According to sources, Sula will soon rake in about Rs 140 Cr as refund, based on its VAT contribution during the 3 previous years- 2020-2021 to 2022-23; it will be about 60% of what is expected to be refunded to the whole industry. It is based on 80% of VAT submitted at 20% and can be used for any purpose, though it is expected to help the expansion and improve the competitiveness of the industry.

The scheme was expected to continue for 5 years but according to a filing by Sula in the Stock Exchange, it has been increased to 8 years. A rider has been added that the refund for each unit will be capped by Rs. 20 Cr each year. It is not expected to cause problems for any wineries including Sula at least for the next couple of years as it runs 4 wineries in the State, 3 of which qualify for this rebate.

The shares of Sula which had recently seen an unexpected drop in the share value of around 7% due to one of the early investor completely offloading its shares in the open market, have not reacted much due to this announcement as the revival of scheme had already been in the pipeline, though it will now add to the cash inflow soon; the share had already jumped up in the stock market when the scheme was announced on 4 January 2024.

The shares had jumped from Rs. 498 to Rs. 662 in a matter of a couple of days when the report about the imminent re-introduction of the Scheme had first appeared on 5 January, 2024 and was an unexpected gift to producers and the investors in Sula which became a public company in December 2022 with an IPO at Rs. 357.

Wine sold in Maharashtra has a 20 percent value-added tax (VAT) levied. Under the Wine Industrial Promotion Scheme, 80 percent of this VAT is returned to the producer at the end of the year.

Analysts have assigned a 12-month price target of Rs 826, implying an upside of 48 percent from the last close of Rs 558 yesterday.

The refund is expected to give a financial boost to all the small and medium sized producers in Maharashtra as a majority of them sell a major chunk (if not 100%) in Maharashtra and are currently overstretched financially due to suspension of the WIPS.

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Subhash Arora