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One reader commended us for the good work of reporting without any fear or taking any favours, wishing Indian companies were a little forthcoming with their numbers and didn't obfuscate matters with tall claims and doubtful figures.
But another reader was unhappy with the quality of the contents, reflecting he found it very immature for us to write without checking on the authenticity of the information. It pained him to hamper someone's reputation without knowing the facts accusing us of sensationalism.
Coincidentally neither Sula nor Indage wanted the article to be published.
ET was the first one to come out almost a week after the delWine article. ‘The company is believed to have pumped huge quantities of stocks into the market, in excess of real demand. The company’s fortunes started detonating after November 2008, when it started experiencing difficulties in paying salaries,’ read the article.
Commenting on TV-18, C H Unnikrishnan of Mint, a national business daily said, ‘The promoters have had very overambitious plan of overseas expansion and also diversification into the related areas. According to the insiders, it had gone wrong because no proper consultancy was done before jumping into these expansion plans and none of the investments especially the two acquisitions in Europe, which they did in a span of less than one year of 2007-08 which didn’t really deliver as it was expected. The company has defaulted on salaries, loan repayments and even statutory dues at least for the last ten months.’
There is not doubt that the company took a lead and put India on the world wine map with his MDP bubbly and later Riviera in the domestic market. But this also highlights the cause of the current problems. Mr. Sham Chougule has undoubtedly been an impassioned wine lover. During a chance meeting with him at the Narayangaon winery a few years ago, he spent over 3 hours showing me and my colleague around with pride, although he was getting frantic calls from Mumbai for some advice. He has also written a book or two about wine appreciation, he told us.
But when my colleague asked a simple yet perennially asked question whether there was a truth to the rumours that they were using table grapes in Riviera, Mr. Chougule lost his cool and said,’ how can you say that? Do you know that wine is produced from only wine grapes? And you claim to be wine intelligent? We do not mention in the bottle label but I can tell you we use Pinot Noir in it.’
We could not believe what we were hearing. We had not, and till this day have not heard about Pinot Noir plantation or the feasibility of it in the Maharashtra region. It has been documented even in some wine books that Indage had been using a substantial amount of Thompson Seedless grapes in the MDP, a fact always denied by the company but corroborated by many former employees.
The issue is not what they were using or how they were making their wines; there are no wine laws to speak about in this country. But when Grover and Sula came to the scene, they believed or were made to believe by their international consultants that using wine grapes was the only way going forward to make quality wines. So when Indage was going all out in increasing volumes and pushing them in the market, these two companies were busy establishing a name for themselves by improving quality and using only wine grapes. The quality perception of the market soon overtook Indage and the unsold stocks reflect the problem, at least in part.
Quality, dumping, recession, unwise expansion-whatever the reasons, the fact remains that the company is facing a challenging time and is behind Sula and Grover in actual sales to the consumer in 2009. It is also noteworthy that they are trying to spring back into action and taking corrective measures. Mr. Sham Chougule is also apparently sympathetic to the employees’ salary problems. Ranjit Chougule is very hopeful for an early end to the whole problem as conveyed to delWine. But the most immediate problem is the liquidity and cash crunch.
‘The pledging of almost 98% shares of the Chougule family, denoting 25.42 % of the total shares according to an August analyst report of Bank of America Merrill Lynch, marks a dramatic decline for the firm, which is short of working capital and has mounting debt due to overseas acquisitions. It also faces employee ire because a majority are not getting paid since at least November,’ said the article in Mint last Thursday.
The company has experience and background to tide over the liquidity crunch and surely would be looking at consolidation to stay afloat and get back the top spot snatched away by Sula, at least for the time being. One hopes they are successful, for consumer’s sake.
However, I would be curious to know how our readers who were critical of our article, reacted to the ET and Mint Article which adds, ’According to two company managers, who spoke on condition of anonymity, at least two banks that earlier extended credit to the firm for working capital have blacklisted it due to defaults.’ Mint could not ‘independently verify this with the bankers. The company has a financial liability of Rs 450 crore (Rs. 4.5 billion) to be paid off immediately, said another executive, who is leaving the firm shortly and did not want to be named.”
Subhash Arora |