Revenue
Margin
Demand
Guidance
Tone
Event Participants
Executives
3 Kapse, Mandar (Head of Investor Relations), Moore, Rinku (Chief Financial Officer), Samant, Rajeev (Managing Director & CEO)
Analysts
5 Aditya (PLSA), Avnish Roy (Nuvama), Ayush (Sotium Securities), Nikhil (SIMPL), Sujeet (Individual Investor)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Net Revenue from Operations | ₹121 crores | +3% YoY (vs ₹118 crores in Q1 FY26); driven by Elite & Premium (+6%) and Wine Tourism (+12%) |
| Own Brands Revenue Growth | +2% YoY | Recovery continuing after 6 consecutive months of positive sales growth; economy & popular segment soft |
| Elite & Premium Portfolio Growth | +6% YoY | Share in own brands at all-time high of 78% (+310 bps YoY); led by The Source and Rasa (combined 16% of own brands) |
| Wine Tourism Revenue | ₹15.5 crores | +12% YoY; contributes ~13% to overall revenue (excl. wine sales); room revenues up 21% |
| Gross Profit Growth | -5% YoY | Impacted by ~150 bps higher blended grape cost (wine grape mix ~100% vs 80% prior) and ~200 bps adverse geographic mix |
| Operating Expenses Growth | -3% YoY | Cost optimization program; employee benefits down 6% YoY (org restructuring, lower ESOP cost) |
| Depreciation Growth | +12% YoY | Reflecting IndAS 116 right-of-use asset for The Haven resort |
| Interest Cost Growth | -4% YoY | Lower average debt levels and cost of borrowings |
| Net Debt | ₹319 crores | Down 7.5% YoY from ₹345 crores; expected to trend lower through FY27 |
| Risk Outstanding Receivables | ₹88 crores | vs ₹86 crores as of March; additional ₹10 crores received in July, reducing to ~₹80 crores |
Geographic & Segment Commentary
- Wine Tourism: Revenue grew 12% YoY to ₹15.5 crores; occupancy at 63% (excl. The Haven at >70%). B2C wine sales at bottle shops up 7% to ₹10 crores. The Haven is scaling from 43% occupancy, expected to improve profitability throughput.
- Elite & Premium Portfolio: Grew 6% YoY, share at all-time high 78% of own brands. The Source and Rasa delivered double-digit growth (combined 16% of own brands); new launches SULA Merlot and Muscat Blanc grew >100% YoY; SULA Shiraz Cabernet posted high single-digit growth on a large base.
- Economy & Popular Portfolio: Continued pressure due to unsustainable competitor discounting; management consciously prioritizing Elite & Premium, leading to moderation in overall own brands growth.
- Karnataka: Entire wine category degrowing; Sula maintaining/increasing share in Elite & Premium but giving up share in Popular. Management expects a turnaround in H2 FY27.
- Maharashtra: Elite & Premium resilient; softer performance in Economy & Popular moderated overall market growth.
- Telangana: Standout market with >50% YoY growth, building on momentum post route-to-market resolution in Dec 2024; momentum expected to continue in Q2.
- Haryana, Chandigarh, CSD, Exports: Strong double-digit growth; CSD will expand from 9 to 14 wine listings once new approvals are operational by Q3 FY27.
Company-Specific & Strategic Commentary
- Premiumization Strategy: Focus on Elite & Premium portfolio; The Source and Rasa distribution expanding beyond core markets (Haryana, Goa, exports). Two new Source variants (Chardonnay, Grenache Red) received excellent market response; both brands combined at all-time high 16% of own brand sales.
- Cost Optimization Program: Operating expenses cut 3% YoY; employee benefits down 6% through organizational optimization and lower ESOP costs. Program continues through FY27, partially offsetting EBITDA margin pressure.
- Wine Tourism Asset-Light Expansion: Third resort The Haven operates on management contract (partners construct, Sula operates); 70 of 150 keys are Sula-owned, no owned construction in last 3-4 years. New projects: amphitheater completed July, bottle shop at Domaine Dindori opening next week, 5,000 sq ft events pavilion on track for Q3 FY27 (festive/wedding season).
- Domaine Rasa Acquisition: Former Chandon Estate acquired for ₹20 crores; tasting room, bottle shop, banquet already operational; winery operations to commence in Q4 FY27 (Harvest 2027). Will be developed as another distinctive wine tourism destination; located 20-minute drive from Nasik Airport.
- CSD Expansion: Preliminary approval for 5 additional brand listings (total 14 wines from 9); listing process expected to complete by Q3 FY27, with sales uplift seen post-launch (CSD contributed ~4% of FY26 revenue, expected to contribute significantly more in FY27).
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| EBITDA Margin | Recovery to last year's levels before end of FY27; surpass thereafter | Grape cost impact subsiding from Q4 FY27 (150 bps drag); cost optimization supporting; management confident |
| Grape Costs | Normalizing from Q1 FY28 (post Harvest 2027) | Table grape prices expected to moderate from ₹35/kg to <₹20/kg; benefits Popular/Economy blends from FY28 |
| Net Debt | Trending lower in FY27 vs FY26 | Balance sheet discipline; expected to moderate finance costs |
| CSD Revenue Contribution | Significant increase in FY27 | 5 new listings to be operational by Q3 FY27; past expansions drove strong acceleration in CSD sales |
| Wine Tourism Occupancy | The Haven scaling to improve profitability | Occupancy at 43% in Q1; revenue growth +12% driven by higher room revenues and day visitor spends |
| Karnataka Market | Turnaround expected in H2 FY27 | Category-wide degrowth; management hoping for recovery but no assurance |
Risks & Constraints
| Risk | Context |
|---|---|
| Karnataka Market Softness | Entire wine category degrowing in a key market; Sula maintaining Elite & Premium share but losing Popular share. Management expects H2 FY27 recovery, but timing uncertain. |
| Competitive Discounting (Economy/Popular) | Unsustainable discounts by competitors pressuring segment; management consciously ceding share here, limiting overall own brands growth (2% in Q1). |
| Raw Material/Grape Cost Volatility | Higher blended grape costs (~150 bps margin impact) due to shift to wine grapes (100% vs 80% prior); expected to weigh for next couple of quarters, subsiding only from Q4 FY27. Table grape prices climate-dependent; expectations of moderation (<₹20/kg) are not guaranteed. |
| Wine Category Growth Stagnation | Industry growth flat/low single-digit for 2-3 years (per IWSR); no white spirits diversification planned currently. Recovery depends on consumption trends; management "quietly hopeful" of bottoming out. |
| Regulatory & Infrastructure Dependencies | CSD listing process (Q3 FY27 target), Karnataka tourism permissions, and Kumbh Mela restrictions (2015 was disappointing) could delay or mute benefits; wine duties unchanged in Maharashtra/Karnataka but beer price cuts and hot weather diverted consumption. |
Q&A Highlights
Raw Material Costs and Margin Outlook
- Question: With cheaper table grapes expected in FY28, will competitors behave rationally given Sula's dominant share in the mass segment? (Avnish Roy, Nuvama)
- Answer: Competitor volume has not been increasing; some players are exiting as the business is unsustainable. Table grape prices are almost certain to moderate (from ₹35/kg to <₹20/kg), but rational behavior cannot be guaranteed. (Rajeev Samant)
- Question: Would gross margin have been better if the grape mix had not shifted to wine grapes? What is the upside in making this shift? (Aditya, PLSA)
- Answer: Yes, a better margin would have resulted. The shift is temporary—the long-term strategic blend is for wines below ₹600 to use almost exclusively table grapes, but some current blends have 60-70% wine grapes. The negative impact will be removed from Q4 FY27. (Rajeev Samant)
Revenue Growth and Diversification Strategy
- Question: Revenue has been flat (~₹600 crore) for last 3-4 years. Is the industry flat? Any plans to diversify into white spirits given its growth? (Avnish Roy, Nuvama)
- Answer: The overall wine industry (domestic and imports) has seen low single-digit growth over the last 2-3 years per IWSR—a consolidation period after the post-COVID spurt. We are hoping the destocking cycle has bottomed out. No white spirit plans currently, but other new segments are being explored with more color in the near future. (Rajeev Samant)
Regulatory and Category Impact
- Question: Other Alcobev companies cite benefits from Maharashtra MML and Karnataka excise policies. Why is Sula not seeing benefits? (Nikhil, SIMPL)
- Answer: These policies are specific to spirits—MML is a purely spirits category, not wine. There is no change in wine duties in Maharashtra or Karnataka. In Karnataka, beer prices have fallen dramatically, and with the very hot summer and delayed monsoon, consumers likely shifted to beer, hurting wine sales. (Rajeev Samant)
Karnataka Market Dynamics
- Question: Q4 showed some improvement, but Q1 is again soft. What's happening in Karnataka? (Nikhil, SIMPL)
- Answer: The entire wine category in Karnataka has degrown; it is not specific to Sula. We have maintained or improved Elite & Premium share but have given up Popular and Economy share. We hope the category will turn around in H2 FY27. (Rajeev Samant)
Wine Tourism Capital Model and CapEx
- Question: What is the capital employed in wine tourism, and what is the typical CapEx per room? (Ayush, Sotium Securities)
- Answer: Wine tourism is not separated on the balance sheet, but it carries better EBITDA margins than the standalone wine business. The model is asset-light—70 of 150 keys are owned (none constructed in last 3-4 years), with resorts like The Haven built by partners on management contracts. We are studying the possibility of constructing on our own; leases typically run 10+ years with standard escalation clauses. (Rajeev Samant, Mandar Kapse)
Seasonality, Business Portfolio, and Wine Tourism Prospects
- Question: Why are Q4 and Q1 always weak? Has Sula taken over any spirits business? (Sujeet, Individual Investor)
- Answer: The industry is highly seasonal—Q3 is the primary quarter (close to 40% of revenue), Q4 second, with Q1 and Q2 far behind. No spirits acquisition; we are completely in wine business with two imported wine brands. (Rajeev Samant, Rinku Moore)
- Question: Is Domaine Rasa just tourism or also production? Any Karnataka tourism expansion and Kumbh Mela impact? (Sujeet, Individual Investor)
- Answer: Domaine Rasa is both—winery operations start in Q4 FY27 (Harvest 2027) and tourism is already welcoming visitors. Karnataka has a tasting room and restaurant but resort permissions have been challenging; recent positive signals from the government. Kumbh Mela (late FY27/FY28) could benefit the entire Nasik region, but we need authorities to ease restrictions (2015 was disappointing). Infrastructure improvements are easing access from Mumbai/Pune. (Rajeev Samant)
Key Takeaway
Sula Vineyards delivered a 3% YoY revenue growth to ₹121 crores in Q1 FY27, continuing recovery momentum (6 consecutive months of positive sales) led by the Elite & Premium portfolio (+6%, record 78% share) and wine tourism (+12% to ₹15.5 crores). Gross profit declined 5% due to a temporary 150 bps grape cost drag from the wine grape-heavy procurement mix and a 200 bps adverse geographic mix from faster growth in lower-margin markets (Telangana +50%, Haryana, CSD, exports), partially offset by a 3% operating cost reduction. Management remains confident of recovering EBITDA margins to last year's levels before FY27-end, with grape costs normalizing from Q4 FY27 and lower table grape prices expected in FY28. Strategic focus continues on premiumization (The Source and Rasa now 16% of own brands), expansion of CSD listings (14 wines by Q3 FY27), and asset-light wine tourism growth (new events pavilion, Domaine Rasa acquisition). Key watchpoints include Karnataka category degrowth, competitive discounting in the economy segment, and execution of the Domaine Rasa winery operations ahead of Harvest 2027.