India’s biggest winemaker, Sula Vineyards, is heading to the stock market, betting on diversifying the taste buds of a burgeoning urban middle class in a country that has long favored hard liquor.
Wine accounts for less than one percent of India’s massive alcohol market, with spirits being the drink of choice in the country of 1.4 billion people.
On average, Indians drink just a few spoonfuls of wine a year, but producers hope the country will replicate the wine boom in China when its economy took off in the 1980s.
Still, experts warn their rosé ambitions are tempered by uncertainties, including the impact of climate change on viticulture and an Australian trade deal lowering import tariffs.
“The time for wine has come,” insists Sula founder and CEO Rajeev Samant.
When the Stanford University graduate returned from California, he first tried growing roses and mangoes on family land near Nashik, an ancient holy city about 160 kilometers (100 miles) from the financial center from Mumbai.
“Where Sula is today was just grassland. There were leopards and snakes. There was no electricity, there was no phone line,” as if it was a century earlier, Samant told AFP.
“I saw beauty here, there was something about this place that really struck me.”
India is one of the largest grape producers in the world and Nashik is one of its key regions, but back then the vines were all table grapes for dining and raisins, rather than grapes. wine grapes.
Samant was inspired by his visits to California’s Napa Valley wine country.
“Why not try to make a decent, drinkable wine here in India, proudly made in India?” he was thinking. “And that’s what I decided to do.”
Named after Samant’s mother, Sulabha, Sula planted its first vines in 1996, later building a sprawling resort and helping cultivate a new reputation for Nashik as India’s wine capital.
Applications for shares in its IPO will open next week, it said on Wednesday, with its owners selling about a third of the company for up to 9.6 billion rupees ($116 million). dollars), valuing it at around $350 million.
According to Ajit Balgi, founder of Mumbai-based wine and spirits consultancy The Happy High, more expensive Indian wines are becoming comparable to their international peers in terms of quality, although they have remained “Indian-style” in terms of of flavor.
“They won’t taste like an Australian or French wine,” he said. “India is too close to the equator, so our grapes we choose are the ripest.”
New drinkers tend to have a sweet tooth and are drawn to “jammier” wines, he added. “Most begin their association with wine with sangria.”
Wine consumption in India rose from negligible levels in 1995, while women drinking in public became more acceptable as more entered the workforce, but volumes were still only 20 million liters last year, according to the International Organization of Vine and Wine.
Mumbai businessman Parimal Nayak is a fan and visited Sula Vineyard with his family to celebrate his 44th birthday.
“The wines of Sula have improved a lot (…) and the atmosphere here is good,” he told AFP. “I’m proud of it.”
But the biggest barrier to expansion was cost, Balgi said.
Wine is often taxed at similar levels to spirits in many Indian states, despite having a much lower alcohol content.
“The price of a basic Indian wine is comparable to a full bottle of basic rum or whiskey,” he said. “There is not much wine consumption in India because the masses cannot afford it.”
Sula recorded revenue of 4.5 billion rupees and net profit of 521 million rupees in the last financial year, and recorded average annual revenue growth of more than 13% in the decade to March 2022.
Samant, 55, plans to sell about 5% of his 27% stake in the company.
But several recent Indian tech IPOs have failed. Payments firm Paytm has lost three-quarters of its value since going public a year ago, and analysts say many companies are overvalued.
Former wine pioneer Indage Vintners pulled out of the list in 2011 after debt and cash flow problems.
Sula could face growing competition from foreign wine, which currently accounts for 17% of the Indian market.
A recent trade pact with its largest supplier, Australia, will reduce import duties on certain wines by 150%.
Sula, meanwhile, warned in his IPO prospectus of the risk of “adverse weather conditions” affecting grape quality.
Farmers in Nashik were already reporting floods and droughts nearly a decade ago, said Prutha Vaze, climate program manager at the Mumbai-based World Resources Institute India.
Higher average temperatures also accelerate the ripening of grapes, lower acidity and increase sugars, which increase alcohol levels in wine. These changes impact the delicate balance of flavors in a wine, experts say.
If producers don’t adapt to climate change, Vaze said, “there could be a day when we bite down on the last piece of chocolate or drink the last glass of wine.”
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