Summary
Sula Vineyards Limited - Q3 FY26 Earnings Call Summary Monday, February 09, 2026, 2:00 PM IST
Event Participants
Executives 3 Abhishek Kapoor (CFO), Mandar Kapse (Head, IR), Rajeev Samant (Founder & CEO)
Analysts 4 Gunit Singh (CCIPL), Madhur Rathi (Counter Cyclical Investments), Pranav (Rare Enterprises), Siddhant (Goodwill)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹151.0 crores | -13% YoY; Impacted by ₹21 crore tactical destocking in Karnataka; excluding this, revenue was flat. |
| Own Brands Revenue | ₹127.0 crores | -16% YoY; Driven by Karnataka destocking; Elite & Premium share remained steady at 80%. |
| Wine Tourism Revenue | ₹20.5 crores | +34% YoY; Record quarter driven by 17% footfall growth and 50 new room additions. |
| EBITDA | ₹32.0 crores | -40% YoY; Margins contracted 800 bps to ~21% due to adverse state mix and new resort start-up costs. |
| PAT | ₹18.5 crores | -47% YoY; Impacted by lower operating profit and a ₹1.7 crore impairment on York brands. |
| Net Debt | ₹319 crores | -₹36 crores QoQ; Debt reduction driven by lower capex and ₹24 crore WIPS subsidy release. |
| Operating Cash Flow | Positive | Supported by working capital optimization and reduced inventory levels in Karnataka. |
Geographic & Segment Commentary
- Maharashtra: The largest market returned to consistent single-digit growth after a sluggish period. Management noted demand recovery is now firm across the state.
- Karnataka: Revenue declined by ₹21 crores due to a conscious tactical decision to destock channel inventory. Demand remains subdued, but management believes stocks are now “right-sized” for FY27.
- Telangana: Returned to double-digit growth following the conclusion of the license renewal process. No further route-to-market disruptions are expected for the next two years.
- Wine Tourism: Achieved record single-day revenue during Christmas 2025 and Republic Day 2026. Capacity increased 50% YoY to 154 keys with the early launch of “The Haven” resort.
Company-Specific & Strategic Commentary
- The Source Portfolio: This premium range grew 23% in 9M FY26, increasing its share within Own Brands to 11% (up from 8.5%). It is a primary focus for institutional listings to counter future import competition.
- FTA Strategy: Management is preparing for the India-EU FTA (75% duty floor on wines above EUR 2.50 CIF). 95% of Sula’s portfolio is priced below the expected ₹1,700 retail threshold for these imports.
- CSD Channel: Sales to Canteen Stores Department (CSD) grew 40% YoY in 9M FY26, supported by new wine listings and expanded reach within the defense personnel segment.
- Capex Shift: Future capex (₹20-25 crores annually) will be primarily allocated to Wine Tourism, with a target to increase room inventory by another 50% over the next two years.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Own Brand Growth | Return to growth Q4 FY26 | Based on improved demand in Maharashtra/Telangana and end of destocking. |
| Capex | ₹20 - 25 crores (FY26/27) | Significant reduction from ₹60 crores in FY25; bulk of major investments are completed. |
| Margins | Gradual reversion to normal | Expected recovery as geographic mix (Karnataka) stabilizes and resort leverage improves. |
| Import Duty Impact | Minimal impact for 12 months | First 75% duty reduction expected in early 2027; long-term phase-in over 7-10 years. |
Risks & Constraints
| Risk | Context |
|---|---|
| Domestic Competition | Extreme discounting (e.g., Buy 1 Get 2) by smaller domestic players in the economy segment is pressuring market share in lower-priced wines. |
| Import Headwinds | The India-EU FTA reduces protection for wines priced above ₹1,700; Sula may face competition for its top-tier “Rasa” labels. |
| Regulatory/Subsidy | WIPS (VAT refund) inflows in Maharashtra have slowed to a “trickle” due to state government fund constraints, impacting cash flow timing. |
| Raw Material | 2026 grape harvest is expected to be lower due to extended monsoons, though Sula is protected by high bulk wine inventories. |
Q&A Highlights
FTA & Pricing
- Question: How will a EUR 2.50 wine retail at ₹1,700 in Maharashtra? (Siddhant)
- Answer: The buildup includes 75% customs duty, 12-13% distributor margin, 20% VAT, and significant “scheme” costs where retailers often require 1 free bottle for every 3 purchased (Rajeev Samant).
Competition Strategy
- Question: Will you re-enter wine imports to compete? (Gunit Singh)
- Answer: We plan to beef up our import portfolio by the time FTA duties drop to satisfy market demand using our dominant distribution network, but we will be cautious as the segment is currently fragmented and low-margin (Rajeev Samant).
Inventory & Destocking
- Question: Why the sudden destocking in Karnataka? (Analyst)
- Answer: Demand was subdued all year; we took the hard call to right-size the channel to preserve working capital. We do not see further material destocking elsewhere (Abhishek Kapoor).
Product Development
- Question: Why not launch a ₹10,000+ wine to build brand prestige? (Pranav)
- Answer: While prestige helps, volume at that price is negligible. Our focus remains on high-quality wines between ₹1,100 and ₹1,500 that the consumer can actually afford (Rajeev Samant).
Key Takeaway
Sula Vineyards reported a difficult Q3 FY26, with revenue declining 13% YoY to ₹151 crores, primarily due to a strategic ₹21 crore destocking exercise in Karnataka. Despite this, the Wine Tourism segment surged 34%, reaching 11% of total revenue, and “The Source” premium range continued its 20%+ growth trajectory. Strategically, the company is pivoting its capex toward tourism and premiumization to insulate its core portfolio from the impending India-EU FTA, noting that 95% of its sales remain priced below the expected entry point for cheaper European imports. Management expressed high confidence that performance bottomed out this quarter, supported by a recovery in Maharashtra and Telangana. Looking ahead, Sula aims to leverage its dominant distribution and 154-key resort capacity to drive a return to growth in Q4, while maintaining a lean capex profile of ₹20-25 crores annually.
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