Sula Vineyards Q4 FY26: Revenue Growth Returns, But Margins Stay Under Pressure

/n# Sula Vineyards Q4 FY26: Revenue Growth Returns, But Margins Stay Under Pressure/n/nSula Vineyards ended Q4 FY26 on a better note operationally, with revenue growth returning after a choppy year in its core wine business. Revenue from operations rose 7% year on year to 142.6 crore. The improvement came from a mix of steady Own Brands growth and another strong quarter in Wine Tourism. However, profitability did not keep pace. Gross profit declined 3% year on year to 100.8 crore and operating EBITDA was marginally lower at 27.8 crore. PAT fell to 8.6 crore, reflecting both operating pressures and a tax-related base effect in the prior year./n/nFor the full year FY26, the picture was more muted. Revenue from operations declined to 596.2 crore versus 619.4 crore in FY25. Management repeatedly emphasized that FY25 included a one-time WIPS unwinding benefit of 10.4 crore, and that the FY26 decline looks less severe on a normalized basis. Still, margins compressed meaningfully. FY26 gross margin dropped to 65.3% from 71.2% and operating EBITDA margin fell to 17.4% from 24.1%. The year highlighted the company’s sensitivity to grape economics, route-to-market mechanics, and state-level disruptions, even as the Wine Tourism engine continued to scale./n/n## Q4 scorecard: growth is back, but costs are sticky/n/nQ4 FY26 was positioned by management as a clear improvement in business momentum. Own Brands revenue grew 5% year on year to 115.3 crore, while Wine Tourism revenue grew 18% to 23.9 crore. The company also noted that it recorded monthly Own Brands and Wine Tourism growth for four straight months, the first such stretch in nearly two years./n/nThe quarter’s weakness was gross margin. Gross margin fell by 745 basis points year on year to 70.7%. Management attributed this to two specific factors. First, blended grape costs rose because the company shifted the procurement mix towards wine grapes versus table grapes as part of an effort to conserve working capital and reduce excess wine inventory. Second, Q4 FY25 included a one-off gain of around 3 crore due to a Karnataka inventory pricing catch-up, which inflated the base. Despite this, operating costs were reduced by about 3% year on year, helping hold EBITDA in absolute terms near last year’s level./n/n| Metric | Q4 FY26 | Q4 FY25 | YoY change |/n|---|---:|---:|---:|/n| Revenue from operations (crore) | 142.6 | 133.1 | 7% |/n| Gross profit (crore) | 100.8 | 104.0 | -3% |/n| Gross margin | 70.7% | 78.2% | -745 bps |/n| Operating EBITDA (crore) | 27.8 | 28.5 | -2% |/n| EBITDA margin | 19.5% | 21.4% | -192 bps |/n| PAT (crore) | 8.6 | 13.0 | -34% |/n/n## Premiumization remains the operating lever in wines/n/nWithin Own Brands, the portfolio mix continued to shift towards higher-end labels. Elite and Premium revenue in Q4 FY26 was 91.6 crore, up 10.6% year on year. Economy and Popular revenue was 23.7 crore, down 11.7%. This moved the mix to 79% Elite and Premium versus 75% in Q4 FY25./n/nManagement highlighted The Source and RĀSĀ as key contributors. On the earnings call, the CEO stated that The Source grew over 35% in Q4 and over 20% for FY26, and increased its contribution to Own Brands by around 250 basis points to over 10% for the year. The company also launched The Source Grenache Red, adding to the range that management described as now having eight labels with a mix of red, white, rose, and bubbles./n/nA practical implication of this strategy is visible in capacity planning. Management said production of four recent launches will be increased by around 40% in FY27 because the company sold out of almost all of them in FY26. These new launches accounted for around 6% of Own Brands sales in FY26, suggesting meaningful early traction without the company disclosing product-level revenues./n/n## Wine Tourism: the steadier growth engine keeps expanding/n/nWine Tourism continues to be positioned as Sula’s most consistent growth driver. Q4 FY26 footfalls were over 1,12,300 visitors, up 12% year on year. The company also cited robust room revenue growth of 22% year on year in Q4, supported by the addition of The Haven by Sula, its third resort in Nashik launched in Q3 FY26. Room capacity increased by about 50% to 154 keys./n/nEven with higher room inventory, Q4 average occupancy was 72%. Management added that excluding The Haven, The Source and Beyond operated at over 80% occupancy in Q4, indicating strong underlying demand. For FY26, the company said total footfalls crossed 4 lakh visitors including resorts, and that Wine Tourism revenue crossed 100 crore for the first time in FY26 when including wine sales at the resorts (wine sold at resorts is recorded within Own Brands in the reported P&L)./n/nThe expansion pipeline is becoming more specific. Management outlined several FY27 projects on the call: a new retail bottle shop at Domaine Dindori to be operational in Q1 FY27, an amphitheater expansion project targeted for completion in Q2 to support higher SulaFest capacity, and an indoor 5,000 sq ft event pavilion expected to be operational in Q3 to support weddings and corporate events./n/n## FY26 recap: a tougher year masked by a strong Tourism offset/n/nFor FY26, Own Brands revenue fell to 511.1 crore versus 546.2 crore in FY25. Wine Tourism revenue rose to 72.8 crore versus 60.3 crore. Overall revenue from operations declined to 596.2 crore. Management said the contraction in Own Brands was driven by disruptions in key markets, particularly Karnataka and Telangana, during the first nine months of the year./n/nProfitability declined more sharply than revenue. FY26 operating EBITDA fell to 103.5 crore from 149.1 crore and PAT fell to 25.7 crore from 70.2 crore. The CFO cited two broad drivers for FY26 gross margin pressure: the route-to-market change in sourcing wine for the Wine Tourism business during H1 and an adverse market mix during the first nine months. He clarified that the route-to-market change was optical from a margin perspective and has now been fully annualized, with no impact expected going forward./n/n| Metric | FY26 | FY25 | YoY change |/n|---|---:|---:|---:|/n| Revenue from operations (crore) | 596.2 | 619.4 | -4% |/n| Gross profit (crore) | 389.1 | 441.2 | -12% |/n| Gross margin | 65.3% | 71.2% | -597 bps |/n| Operating EBITDA (crore) | 103.5 | 149.1 | -31% |/n| EBITDA margin | 17.4% | 24.1% | -671 bps |/n| PAT (crore) | 25.7 | 70.2 | -63% |/n/n## Capital allocation and balance sheet: more discipline, more Tourism focus/n/nSula’s commentary reflects a pivot in capital allocation toward Wine Tourism. The CFO stated that capex in FY26 was around 25 crore and that regular capex requirements have reduced significantly compared to the 50 to 60 crore annual levels incurred up to FY25. He also said FY27 capex should remain lower than FY26, excluding the proposed asset purchase agreement with Chandon./n/nThe most prominent inorganic move is the signed agreement to acquire Chandon’s 19-acre estate in Dindori, Nashik. Management said the transaction is underway with regulatory approvals pending and the conveyance deed still to be signed. Details of the planned project are expected only after completion. The CFO indicated the company expects to conclude the acquisition in H1 FY27./n/nOn leverage and liquidity, net debt at FY26 end was about 280 crore, slightly lower than 285 crore last year. Debt to EBITDA was stated to be below 3x on a trailing 12-month basis. Operating cash flow improved materially, with net cash generated from operations rising 70% year on year to 99 crore in FY26, driven mainly by working capital movement./n/nThe company also disclosed the position on WIPS receivables, which remain relevant for cash conversion. WIPS outstanding receivables were 86 crore as of March 2026 versus 72 crore last year. During the year, Sula accrued 48 crore and received a payout of 35 crore, and additionally received 8 crore in April, taking the outstanding to around 81 crore./n/n## What to watch next: margins, CSD expansion, and deal closure/n/nManagement did not provide numeric guidance on revenue or margins. However, it offered a clear near-term margin framework. The CFO said the grape mix impact would continue for the next couple of quarters. The CEO also stated he does not expect the company to return to 30% operating margins anytime soon, even noting that prior peaks were already described as unsustainably high when they were achieved./n/nCommercially, two near-term levers were highlighted. First is the continued national scaling of The Source and RĀSĀ, including institutional listings aimed at strengthening competitiveness ahead of any duty reductions on European wines. Second is the defence channel. Management said it has received preliminary approval from CSD for five additional wine listings, which would take total listings to 14 from 9, with an objective to complete the process before the end of the year and launch the new wines in CSD by Q4./n/nSula also indicated pricing actions. The CEO said the company has restarted price hikes in free-pricing states such as Maharashtra after holding back for about 1.5 years, and expects packaging material cost pressures in FY27. At the same time, he said the company would be cautious with price increases on wines above 1,200 per bottle given potential relative affordability shifts once EU duties come down./n/nThe quarter reinforced a familiar pattern for Sula. When demand stabilizes and premium mix improves, revenue momentum returns quickly. But grape economics and state-level market mechanics can still weigh on margins for extended periods. The next few quarters will likely be judged on how quickly gross margins normalize as grape mix effects pass through, and how efficiently the company converts Wine Tourism scale-up into profit throughput while keeping leverage controlled./n