Disclosure Context

Business Performance Overview

  • Q1 FY27 net revenue increased 3% YoY to INR 121 crore from INR 118 crore in Q1 FY26, marking six consecutive months of positive sales growth.
  • Own Brands business grew 2% YoY, with Elite & Premium portfolio growing 6% and reaching 78% share of Own Brands (310 bps increase YoY).
  • Wine Tourism revenue grew 12% YoY to INR 15.5 crore, contributing approximately 13% to overall revenue.
  • Economy & Popular portfolio faced pressure due to unsustainable discounting by competitors.

Product Portfolio Performance

  • The Source and RASA brands delivered double-digit growth and now account for 16% of Own Brands sales.
  • The Source portfolio expanded with two new wines: The Source Chardonnay and The Source Grenache Red.
  • Sula Merlot and Sula Muscat Blanc grew over 100% YoY (from small base).
  • Sula Shiraz Cabernet recorded high single-digit growth and accounts for nearly 45% of Own Brands revenue.

Regional Market Performance

  • Strong double-digit growth in Telangana (over 50% growth), Haryana, Chandigarh, Exports, and CSD.
  • Karnataka market remained soft due to industry-wide degrowth, though company maintained market share in Elite & Premium segment.
  • Maharashtra showed resilience in Elite & Premium but moderated by softer Economy & Popular performance.

CSD Expansion

  • Received preliminary approval for five additional brand listings in CSD, taking total approved wines to 14 from current 9.
  • Expect to complete listing process by Q3 FY27 and introduce new wines before end of FY27.
  • CSD contributed approximately 4% of revenues in FY26, expected to contribute significantly more in FY27.

Wine Tourism Details

  • Growth driven by 21% increase in room revenues and higher spend per guest from day visitors.
  • Resort occupancy stood at 63% for quarter (over 70% excluding The Haven).
  • B2C wine sales from bottle shops grew 7% to INR 10 crore in Q1.
  • The Haven resort occupancy at 43% in Q1, expected to scale up.

Capital Projects Update

  • Amphitheater expansion at Nashik campus completed in July 2026.
  • New bottle shop at Domaine Dindori set to open in August 2026.
  • New 5,000 sq ft events pavilion at Nashik campus on track for Q3 FY27 completion.
  • Acquired former Chandon estate for INR 20 crore, renamed Domain RASA.
  • Tasting room, bottle shop, and banquet facilities at Domain RASA already operational.
  • Winery operations at Domain RASA to commence in Q4 FY27 during 2027 harvest season.

Financial Performance

  • Gross profit declined 5% YoY despite revenue growth.
  • Gross margin impacted by approximately 150 bps from higher blended grape costs (100% wine grapes vs 80% historically).
  • Additional 200 bps gross margin impact from adverse geographical mix.
  • Operating expenses reduced 3% YoY through cost optimization initiatives.
  • Employee benefit expenses reduced 6% YoY due to organizational optimization and lower ESOP cost.
  • Depreciation increased 12% YoY due to new resort accounting under Ind AS 116.
  • Interest cost declined 4% due to lower average debt levels and cost of borrowings.
  • Net debt stood at INR 319 crore as of June 2026 vs INR 345 crore in June 2025.

Working Capital Update

  • WIPS outstanding receivable stood at INR 88 crore as of June 2026 vs INR 86 crore in March 2026.
  • Accrued INR 9 crore under WIPS in Q1, received payout of INR 8 crore.
  • Received additional INR 10 crore payment in July 2026, reducing outstanding to approximately INR 80 crore.

Outlook and Guidance

  • Higher blended grape cost impact expected to subside in Q4 FY27 and fully normalize from Q1 FY28.
  • Expect table grape prices to decrease meaningfully from harvest 2026 levels due to current climate conditions.
  • Expect to recover to previous EBITDA margin levels before end of FY27.
  • Net debt levels expected to continue trending lower by end of FY27.

Management Changes

  • Rinku More introduced as new CFO, having been with Sula for 8 years.

Q&A Highlights

  • Competition behavior uncertain but table grape prices expected to moderate significantly in harvest 2027.
  • Wine industry has seen low single-digit growth post-COVID, unlike strong growth in white spirits.
  • No current diversification plans into white spirits but exploring new segments.
  • Maharashtra MML policy and Karnataka excise policies specifically target spirits, not wine.
  • Karnataka wine category has seen degrowth industry-wide.
  • Wine Tourism operates on asset-light model with typical 10+ year management contracts.
  • Strong seasonality with Q3 typically contributing ~40% of annual revenue.
  • Domaine Sula facility in Karnataka has tasting room and restaurant but awaiting resort permissions.
  • Expect potential benefits from upcoming Kumbh Mela in Nashik subject to government policies.