Verlinvest buys 15% stake in Sula maker for $15 mn

Verlinvest buys 15% stake in Sula maker for $15 mn

Mumbai: Verlinvest SA, a Belgian family owned investment holding company with €250 million (around Rs1,520 crore) under management, has purchased a 15% stake in India’s largest wine maker Nashik Vintners Pvt. Ltd (NVPL), known for its Sula brand, for $15 million (around Rs70 crore), said a person familiar with the development.

Rajeev Samant, founder and chief executive officer of Sula Vineyards, confirmed on Thursday that the investment was “significant" by Verlinvest, adding that GEM India Advisors (GIA), among Sula’s earliest investors, sold a part of its holding in the company to the new investor.

“The Samant family continues to be the largest shareholder in Sula and did not divest any shares as part of the transaction," he said in an email.

Samant declined to give details of the shareholding pattern.

The third round of private equity investment values the privately held NVPL, which sells wine brands Sula and Samara, at $100 million, nearly 10 times what it was pegged at when GIA purchased a 35% stake for $3.5m in 2004.

The capital raised will primarily be used to boost sales and marketing efforts, and constructing a new ecologically friendly, state-of-the-art winery with a capacity of four million litres in Maharashtra. “Sula aims to engage in sustainable agriculture in the Nashik region and to support the local rural economy," Samant said.

NVPL needs capital to expand capacity to capture the market lost by rival Indage Vintners Ltd, currently engaged in a corporate debt restructuring programme, said Alok Chandra, founder of Gryphon Brands Inc., a Bangalore-based wine consultancy.

Wine making has high fixed costs and companies need Rs5-10 crore to attain scale and build a winery, apart from marketing costs, Chandra said.

Wine companies need to keep investing in distribution and advertising to create a national brand, said an analyst from a domestic brokerage on condition of anonymity.

Verlinvest—an investor in Anheuser-Busch, which makes Budweiser and Bud Light beer, and French liquor maker Rémy Cointreau—agreed to purchase the NVPL stake on Wednesday, said the person cited above.

Everstone Capital, which holds a 10% stake in the company, was the exclusive adviser to the transaction.

NVPL’s subsidiary Sula Vineyards, which owns the company’s vineyards, began distributing Rémy Cointreau’s brands this year. Verlinvest had earlier invested in water brand Glacéau, a stake it sold to Coca-Cola Inc. in 2007.

Mint had reported on 25 February that Sula’s parent was seeking private equity investments through the issue of new shares to expand its capacity in second-tier cities.

The Indian wine market, expected to grow at 30% every year, is estimated at Rs500 crore.

The industry, which had contracted in FY10 as Indians spent less following an economic slump, is expected to report sales of 1.5 million cases in the year to March 2011, Gryphon’s Chandra said.

Unorganized companies have a 50% share of the Indian wine market, with those in the organized sector having a 30% share and the remaining 20% being met through imports, according to Chandra.