Fratelli Vineyards to debut on exchanges, aims to become ₹650-cr biz by 2028

Fratelli Vineyards, India’s second-largest wine brand with a 35% share in the domestic market, is set to debut on the stock exchanges this week, months after a share-swap transaction with a listed sister firm.

The company aims to become a ₹650-crore enterprise by 2028.

Gaurav Sekhri, managing director of both Fratelli Wines and Tinna Trade India, which is facilitating the listing through a reverse share swap, spoke exclusively with Mint.

In March this year, BSE-listed Tinna Trade, a farm commodity trader, acquired a 100% stake in Fratelli Wines Pvt Ltd through a share-swap deal.

Wine consumption is growing, albeit at a slow pace, in India, driven by rising discretionary income, Sekhri said, at a time the European wine industry is being seriously challenged by geopolitical tensions.

The reduced wine consumption in Europe has meant that European producers are eager to access the Indian market. “There is currently a glut of wine in Europe, with many vineyards being uprooted and supply chains being disrupted. Additionally, due to global unrest and the ongoing war, there are no wine sales to Russia. So, we think the wine industry in India needs protection, especially amidst ongoing Free Trade Agreement (FTA) negotiations,” he said.

He said that some Indian wines are of far superior quality at the same price points as imported wines. Yet, new imported wines will likely cause a risk to the entire industry as Indian consumers may prefer imported wines over Indian ones due to perceptions of quality. “We need the continuous support of the government, he said.

India’s per capita consumption of wine is still very low, but has changed dramatically from, say, about a decade ago. Then, according to Sekhri, as much as 80% of India’s wine consumption happened out of big cities. Today, that number is around 65%. Consumption is growing in cities like Lucknow, Kanpur, Nagpur, and Vijayawada too, which were earlier not considered conventional wine-drinking pockets.

“Part of the reason is still that wine is not inexpensive. But we see good growth for our business from these markets as well as Delhi, Mumbai, Bengaluru, and states like Andhra Pradesh etc., But even a slight increase in consumption in the seven metros in India is good enough to grow the entire industry,” he said.

The promoter family owns about 57% of the business. It also has partners from Italy, the Secci brothers, Andrea and Alessio, who own a substantial minority stake. The remaining shares are with friends. In the past two years, the company has raised ₹72.6 crore, of which ₹36.4 crore was through a preferential allotment of shares.

In FY24, the company achieved a gross turnover of about ₹247 crore. Of this, 70% of the revenue came from categories like luxury, super-premium, and premium segments. The largest share, premium, contributes the most, at 60%. Its strongest area of the business is the luxury segment (wines priced above ₹2,000) and the ready-to-drink wine in a can space, he said. The business has achieved a 25% growth rate over the past four years, as against the industry average of 15%. Internationally, while it exports to over 10 countries, only 5% of its entire business comes from overseas sales.

Over the past four fiscal years, the company’s gross revenue has nearly doubled, increasing from ₹129.5 crore in FY21 to ₹246.9 crore in FY24. This upward trend began with a significant recovery in FY22, as revenue rose to ₹158.9 crore following the initial impact of the covid-19 pandemic. The momentum continued into FY23 with a substantial 45.7% increase to ₹231.5 crore, driven by favourable market conditions.

The company sells about five lakh cases a year and is in the process of ramping up its capacity to 15 lakh cases. Competitor Sula produces and sells over one crore cases across India and says it has more than 60% share in the super-premium and premium wine business.

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Fratelli has four wineries — which the family owns privately and leases as well from outsiders — in Maharashtra and Karnataka, with a capacity of 4.7 million litres across 300 acres of land and about 860 acres of farm land which is leased. By the end of this calendar year, it will also look to expand this capacity. He said the company is the first in Asia to produce white wine from red grapes (Sangiovese Bianco).

Tinna Trade Limited — which used to trade pulses and grains — was a subsidiary company of Tinna Rubber. Tinna Trade, established in 2009, changed its name to Tinna Viterra Trade Private Limited after Viterra Inc. acquired a 60% stake, but later became a subsidiary of Tinna Rubber & Infrastructure Limited and reverted to Tinna Trade Private Limited in 2013. In 2015, it became a public company, renamed Tinna Trade Limited, and was listed on the Bombay and Calcutta Stock Exchanges after demerging from its holding company in 2019. The company became Fratelli Vineyards after the share swap.

Route to IPO

Sekhri said it became difficult to justify over time why a bean and pulse trading business was to be listed. “We realised that we wanted to list Fratelli Wines and we wanted to go via IPO someday,” he said. For now, it’s a subsidiary of Tinna Trade, but the two companies will merge to become Fratelli Vineyards. The company decided to do a share swap through which Fratelli Wines will become a listed company, and the trading company has been shut down. This quarter will be the last quarter in which the company will be a trading business.

Fratelli Wines first began operations in 2007, with Gaurav’s brother Kapil leading it before passing away in 2020. For the business, 65% comes from sales at liquor vends and the remaining at hotels, restaurants, and bars.

“We feel the wine business is only getting started in India. The country’s demographic dividend will reap for sure, it’s just a matter of time. So, listing also helps brand building and can raise capital with the right terms. Markets are providing us a good opportunity to list right now. This is not a slam dunk business, it’s a business of grind, that’s why we only see two players of scale,” he added.

According to spirits consultancy IWSR, India’s wine market is projected to grow at 10% per annum till 2027. In 2022, India’s consumption by volume of wine increased by a healthy 19%, spirits in general climbed 2%, beer rose by 38%, and albeit on a very small base, ready-to-drink products surged 40%.