Renowned investor Porinju V Veliyath has made a significant move in the stock market, acquiring a substantial stake in Fratelli Vineyards . The investment comes at a time when the company's stock has been experiencing a downward trend, potentially signaling Veliyath's confidence in the company's future prospects.

Investment Details

Porinju Veliyath, known for his value investing approach, has purchased 5 lakh shares of Fratelli Vineyards through bulk deals. The transaction was executed at Rs 109.70 per share, amounting to a total investment of Rs 5.50 crore. This move has caught the attention of market watchers, given the stock's recent performance and the company's financial situation.

Stock Performance

Fratelli Vineyards' stock closed at Rs 109.70 on the BSE, marking a 5% gain from the previous day's closing price of Rs 104.50. However, this uptick comes against a backdrop of significant decline:

• The stock has fallen 72% over the past year
• Year-to-date, it has declined by 67%
• Currently trading below both its 50-day moving average of Rs 136.00 and 200-day moving average of Rs 200.00

Technical indicators suggest the stock may be oversold, with the Relative Strength Index (RSI) near 20 and the Money Flow Index (MFI) around 7.

Financial Performance

Fratelli Vineyards' recent financial results paint a challenging picture:

The company reported a consolidated net loss of Rs 5.80 crore in its latest quarterly results. While this represents an improvement from the Rs 11.00 crore loss in the previous quarter, it's a significant downturn from the Rs 2.70 crore profit reported in the same quarter last year. Revenue saw a sharp 80% decline year-over-year, falling to Rs 29.00 crore from Rs 144.20 crore.

Investor Profile

Porinju Veliyath's investment portfolio now includes 11 publicly held stocks, with a total worth exceeding Rs 222.60 crore. His decision to invest in Fratelli Vineyards adds a new dimension to his diverse holdings.

Regulatory Context

The investment coincides with a significant change in the regulatory landscape. The government has introduced a GST rationalization that brings in a 40% tax rate on sin goods, up from the previous 28% rate. This change could have implications for companies in the alcoholic beverage sector, including Fratelli Vineyards.

As the market digests this substantial investment by a prominent investor, all eyes will be on Fratelli Vineyards to see how it navigates its current challenges and capitalizes on potential opportunities in the evolving regulatory environment.

Fratelli Vineyards Limited , one of India's leading premium wine companies, reported a 16% year-over-year decline in net sales for Q1. Despite the revenue dip, the company saw improvements in gross margins and continued to focus on its premium portfolio and expansion plans.

Financial Performance

The company's premium and above segments contributed over 70% of total sales in Q1, underscoring Fratelli's strength in the high-value space. Gross margins improved by 700 basis points, supported by disciplined cost control and operational efficiency. However, EBITDA margins were softer due to increased investments in new initiatives such as Shotgun, a wine-based ready-to-drink (RTD) product, and other long-term projects.

Expansion and Innovation

Fratelli Vineyards has expanded its winery capacity to 5.40 million liters with a new 47,000 sq ft facility in Akluj, Maharashtra. The company also entered three new international markets, bringing its presence to 12 countries and two duty-free zones in Delhi and Mumbai. On the domestic front, Fratelli established operations in Chhattisgarh, reaching a total of 29 states and union territories.

In February, the company launched Shotgun, targeting presence across 15 states by the end of the fiscal year. Within three months of its launch, Shotgun secured a 5% market share in tracked states and is now present in nine domestic markets.

Future Outlook

Gaurav Sekhri, Chairman and Managing Director of Fratelli Vineyards, stated, "We remain committed to unlock India's untapped potential of wine and increasing TAM (Total Addressable Market)." The company expects 15-20% top-line growth for the fiscal year and aims to improve EBITDA margins beyond 10%.

Fratelli is also planning to invest in the hospitality sector, with plans to spend approximately Rs.65.00-75.00 crores on a 40-key property in Maharashtra. Additionally, the company is considering setting up its own winery in Karnataka.

Market Challenges and Opportunities

The company faced a temporary disruption in the Maharashtra market due to excise duty changes on spirits. However, management noted that the UK-India Free Trade Agreement, which came into effect this quarter, is not expected to have any negative impact on the sale of Indian wines.

Fratelli Vineyards currently commands roughly one-third share of the Indian wine market, which is expected to grow 15-20% annually for the next 3-4 years. The company remains focused on expanding its premium portfolio, strengthening its hospitality vertical, and widening its presence across markets.

Sustainability Initiatives

In line with its sustainability commitment, Fratelli has installed 520 kW of solar capacity, meeting 50% of its electricity needs and generating annual savings of approximately Rs.50.00 lakhs.

As Fratelli Vineyards navigates the challenges and opportunities in the Indian wine market, the company continues to focus on innovation, expansion, and operational efficiency to drive long-term growth and profitability.