Sula Vineyards IPO Day 3: IPO subscribed 2.33 times

SULA Vineyards’ initial public offering was announced with much fanfare on December 12. After the final day of bidding on Wednesday, the offer received bids for 4.38 crore equity shares against an IPO size of 1.88 crore shares, getting subscribed 2.33 times.

Retail investors bought their quota 1.65 times, while high-net-worth individuals booked 1.51 times the reserved portion. Qualified institutional buyers bought 4.13 times the portion set aside for them.

Media reports claim that the company’s shares were traded at a premium of Rs 17 in the grey market. This is down from the earlier reported grey market premium of Rs 34.

In the pure offer for sale, Sula’s promoters hoped to raise Rs 960.35 crore.

Sula is India’s most recognised wine brand, with its vineyard located in the Nashik region, 180 km northeast of Mumbai. 

The company is the market leader across all four price segments of wines; ‘Elite’ (Rs 950+), ‘Premium’ (Rs 700-950), ‘Economy’ (Rs 400-700), and ‘Popular’ (<Rs 400). It had a higher share of 61 per cent by value in the ‘Elite’ and ‘Premium’ categories in FY22. The company is also recognised as the market leader across wine variants including red, white, and sparkling wines.

Since the share of wine to overall alcohol consumption in India is less than one per cent – as opposed to the world average of around 13 per cent, it makes a case to subscribe to the IPO as India’s demography and consumption patterns are expected to shift in favour of wine consumption. 

However, one cannot ignore the fact that promoter holding after the IPO is likely to be in the region of 27–30 per cent. The liquor industry traditionally has turbulent operating margins. That is not the only risk, however; there are risks associated with the regulation of alcoholic beverages in India in general. 

In its draft red herring prospectus, the company listed total assets amounting to Rs 758.56 crore with a total annual income of Rs 456.50 crore for the year ended March 31, 2022.