Sula Vineyards Share Lists at a Premium Over IPO Price; Should you Buy, Sell or Hold?

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Sula Vineyards Listing on BSE, NSE: Sula Vineyards made its stock market debut on Thursday on a muted note. The shares got listed at Rs 361 on the National Stock Exchange (NSE), a premium of 1.14 per cent over its issue price of Rs 357 apiece.

The initial public offering (IPO) of Sula Vineyards was open from Monday, December 12 till Wednesday, December 14, 2022, which got subscribed 2.33 times by the last day of offer. The Rs 960-crore initial share-sale received bids for 4,38,36,912 shares against 1,88,30,372 shares on offer.

The public issue was a complete offer-for-sale, which means the company did not receive any proceeds from the offer and the money went to the selling shareholders.

“Lower promoter holdings are cause for alarm. Investors with cash surpluses might think about investing for a long-term reward,” said Manoj Dalmia Founder and Director, Proficient Equities.

As of September quarter end, Sula Vineyards had outstanding borrowings of Rs 231.5 crore and cash and cash equivalents of Rs 13 crore.

Over the last five years, Sula’s financial performance has been inconsistent. For the year ended March 2018, it reported net profit of Rs 12.3 crore. Next year, net profit was Rs 7.2 crore followed by a loss of Rs 16 crore. For the year ended March 2021, which was the Covid-hit year, net profit was Rs 3 crore. And the year after that, right before the IPO, net profit jumped to Rs 52 crore.

“If we look at its financial track record the issue is fully priced-in and discounts all near-term growth,” according to Prashanth Tapse, Senior VP Research at Mehta Equities.

What Should Investors Do Now?

Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd., said: “The company’s muted listing, debuted at Rs. 361 over its issue price of Rs. 357. But the issue had received a good response from investors on both the institutional and retail sides. It is the largest wine producer with a wine tourism business. It enjoys the benefit of high entry barriers and has the largest wine distribution network and sales presence. Its financial performance is also improving. This issue of Sula Vineyards had a P/E valuation of 54.67, which seems fully priced; the issue, however, was a complete offer for sale, and a low promoter holding is also a concern. So, allottees who applied for the public offering for listing premium are advised to maintain their stop loss at Rs. 350 and wait for further upside till Rs. 380.”

The company decided to allot 80,70,158 equity shares to anchor investors at Rs 357 apiece. The capital was raised from 22 investors, including BNP Paribas Arbitrage, Morgan Stanley (Asia) Singapore Pte Ltd, Citigroup Global Markets Mauritius Pvt Ltd, Goldman Sachs and Abu Dhabi Investment Authority.

Companies like Kotak Mahindra Capital Company, CLSA India, and IIFL Securities were acting as the book-running lead managers for the IPO, while KFin Technologies was the registrar of the share sale.

Sula Vineyards Limited is the India’s largest wine producer and seller as of March 31, 2022. The company also distribute wines under a bouquet of popular brands including RASA, Dindori, Satori, with its flagship brand Sula being the category creator of wine in India. Notably, Sula is recognised as the market leader across wine variants, including red, white, and sparkling wines.

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