Jobaaj Stories
Indian wine producer Sula Vineyards was the latest addition to our stock exchanges as the company's stock failed to impress investors with a disappointing first week.
Sula Vineyards is India's largest wine producer as of March 2022. The company was incorporated in 2003 and was the first to produce Sauvignon Blanc and Chenin Blanc in India. It was also the first to open India's first tasting room at a winery in 2005.
The company operates 4 main wine brands: RÄsÄ, The Source, Dindori, and Sula Classics. The company also operates its own wine resorts, bottle shops, and dining facilities. It has 4 own and 2 leased facilities in Maharashtra and Karnataka with the largest distribution network in the counts of wine companies.
It reportedly has 13,000+ retail touchpoints across the country, over 50 distributors, 11 corporations, 14 licensed resellers, 7 company depots, and 3 defense units.
Before the opening of its public issue on 12th December, Sula Vineyards raised Rs 288.10 crores from 22 anchor investors which included marquee investors like Abu Dhabi Investment Authority, Goldman Sachs, New York State Teachers Retirement System, Ashoka India Equity Investment Trust Plc, Segantii India Mauritius, Morgan Stanley, BNP Paribas Arbitrage, and Citigroup Global Markets Mauritius.
The 100% OFS IPO saw a fairly muted response from applicants. QIBs were the most interested in the issue as their portion, which was 50% of the entire Rs 961 crore issue, was subscribed 4.13x times. However, other investors were not nearly as interested in the issue as the HNI and RII portions were subscribed 1.51x and 1.65x times respectively, taking the entire issue to a fair 2.33x times subscription.
Analysts saw a sharp decline in the GMP of the stock prior to its listing. The stock, which was available at a premium of Rs 70-75 per share, was trading at a discount of Rs 10-15 per share. Selloffs in the secondary markets, rich valuations, and muted interest in the issue resulted in lower GMP. A flat to negative listing was anticipated by the analysts.
In line with analysts' expectations, the stock witnessed a significant discount. The stock opened at Rs 361 per share, a premium of 1.1%, and touched a high of Rs 363 a little later. However, sellers quickly took over the stock as it fell.
At the end of its first day, the stock closed at Rs 331.20 per share, down 7.23% at the end of its first day. The second day opened slightly better, but sellers remained dominant on the stock as it fell to close at Rs 310.75 per share, falling a further 6%.
After its first week, the initial investment of Rs 14,994 (42 shares x Rs 357 per share) declined to Rs 13,051(42 shares x Rs 310.75 per share), registering a decline of 12.9%!
According to analysts, the 100% OFS nature of the issue, which allowed the dilution of promoter stake in the company, was a matter of concern. Fresh investors are advised by brokerages to prevent entry on account of further selling pressure while existing investors are suggested to maintain their positions.
Article by Aman Agarwal.
