Sula Vineyards shares rally 12%; here’s why

Shares of Sula Vineyards (Sula) jumped nearly 12% in intraday trade on Wednesday as investors cheered sales growth numbers of the homegrown wine producer for the March quarter. The company clocked highest ever annual revenues both for its own brands as well as the wine tourism business in the financial year 2022-23, the country’s only listed wine producer said in a regulatory filing on Tuesday.

Reacting to the Q4 sales update, Sula shares opened 10.7% higher at ₹389.75 against the previous closing price of ₹352.10 on the BSE. The stock jumped 12% to touch an intraday high of ₹394.20, while the market capitalisation increased to ₹3,257 crore. There was a surge in buying activities as 2 lakh shares changed hands over the counter compared with the two-week average volume of 0.46 lakh stocks.

At the current price level, the newly listed company trades 9% lower than its all-time high of ₹432 touched on January 23, 2023, while it is up 10.5% against the IPO price of ₹357 apiece. The smallcap stock hit its lowest level of ₹305.55 on December 26, 2022. The Nashik-based company made its debut on the stock exchanges on December 22, 2022, after raising ₹960 crore through initial public offering (IPO), which was entirely an offer for sale (OFS).

In its Q4 sales update, Sula, India’s largest and only listed wine producer, said its own brands sales volumes crossed 1 million cases in FY23, with elite & premium wines surging past the 5 lakh case mark for the first time. This was the highest ever annual revenues both for its own brands as well as the wine tourism business, it said.

As per Technopak report, Sula has higher share in the elite and premium wines category, which crossed 60% market share by value in FY19 and further increased to 62% in FY22.

For Q4 FY23, the company posted a 15% year-on-year (YoY) growth in its own brands, while wine tourism rose by around 18% YoY with nearly 30% jump in FY23 over FY22. Wine tourism represents room revenue, sale of food & beverages, merchandise, and all other ancillary service; excluding sale of wine.

On a provisional basis, the company’s net revenue from its own brand stood at ₹104.3 crore in Q4FY23, up 15% from ₹90.7 crore in the same period last year. For the full financial year 2022-23, the revenue from its own brand rose 26% to ₹482.5 crore versus ₹382.2 crore in the previous fiscal.

The revenue from wine tourism was at ₹12.4 crore at the end of the March quarter of 2022, up 18% from ₹10.5 crore in the corresponding quarter last year. For FY23, wine tourism’s revenue stood at ₹45 crore as compared to ₹34.7 crore in FY22.

Rajeev Samant, CEO said, “FY23 has been one of the most momentous and successful years in Sula’s 23-year journey. Our focus on premiumisation is reaping rich dividends - more than 52% of 1 million cases are our Elite & Premium wines including our Sula Vineyards, RASA & The Source brands. That share was just 46% in pre-pandemic FY19.”

“I’m particularly pleased that we conducted more than 1.3 lakh unique individual tastings at our iconic vineyards, a massive 66% growth from the year before. This continues to be a significant focus area for the company,” Samant said.

“Our wine tourism business continues to soar with total revenue touching ₹80 crore in FY23 vs just ₹44 crore in FY19 and we expect this to be a ₹100 crore business in the coming year,” he added.