💰 Financial Performance

Revenue Growth by Segment

In H1 FY26, Own Brands revenue was INR 226.4 Cr (down 6.4% YoY), Wine Tourism grew to INR 26.9 Cr (up 14.5% YoY), and Other segments including imported brands reached INR 4.6 Cr (up 10.1% YoY). Total revenue from operations for H1 FY26 was INR 258.0 Cr, a decline of 4.3% YoY from INR 269.7 Cr.

Geographic Revenue Split

Maharashtra, Karnataka, Telangana, New Delhi, and Goa collectively contribute over 75% of total revenue. Maharashtra is the largest market, while Telangana is the third largest. Sula is expanding in non-core markets like Haryana, Uttar Pradesh, Rajasthan, and West Bengal to reduce concentration risk.

Profitability Margins

Operating margins moderated significantly to 18.2% in H1 FY26 from 26.7% in H1 FY25. Gross margins fell to 66.4% in H1 FY26 from 74.9% YoY, impacted by a 150 bps hit from high-cost liquid inventory carryover and a 400-500 bps increase in COGS due to third-party sourcing for wine tourism.

EBITDA Margin

Operating EBITDA margin was 17.0% in H1 FY26, down 809 bps from 25.1% in H1 FY25. Operating EBITDA absolute value fell 35.2% YoY to INR 43.8 Cr. The decline was driven by higher selling and distribution expenses and a shift in product mix, partially offset by an 8% reduction in operating costs through disciplined management.

Capital Expenditure

Sula incurred INR 78 Cr in capex during FY25 for capacity expansion and renewable energy. Planned annual capex for FY26-FY28 is INR 30-35 Cr, primarily for maintenance, sustainability, and expanding wine tourism facilities like the Haven by Sula resort.

Credit Rating & Borrowing

ICRA and CRISIL maintain ratings with a stable outlook. Interest coverage ratio moderated to 5.1 times in FY25 from 6.7 times in FY24. Total debt/OPBDITA rose to 2.6 times as of March 31, 2025, from 2.1 times the previous year due to margin contraction.

⚙️ Operational Drivers

Raw Materials

Grapes are the primary raw material, accounting for the bulk of wine production costs. High-cost grape inventory from the 2024 harvest season impacted gross margins by approximately 150 basis points as it was phased out through H1 FY26.

Import Sources

Grapes are sourced domestically from over 2,800 acres of vineyards located in Maharashtra (Nashik) and Karnataka. The company also imports international wine brands for its trading business, which accounts for approximately 2% of revenue.

Key Suppliers

Sula sources grapes through a network of contract farmers across 2,800 acres. It also recently transitioned to third-party sourcing for its wine tourism food and beverage operations to focus on core wine production.

Capacity Expansion

Current production capacity is 18.2 million liters (16.5m in Nashik, 1.7m in Karnataka). Sula is expanding its tank capacity to 19.2 million liters by the end of FY26 to support long-term volume growth.

Raw Material Costs

Cost of Goods Sold (COGS) rose 34.7% YoY in H1 FY26 to INR 69.2 Cr. This increase was driven by the transition to third-party sourcing for hospitality and the utilization of expensive grape stock from the previous harvest.

Manufacturing Efficiency

The company operates six manufacturing units (four in Nashik, two in Karnataka). Efficiency is being targeted through a 15.9 million liter production base that is currently being scaled to 19.2 million liters to improve operating leverage.

Logistics & Distribution

Sula utilizes an extensive network of 50 distributors and has the largest wine distribution network in India. Selling and distribution expenses increased in H1 FY26 as the company invested in expanding its footprint in non-core states like Telangana and Madhya Pradesh.

📈 Strategic Growth

Expected Growth Rate

11%

Growth Strategy

Growth will be driven by premiumization (Elite & Premium brands share at 78%), expanding the CSD segment (sales doubled YoY in Q2 FY26), and increasing wine tourism capacity by adding 20 rooms at Haven by Sula. The company is also re-entering the imported wine distribution business to leverage its existing network.

Products & Services

Sula sells 60+ labels of wine across Elite, Premium, and Economy segments. It also provides hospitality services through wine resorts (The Source, Beyond by Sula, Haven by Sula) and wine tasting sessions.

Brand Portfolio

Sula, The Source, Dindori, Beyond Sula, Haven by Sula, and Rasa.

New Products/Services

Expansion of the CSD (Canteen Stores Department) portfolio from 5 to 9 labels contributed to a 100% YoY growth in that segment during Q2 FY26. New hospitality capacity at Haven by Sula is expected to commence in Q4 FY26.

Market Expansion

Targeting double-digit growth in states like Haryana, Uttar Pradesh, and Rajasthan. Sula is also focusing on increasing its presence in Madhya Pradesh and Telangana to capture emerging wine consumption trends.

Market Share & Ranking

Sula is the market leader in the Indian wine industry with a dominant market share of over 50%.

Strategic Alliances

Sula acquired a 100% shareholding in N D Wines Private Limited in Q1 FY25 to strengthen its manufacturing footprint in the Nashik region.

🌍 External Factors

Industry Trends

The industry is shifting toward premiumization and wine tourism. While the overall market faces regulatory hurdles, Sula is positioning itself as a lifestyle brand rather than just a liquor producer to capitalize on evolving societal attitudes.

Competitive Landscape

Sula competes with other domestic wineries and international imports. Despite lower S&D spend than some competitors, Sula continues to gain market share in key corporation markets.

Competitive Moat

Sula's moat is built on its 50%+ market share, a vast distribution network of 50+ distributors, and high entry barriers created by complex state-specific regulations and advertising bans that favor established incumbents.

Macro Economic Sensitivity

Demand is sensitive to urban discretionary spending and inflationary pressures, which caused a moderation in revenue growth to 5% in early FY25.

Consumer Behavior

There is an increasing trend toward wine tourism and premium wine consumption in urban centers, which Sula captures through its resorts and 'The Source' brand line.

Geopolitical Risks

Trade barriers and import duties on international wines favor Sula's domestic production, but changes in state-level policies act as internal 'geopolitical' risks within India.

⚖️ Regulatory & Governance

Industry Regulations

The industry is highly regulated with extensive government controls on advertising, pricing, and distribution. State-specific retail license auctions (e.g., Telangana) can cause temporary total cessation of sales in those regions.

Environmental Compliance

Sula is investing in sustainability capex and renewable energy, though specific ESG compliance costs in INR are not detailed.

Taxation Policy Impact

Sula is subject to state-specific excise duties and VAT. The Wine Industrial Promotion Scheme (WIPS) provides a VAT refund in Maharashtra, with INR 20 Cr accrued in H1 FY26 and INR 70 Cr currently outstanding.

Legal Contingencies

Sula received a tax assessment order under the Central Sales Tax Act, 1956 for the period 2020-2021 from the Assistant Commissioner of State Tax, Nashik, in April 2025.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the continuation of the WIPS subsidy beyond FY28 and the risk of unfavorable excise policy changes in Maharashtra and Karnataka, which could impact margins by over 500 bps.

Geographic Concentration Risk

High concentration risk with over 75% of revenue coming from just five states/regions: Maharashtra, Karnataka, Telangana, New Delhi, and Goa.

Third Party Dependencies

Increased dependency on third-party sourcing for wine tourism operations (COGS impact of 400-500 bps) and reliance on contract farmers for grape supply.

Technology Obsolescence Risk

Low risk of obsolescence in wine production, but the company is digitizing its distribution and direct-to-consumer sales channels to maintain its competitive edge.

Credit & Counterparty Risk

Receivables from the Telangana Government were overdue but partially recovered in October 2025; timely receipt of WIPS accruals from the Maharashtra government remains a key monitorable for cash flow health.