The country’s largest wine producer, Sula Vineyards, is the first to launch an IPO in December. The public offering will open for subscription on December 12, with a deadline of December 14, 2022.

The price range for the offer is fixed at Rs 340 to Rs 357 per share. The company intends to raise Rs 960.35 crore through the IPO of 2.69 crore shares at the upper end of the price range. The public offering is entirely an offer for sale by promoter Rajeev Samant and several investors.

Promoters will sell 937,000 shares through a tender offer. In contrast, investors Cofintra SA, Haystack Investments, Saama Capital III, SWIP Holdings, Verlinvest SA and Verlinvest France SA will sell 2.19 crore shares through OFS.

Among the investors mentioned above, Cofintra SA, Verlinvest SA and Verlinvest France SA will exit the company by selling all their shares.

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

The primary purpose of the tender offer is to execute this tender offer and realize the benefits of listing the shares on the stock exchange.

The company will not receive any proceeds from the offer, and all proceeds other than offering expenses will go to selling shareholders.

Investors can bid a minimum of 42 shares, after which they can bid in multiples of 42 shares. Retail investors can invest a minimum of Rs 14,994 per lot and a maximum of Rs 1,94,922 in 13 lots.

The firm reserves half the offer size for qualified institutional buyers, 15% for high-net-worth individuals (non-institutional investors), and the remaining 35% for retail investors.

The anchor book is also part of the qualified institutional investors. Sula Vineyards raised Rs 288.10 crore ahead of its public offering on December 9, 2022.

Sura Vineyards is India’s largest wine producer and marketer as of March 2022, according to Technopak. It has been increasing its market share (based on its total operating revenue) from 33% in the wine category in FY09 to 52% in FY22.

The company, which also serves nearly 8,000 hotels, restaurants and caterers, has seen significant growth in off-site sales over the past three years, accounting for 72.25% of its secondary sales in FY22, compared to 61.33% in FY20.

It has built the largest distribution network among wine companies in India, with nearly 13,000 retail touchpoints across the country by 2021. It also has a strong direct-to-consumer (D2C) sales channel, mainly through wine tourism commercial facilities in Nashik (Maharashtra) and Bangalore (Karnataka) and India’s wine market in FY21. The industry has the highest D2C sales.

Sula Vineyards recorded a profit of Rs 52.14 crore for the financial year ending March 2022, significantly higher than the previous year’s Rs 3.01 crore, due to a low base in FY21 due to the impact of Covid. Operating income increased from Rs 417.9 crore to Rs 454 crore during the same period.

For the half-year period ending September 2022 (FY23), profit was Rs 30.5 crore on revenue of Rs 224 crore and profit of Rs 4.5 crore on a profit of Rs 159 crore.

Rajeev Samant is the company’s founder, MD and CEO. He and the promoter group currently own 28.44% of the company, with the rest held by the public.

Investor Verlinvest Asia Pte Ltd is the company’s second-largest shareholder with a 20.90% stake, followed by Cofintra SA and Verlinvest SA with 8.52% each.

Below are some key risks and concerns highlighted by brokerage firms (Canara Bank Securities, Anand Rathi). The legal, regulatory and policy environment in which they operate is likely to change.

Any disruption caused by adverse weather conditions could disrupt the supply of grapes, which could adversely impact its business.

If suppliers of any particular packaging material or consumables are unable or unwilling to meet their requirements or estimate demand to be unmet, they may experience shortages or increased costs. Due to state regulations, they may need help to adjust their products’ retail prices.

Suppose their products need to adapt to changing market trends, consumer tastes, preferences and consumption habits. In that case, it may decrease their sales, and they may not be able to maintain their competitive position in the alcoholic beverages and wine industry.

Their processing plants, raw materials and business operations are primarily concentrated in the west and south-west of India, and any significant social, political, economic or seasonal disruption, natural disaster or civil unrest may have adverse effects on the business, results of operations, future cash flows and financial condition.

Sula Vineyards has until December 19 to complete its IPO stock allocation. Refunds will be credited to unsuccessful investors’ bank accounts by December 20, and qualified investors will get their shares in their Demat accounts by December 21. Finally, shares will be listed on the BSE and NSE on December 22.

Analysts said that its IPO shares are now trading at a roughly 10% premium to the upper end of the price range on the grey market, the unofficial trading platform for IPO shares. They believe that the problem of being sold and the recent correction in the stock market may be the critical reasons for the low premium.

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