Sula Vineyards Q4 FY26: Demand Returns, Margins Still Caught in the Grape Grinder

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1. At a Glance

Sula’s Q4 recovery is real but fragile. The company posted ₹135 Cr revenue in the quarter, up 7.3% YoY, and management declared “for the first time in nearly 2 years, we recorded monthly Own Brands and Wine Tourism growth for 4 straight months.” The wine tourism business crossed ₹100 Cr in annual revenue—a structural pivot away from volume grind.

Yet FY26 as a whole contracted: ₹556 Cr revenue, down 4% YoY. Profit after tax collapsed 61.2% to ₹26 Cr. The market pays 48.7x earnings here; the peer median sits at 42x. The tension: a company that finally stabilized demand and is spending to capture it, but remains caught in margin compression from high-cost grape inventory procured in earlier harvests.

2. Introduction

Sula Vineyards was India’s category creator for wine, listing at ₹960 Cr in an all-OFS in December 2022. The business is built on three pillars: owned wine brands (87.5% of H1 FY26 revenue), wine tourism (10.5%), and imports (2%). The first two years post-IPO were bruising—urban demand weakened, state excise shocks hit key markets (Telangana’s retail licence expiry tanked sales), and elections disrupted buying calendars.

By Q4 FY26, demand normalization arrived. The company grew revenue sequentially and YoY, extended distribution (targeting 5 new CSD listings to reach 14 total in defence channels), and pushed premiumization—elite and premium wines now account for 79% of the mix, up from 75% in Q3. Management signaled FY27 as the year growth returns to trend.

3. Business Model: WTF Do They Even Do?

Sula operates four owned and two leased wineries across Maharashtra and Karnataka, with a combined installed capacity of 19.2 million litres per year. The company sources 2,800+ acres of contracted vineyards—90% of grape needs—with 2,200+ acres locked under long-term supply contracts (up to 12 years) and built-in price escalations. This sourcing scale exceeds the next two Indian wine producers combined.

The brand portfolio sprawls: 69 labels across SULA (13), RĀSĀ (3), The Source (now 8 labels, the high-margin engine), Dindori (3), York, Mosaic, Dia, Madera (27 SKUs), and imports (17). The price segmentation is intentional—elite (₹1,000–2,100), premium (₹700–950), economy (₹400–700), popular (<₹400)—but the firm has bet hard on premiumization. Elite and premium mix lifted to 79% in Q4, a swing of ~250 bps year-on-year.

Wine tourism anchors the second leg. Three vineyard resorts (The Source at Sula, Beyond by Sula, Haven by Sula—the last added 30 keys in Q3) plus tasting rooms at Domaine Sula, Milestone Cellars, and York pulled in 330,000+ visitors in FY25 (rebounded to >400,000 in FY26). Occupancy >70% in core resorts even as Haven scaled. The tourism segment is no longer a side venture—it’s the growth engine.

4. Financials Overview

Figures are consolidated, in ₹ crore. Latest period is FY26 (March 2026). Result type: Annual.

The story of FY26 is margin destruction. Revenue held flat-ish (a decline masked by tourism), but operating profit fell 30% and net profit cratered 63%. The culprit was multi-layered: higher-cost grape inventory carried forward from 2024 harvest (when the company expected to sell premium volumes), a transition to third-party sourcing for wine tourism that added 400–500 bps to COGS, and a shift in product mix toward lower-priced SKUs (using expensive wine grapes in economy bottles). One-off benefit: ₹20 Cr accrual from the Wine Industrial Promotion Scheme (WIPS) in H1 mitigated further damage.

EBITDA margins compressed to 19% in FY26 from 26% in FY25. Operating margins fell to 20.6% (Q4) from 27.2% (Q1 FY25).

Concall insight (May 2026): Management acknowledged the grape cost shock was cyclical—once cheaper 2025-harvest grapes flow through, margins should recover sequentially. But the firm explicitly stated it will not “return to 30% margins anytime soon.” Cost discipline is tightening: operating expenses fell 3% YoY in Q4 despite revenue growth.

5. Market Expectations & Historical Multiples

This section describes how the market is currently pricing the company and how that compares with its own history and peer group. It is descriptive, not predictive.