Fratelli Vineyards Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

Gaurav Sekhri (Chairman & Managing Director), Aditya Brij Sekhri (Director), Hemant Parora (Chief Business Officer), Rajesh Garg (Chief Financial Officer)

Analysts

Akshat (AJ Capital), Deepesh Sancheti (Manya Finance), DVM Teja (Individual Investor), Erika Banduni (Chompy Enterprises), Heer Gogri (Choice Institutional Equities), Ranbir Kumar Singh (Ranbir HUF)

Financials & KPIs

Geographic & Segment Commentary

Wine Business: Core wine grew ~8% YoY with premium positioning strengthening. Super premium category grew ~7% with Janoon up >36%. Fratelli maintains market leadership in luxury segment. Shiraz Cabernet (launched April 26) already registered across 11 states. Fratelli Brute expanded from 4 to 9 states (targeting 15 by H2 end). Sette 15th Anniversary Limited Edition (Manish Malhotra collaboration) present across 7 states since January launch. Temporary regulatory headwinds in Delhi (label registration delays) and UP (excise policy changes) were procedural, not demand-related; strong performance in Chandigarh, Haryana, Telangana, Odisha, and Pondicherry offset these.

RTD / Shotgun: Emerged as key growth engine, doubling YoY. Sold ~50,000 cases in Q1; expanded from 20 to 22 states (added Chhattisgarh and Karnataka). Four flavors currently in market; Shotgun Jamun launching Q2 FY27. Added >6,000 new touch points via Shotgun in outlets with minimal prior wine presence. Repeat purchase ratio at healthy 55-60%. Targeting >200,000 cases in FY27 (vs ~80,000 in FY26). RTD gross margin ~70%.

CSD / Defense Channel: Contributed ~8% of top line in Q1. Tilt Red, Tilt Bubbly Rose, and Shiraz Rose (listed Q4 FY26) debuted strongly. Tilt is first wine-in-a-can listed in Army Canteen. Merlot and Noe sparkling wine expected from Q2; Shotgun in H2. CSD expected to become increasingly meaningful contributor.

Exports: Present in 17 countries; added 2 new geographies in Q1. Exports of Tilt and Shotgun commenced. Revenue contribution remains small (~1.5-2% of net sales) but profitable. Core markets in Asia and Europe.

Company-Specific & Strategic Commentary

Global Recognition: Fratelli became the first Indian winery to secure 5 wines with 90+ points at the Decanter World Wine Awards, validating Indian wine quality internationally.

Vision 2030: Company on track toward Vision 2030 targets, including ₹500 crore revenue ambition. Revenue guidance of ~20%+ growth trajectory; gross margins at upper end of guided range. Management expects to achieve ₹500 crore even without hospitality, through wine, RTD, and possibly a third business element within next year.

Capital Allocation & Debt Management: Total borrowings ~₹130 crores; management evaluating options to bring in liquidity for efficiency. No meaningful increase in debt levels expected. Operationally profitable path with net-net breakeven expected this fiscal.

Vertical Integration: One-third of grape requirements from own vineyards (400 acres under long-term lease, not on FVL balance sheet), one-third from contract farming, balance from spot purchases. This hedging provides gross margin resilience despite grape price inflation.

Hospitality Delayed: 10 acres acquired within vineyards for hospitality (sits on Fratelli balance sheet). Small existing wine hospitality business (experience center + 4-bedroom stay). Proper hospitality rollout delayed; priority is core wine and fast-tracking RTD. No meaningful hospitality revenue for next 2 years.

Product Innovation: Five Shotgun variants planned (four in market, Jamun launching Q2). First wine-in-a-can (Tilt) at CSD. New launches (Shiraz Cabernet, Fratelli Brute, Sette Limited Edition) driving geographic expansion.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Revenue Growth and Margin Trajectory

• Question: With RTD sales doubling, what is Shotgun's expected revenue contribution by year-end, and what EBITDA margin is expected for FY27 and FY28? (Heer Gogri)
• Answer: Shotgun should contribute ~10% of overall top line by end of FY27. EBITDA margin guidance is 5-6% for the year. Gross margin for Shotgun is ~70%. (Gaurav Sekhri)

Q1 Seasonality and Growth Sustainability

• Question: Last quarter's guidance was 30% top-line growth; Q1 delivered 22%. Any concerns? (Ranbir Kumar Singh)
• Answer: Q1 is typically a weaker quarter in Alcobev business. Delivering 22% YoY in Q1 is encouraging; the full year should be better. Management optimistic about achieving stronger growth as year progresses. (Gaurav Sekhri)

RTD Demand and Luxury Segment

• Question: Are you seeing RTD demand strengthen from Q1 levels? What about luxury wine demand? (Akshat)
• Answer: Shotgun demand continues to grow; distribution widening is the first priority with inclusion in 20+ states. Repeat ratios healthy. Luxury portfolio robust - Janoon growing north of 30%. Better clarity after H1 ends. (Gaurav Sekhri)

Export Business

• Question: What is current export revenue and growth outlook? (Akshat)
• Answer: Export revenue is ~1.5-2% of net sales. Added 2 new geographies in Q1; RTD exports (canned and Shotgun) commenced. Present in 17 countries, primarily Asia and Europe. Export business is profitable but scale-dependent for meaningful contribution. (Gaurav Sekhri)

Brand Investment and EBITDA Expansion Levers

• Question: What percentage of revenue is allocated to brand building, and what drives margin expansion? (Deepesh Sancheti)
• Answer: Brand spending has been 5-7% of revenue over the last couple of years; guidance remains ~5% this year. EBITDA expansion will come from scale - gross margins are industry-leading at 79-80%. As both RTD and bottles business scale, EBITDA will expand toward FY2030 guidance. (Gaurav Sekhri)

Hospitality and ₹500 Crore Revenue Ambition

• Question: What contribution is expected from hospitality in the ₹500 crore revenue plan? (Deepesh Sancheti)
• Answer: Hospitality is part of the ₹500 crore forecast but is slightly delayed. Capital expenditure heavy; priority is core wine business and fast-tracking RTD. The ₹500 crore target is achievable even without hospitality from core business, RTD, or possible third element. (Gaurav Sekhri)

Grape Sourcing and Margin Resilience

• Question: With grape prices almost doubling, how sustainable is margin resilience given captive sourcing? (Deepesh Sancheti)
• Answer: Approximately one-third of grape requirements from own vineyards, one-third from contract farming, balance from spot purchases. This hedge from business inception has helped manage gross margins. Primary motivation for own farming is wine quality, not just cost. (Gaurav Sekhri)

CSD Channel Outlook

• Question: What growth and profitability are expected from CSD sales? (DVM Teja)
• Answer: Expecting to maintain ~20%+ growth trajectory achieved in Q1 with net-net breakeven this financial year. (Gaurav Sekhri)

Regional Revenue Mix

• Question: Which regions are top contributors to revenue? (Unidentified Participant)
• Answer: North accounts for ~23%, South ~30%, West ~25%, Defense ~8%, East ~11%, Exports ~2%. HORECA contributes ~35% of net sales, retail ~65%. Online contribution remains minimal due to limited state-level availability. (Gaurav Sekhri)

Shotgun Repeat Purchases and New Market Performance

• Question: How are repeat purchases measuring in existing vs. new outlets? (Unidentified Participant)
• Answer: Repeat purchase ratio is 55-60% for the last 2-3 quarters, healthy for a product just one year old. The 6,000 new touch points are outlets with minimal prior wine sales where Shotgun makes sense. Repeat ratios in tier 2/3 markets very healthy. (Gaurav Sekhri, Hemant Parora)

FTA Impact on Business

• Question: What will be the effect of FTA on the business? (Akshat)
• Answer: Duty reductions have protection for Indian wines - imported wine over $5 retains 150% duty (Australian context), over $2.50 drops to 75% (European context). FTA should help grow the category; Fratelli views as opportunity given quality wines at competitive prices. (Gaurav Sekhri)

Working Capital and Debt Levels

• Question: Will debt levels increase to fund 20% growth? (Unidentified Participant)
• Answer: Total loans ~₹130 crores, ~₹35 crores long-term. Company considering options to bring in liquidity for efficiency; premature to discuss specifics. Debt expected to remain at current levels without meaningful increase. (Gaurav Sekhri)

Competitive Intensity

• Question: One competitor called the mid/low-price segment unreliable due to competitive intensity. Thoughts? (Unidentified Participant)
• Answer: High discounting is mostly prevalent in Maharashtra economy segment where multiple players exist. Fratelli has been conscious of discounts, taking calibrated efforts to maintain margins. Company is okay letting go of sales where competitors offer very high schemes. (Gaurav Sekhri)

Shotgun Margins and Pricing

• Question: What are the gross margins for RTD? (Ranbir Kumar Singh)
• Answer: RTD gross margin is approximately 70%; overall company gross margin is consistently around 78-80%, with product mix changes having some impact. (Gaurav Sekhri)

Key Takeaway

Fratelli Vineyards delivered a resilient Q1 FY27 with revenue growing 22% YoY to ₹46 crores, driven by 8% wine growth and RTD more than doubling, while achieving positive EBITDA of ~₹1 crore (vs. -₹2.3 crores loss last year) despite temporary regulatory headwinds in Delhi and UP. Shotgun sold ~50,000 cases, expanded to 22 states with 6,000+ new touch points, and tracked toward 200,000+ cases ambition for FY27; management guides to ~10% of top line from Shotgun and 5-6% EBITDA margins for FY27. Premium positioning remains strong with premium-and-above at 71% of bottle revenue and Janoon growing >36%, while international recognition (5 wines at 90+ points, Decanter) elevates brand credibility. Management remains on track toward net-net breakeven this fiscal and Vision 2030 (₹500 crore revenue) achievable even without delayed hospitality rollout. Watch points include competitive discounting in Maharashtra, grape price inflation, working capital-driven finance costs (₹130 crore debt), and FTA-related duty changes viewed as a category expansion opportunity.