Analysts have said unequivocally that the stock is not a short-term investment. Those looking for short-term returns should go elsewhere.
As Sula Vineyard, India’s largest winemaker launched on bourses without fanfare, analysts advised only those seeking long-term returns should stay involved, while the others should sell if they receive the allotment.
The stock opened with a 1% rise but quickly fell as supply pressure intensified. As of 11 a.m., the stock was trading at Rs 344.50, down about 4% from its IPO price.
“The management plans to increase awareness and consumption of wine in Tier-1 and Tier-2 cities as consumption of wine in India is less compared to other alcoholic beverages,” he said. “Investors need to hold for long term for gains.”
“Considering the market mood, we advise allotted investors to exit on the listing day and wait and watch for better lower valuations after listing, and if investors wish to add this on the listing day, conservative investors should better wait and watch, while risk-takers can add and keep it only for the long term,” said Prashanth Tapse, Sr VP Research, Mehta Equities.
Sula Vineyards’ initial public offering (IPO) was subscribed to 2.33 times from December 12-14, with every category receiving full subscription, however it fell short of experts’ forecasts. The IPO was completely a share sale by existing shareholders, hence the firm received no revenues from the offering.
Sula Vineyards is India’s largest wine producer and seller, according to Narendra Solanki, Head- Equity Research Anand Rathi Shares & Stock Brokers, and has been a steady market leader in the Indian wine business in terms of sales volume and value.
Sula’s financial performance has been erratic during the previous five years. It declared a net profit of Rs 12.3 crore for the fiscal year ending March 31, 2018. The net profit the next year was Rs 7.2 crore, followed by a loss of Rs 16 crore. The net profit for the fiscal year ended March 2021, which was the Covid-affected year, was Rs 3 crore. The next year, just before the IPO, it soared to Rs 52 crore.
Sula’s financial performance has been erratic during the previous five years. It declared a net profit of Rs 12.3 crore for the fiscal year ending March 31, 2018. The net profit the next year was Rs 7.2 crore, followed by a loss of Rs 16 crore. The net profit for the fiscal year ended March 2021, which was the Covid-affected year, was Rs 3 crore. The next year, just before the IPO, it soared to Rs 52 crore.
Sula Vineyard also has outstanding borrowings of Rs 231.5 crore and only Rs 13 crore in cash and cash equivalents, both of which are cause for worry.
Analysts believe that in the long run, economic opportunities outweigh these worries.
