SmallCap Hunter : Trying to find the dark horses with triggers

Q1 FY25-First Concall

Risk- See, natural calamities when you are in a business which is dependent on agriculture, some of those risks are we are exposed to them. Something we have done recently and we will continue to do more of is that we have recently taken a new parcel of 150 acres of land under active farming which is approximately 200 kilometers away from our winery. Now, what that does is that it slightly derisks us from an agro-climate risk perspective, so those are the initiatives that one can deploy to reduce any risk, which is nature related.

Our revenue guidance for the year though still remains at north of 15%.

Guiding only 15% growth and no EBIDTA guidance bcz we are going to be doing a major capacity expansion as I mentioned earlier as well, which is going to give us a 25% increase in our overall installed capacity over the previous financial year.
Topline and EBIDTA will grow YoY for next 3 Years(Not giving specific guidance for OPM).

Hotel sector will grow so Fratelli will grow as they operate in Premium and super Premium segment.

We are a family driven business that is professionally managed.

While in Q1, the trading business of the listed entity contributed approximately Rs. 100 crore in revenue, this will reduce dramatically in Q2 and will completely shut down in Q3.

In Q1 we delivered revenues of approximately Rs. 45 crore relative to Rs. 46 crore for the same quarter last financial year. This follows challenges in availing permits, owing to the disruption due to the general elections and of course that aspect has been resolved now in Q2. Q1 is also seasonally off quarter, and we are already seeing the other trends as well reverting to the norm.

we are now the second largest brand in the country and about 4 times the size of the number 3.

Capex will go live in By December 2024

No geographical Concentration- I would like to say is that we don’t have a high dependence on any one region. The South, the West and the North regions contribute handsomely of course to our overall topline. And they are all within the range of 25%-30% . And then of course, that is followed by the East region in number 4 . That is the rough split.

Our top markets, which we identify is our big 6-7 and they would be Maharashtra, Karnataka, Delhi, Telangana, West Bengal, and Goa,

we enjoy a strong presence in all segments with a major focus on Premium and Luxury segments. For FY21, we had 70% contribution from the premium and super premium segments, and this has risen to 73% in FY24 on an expanded operating base.

70% plus revenue has been coming from our Premium and Luxury segments now for the last couple of years

Rs. 600 above is what we classify as Premium in our portfolio.

we have come to command 30% market share in our industry today where time is a very powerful moat as mentioned previously as well. There are a few additional moats in the business that I will briefly like to touch upon today. We have imported now and adapted approximately 12 varietals from the best wine growing regions in the world and have successfully cloned them as well. The process of identifying and incorporating new varietals is still ongoing.

As we look to the next level of growth, the benefit we have is that we have over 400 acres of active farming and approximately 1,400 acres overall, which are under cultivation. This along with favorable agroclimatic around our vineyards works in our favor at the moment . These natural moats in business distinguish us and give us a strong lead in terms of operating excellence in business.

In this financial year, we have renovated our Master Selection range and launched it in Q1.

We have also launched Pinot Noir and this adds a much sought after varietal in our premium range. We are also working on a range of launches and renovations in the upcoming quarters, which are all poised to cater to various cohorts of consumers.
We have created exclusive brands, some of these including Svara for the Taj Group of hotels, Ghungroo for the ITC hotels and Amaris from Living Liquidz, which is a leading premium retailer, all of with whom we enjoy very strong relationships. Within select states, we have leading market shares in the HoReCa channel as well. This includes markets of Delhi, West Bengal, Karnataka, and Odisha.
At an overall level, we have derived significant contribution from the HoReCa channel, and this share will continue to grow as of course, new outlets keep opening year-on-year.
Furthermore, there is a major traction consumption across Tier-2 and Tier-3 towns for hospitality and modern retail or what we call MTO brands. As these brands cater to the next set of patrons, we will be ready with our distribution reach. Having an edge in the HoReCa and the MTO channel will allow us to seamlessly extend our strengths into newer markets as these new outlets get inaugurated in new towns and cities.

Wine tourism- Going forward, we are investing to open a 40 key multiuse property which will be spread over 170 acres at Akluj .This will strengthen our brand visibility, enhance B2C selling and add a supplementary profitability stream to our business. We are looking at introducing some new formats to explore in-city opportunities for vineyard tourism as well.
This strategy has five key pointers to it, firstly, being an integrated wine maker, our investments foremost are being channeled into development of vineyard acreages. We are continually introducing and adapting select imported varietals into the country.
in order to support the business of producing and selling a higher value, high quality portfolio of wines, we are continually investing in technology both at the manufacturing end and also across the sales functions.

Yes, ma’am, we are. We operate in Maharashtra. Maharashtra offers a wine promotion scheme and we are beneficiaries of it just like any other winery in Maharashtra
Top three brands in our portfolio would be the two Reds, which is firstly Reds as you probably would know, is the highest contributing segment in our wine business and in the wine industry as well. And therefore, we have two very strong brands in the Red Wine segment, one with Cabernet Sauvignon and the other being Cabernet Franc-Shiraz both contribute roughly 8%-8.5% to our overall business.
So, the whole thing about our portfolio is that we have a lot of hero brands which are contributing between 5%-7% of our topline and that consists of roughly 7 to 8 major brands.

Wine Tourism – We are expecting to build a 40 key property in Phase-1 at our location. We expect our ARRs to be around Rs. 20,000 – Rs. 25,000 per room night. In terms of occupancy rates, I think first maybe up to 3 years, it may be around 40% odd, but after 3 years it will pick up to about 60%-70% is our expectation.

In our CAPEX outlay for the next 2 years, all of it will get committed in this financial year, but some will get spend this year and some in the year after. But we expect to spend about Rs. 30 odd crore in capacity expansion and brand building. We are expecting to spend ~Rs. 5 odd crore in expanding area under cultivation. I mentioned already about Rs. 45 crore – Rs. 50 crore in building the hospitality business . These are some of the broad areas where we are committing our CAPEX.

Right now- more than 85% capacity utilisation
At this point of time, we have roughly Rs. 90 crore of debt in our balance sheet. About Rs. 15 crore is long term debt, and the balance is working capital. We may take an additional Rs. 10 crore – Rs. 15 crore of long-term debt going forward to complete all the CAPEX that we have planned over this year and the next year.

our Value contributes between 20%-25% looking at market specific trends. That has been the trend roughly for the last 3-4 years. Premium as a category, roughly all put together like I said is contributing almost 75%. Like I said, the Super Premium and Luxury is contributing about 15%, Premium is contributing anything between 55%-60%. And Cans, on the other hand contributes roughly 5%, that is our product mix