one of the few companies currently seeking to go public in Mumbai is testing investors’ appetite for India’s burgeoning liquor market.
Sula Vineyards Ltd., which filed for an initial public offering last month, says it has more than 50% share in India’s small but fast-growing liquor market. The 26-year-old company has opened tasting rooms and hosted an annual music festival as part of its effort to make the drink fashionable in a young country with a growing middle class.
Abhay Kevadkar, an independent alcoholic beverage consultant, said, “When Sula entered the market, alcohol was seen as something of an aspiration for people over the age of 45. He broadened that perspective by targeting younger consumers. Cleverly changed.”
The winemaker is looking to go public at a time when IPOs have dried up in India, as in most parts of the world, amid recession concerns. Young retail traders who helped propel the local stock market over the years have been burned by plunging into high-flying tech unicorns such as Zomato Ltd and Paytm parent One97 Communications Ltd in recent months.
S&P BSE IPO The index, a gauge tracking the performance of Indian stocks for the first two years after listing, has fallen 24% so far in 2022 after nearly tripling in the last three years.
Sula has yet to disclose a price it plans to sell about a third of its existing equity, which includes shares of founder and managing director Rajeev Samant. The company posted sales of $57 million for the year ended March 31, with Zomato and Paytm accounting for a tenth of the revenue, although unlike the two tech firms Sula is profitable.
In its draft prospectus, Sula claims that India is the world’s third largest market for alcoholic beverages with $33 billion in 2020, but wine is only 1%. The company believes this leaves a lot of room for growth, estimating total Indian sales of 3.4 million cases of alcohol in 2025, up 70% from 2021 levels.
Samant, a 55-year-old Stanford graduate, has worked to boost demand by promoting wine tourism in Nashik’s production base of Sula, which is seen as India’s version of the Napa Valley. The company says social media has also helped raise the drink’s profile, and claims Sula’s is one of the top 10 most-followed vineyards on Instagram globally.
Sula will not raise any money from the IPO, but expects the listing to boost its visibility and brand image. This could have a halo effect for the entire industry, including the company’s local competitors including unlisted Fratelli Wines and Grover Zampa Vineyards.
Raunak Soni, Analyst, Equirus Securities Pvt Ltd, said, “This IPO will bring the Vine segment into the limelight.” “It’s a rapidly growing segment.”
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