FratelliVineyard — Q4 FY25 earnings call

Call held 30 May 2025

Management summary

Fratelli Vineyards reported FY25 revenue of INR 182 crores, experiencing a 13% YoY volume decline due to policy changes, elections, and internal supply chain disruptions. Despite EBITDA pressure from strategic investments, gross margins improved by 200 bps to 79%. The company expanded capacity to 5.4 million liters and launched new products like Shotgun, targeting 20-25% top-line growth and EBITDA recovery in FY26, with a revenue guidance of ~INR 250 crores.

Highlights

  • FY25 Revenue stood at INR 182 crores.

  • Premium & Above segment contributed 73% of FY25 revenue.

  • Gross margins improved by 200 basis points YoY, reaching approximately 79%.

  • FY25 volume dropped by 13% YoY.

  • Total installed capacity increased by one-third to 5.4 million liters.

  • FY26 revenue guidance is ~INR 250 crores (excluding Shotgun).

  • Brand investments in FY25 were 8% of top line, up from 6% in the previous year.

  • Current borrowings are ~INR 100 crores with a 10% cost of debt.

Concerns

  • FY25 Degrowth due to Policy Changes & Elections

Key financials

  1. Revenue ₹182 Cr
  2. Volume Growth -13%
  3. Gross Margin 79%
  4. Gross Margin Improvement 200 bps
  5. Brand Investments % of Revenue 8%

What they filed

Q1 FY27: revenue up 22.5%, net profit up 36.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue62 58 32 37 46 −26%64 +10%35 +11%45 +22%
EBITDA1 -0 -11 -3 1 +5%-1 −31%-5 +54%0 +110%
Net profit-3 -3 -11 -6 -3 −14%-9 −215%-7 +36%-4 +37%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Premium & Above Segment
    73% Revenue Contribution

Capital allocation

high confidence
  • Capex ₹15 Cr
    • Vineyard expansion (100 acres, 40 acres planted in Jambhali)
    • Routine expenditures for efficiency improvement (vineyard and winemaking)
    We expect that number for this financial year to be under INR15-odd crores for this financial year. So nothing major. Last year, we were approximately INR40-odd crores that we spent. This year, it should be about INR15 crores. And of course, this is not including the hospitality project. ... Typically, it takes about 3 years for us to get a viable yield out of any new plantation. So this capex is underway in a place called Jambhali in Ahmednagar district, where we have already planted approximately 40 acres. The net planting area we will get in this land is about 100 acres, and we've planted about 40 as of now. And the big chunk is getting done in this financial year.
  • Debt Gross ₹100 Cr Cost 10%
    So right now, we have borrowings of around INR100 crore, and out of which two third is the working capital and one third is the term debt. ... 10%.

Guidance & targets

Volume

  • Wine Industry Growth CAGR Volume · next few years · Medium confidence 15-20%
    We're looking to grow at a CAGR of 15% to 20% year-on-year. And therefore, our outlook remains consistent with that.

    — Aditya Sekhri

Revenue

  • Top Line Growth Revenue · FY26 · High confidence 20-25%
    But what I can tell you is that on the sales of previous year, we are fairly confident that we will achieve this year about 20% to 25% growth.

    — Gaurav Sekhri

  • Revenue Guidance Revenue · FY26 · High confidence INR 250 crores
    So my revenue guidance for this financial year is about INR 250 crores.

    — Gaurav Sekhri

Profitability

  • EBITDA Recovery Profitability · FY26 · Medium confidence Major recovery
    Our priority remains on driving EBITDA recovery while continuing to invest in capacity, brand development and systems that will support long-term sustainable growth.

    — Aditya Sekhri

  • EBITDA Margin Profitability · next 5 years · Medium confidence 10-20%
    With respect to the EBITDA expansion over the next few years, as mentioned in, our outlook as well where we're targeting the roughly 20%, a lot of it will come from the operating leverage as well as you scale up.

    — Aditya Sekhri

Marketing

  • Brand Investments as % of Revenue Marketing · 2028-2030 · Medium confidence 5-6%

    Previously 8% → 5-6%

    Ultimately, as you approach 2028 or 2030, this will ultimately stabilize around 5% to 6%.

    — Aditya Sekhri

Distribution

  • Shotgun State Availability Distribution · end of FY26 · High confidence 10+ states
    And we will be looking to be available in 10-plus states by end of this FY.

    — Aditya Sekhri

Projects

  • Hospitality Project Readiness Projects · 2027 · Medium confidence Ready by 2027
    We are still very much attempting to have the facility ready by and open in 2027.

    — Gaurav Sekhri

What to watch in Q1 FY26

FY26 Revenue Growth

Next quarter (Q1 FY26 results)
Current FY25 revenue INR 182 crores, -13% volume growth
Target 20-25% top line growth, ~INR 250 crores (excluding Shotgun)

Why it matters

This is the primary growth target for the company, indicating recovery from FY25 challenges.

I don't want to speculate so much on the EBITDA margin side. But what I can tell you is that on the sales of previous year, we are fairly confident that we will achieve this year about 20% to 25% growth. On the top line, and this is not including the Shotgun product launch. That will be on top. So my revenue guidance for this financial year is about INR 250 crores.

Risks & concerns

  • FY25 Degrowth due to Policy Changes & Elections

    high

    Policy changes in key states (Karnataka, AP, Delhi) and election-related dry days significantly impacted sales opportunities, leading to a 13% volume drop in FY25.

    Management acknowledged

  • Macroeconomic Slowdown

    medium

    General slowdown in discretionary spending (including alcohol) impacted demand, but the company believes it can achieve growth by expanding its total addressable market and focusing on premium segments.

    Analyst acknowledged

  • EBITDA Pressure from Strategic Investments

    medium

    Elevated investments in category development, infrastructure upgrades, and sustained brand-building efforts (8% of top line in FY25) put pressure on EBITDA, but these are foundational for future growth.

    Management acknowledged

  • Competition from Imported Wines post FTA

    low

    Analyst concern about European wines flooding the market post-FTA; management believes current FTA negotiations include sufficient protection for domestic wines and will not have a significant impact.

    Analyst downplayed

Q&A highlights

8 direct
FY25 Degrowth Factors Direct
Yes. So the degrowth, as I mentioned as well in my opening remarks, are were attributed to a couple of key or marque reasons. One major aspect was on account of the change in policies last year, which happened in key states like Karnataka and Andhra Pradesh, even in Delhi. So these are 3 major markets which were disrupted. Another key aspect was the election factor, which led to a high number of dry days and sales opportunity to which we could not do sales during those dry days. The third factor also which was the contributor was some disruption in our internal supply chain because we were transitioning into a new unit altogether, and that happened largely in Q4.

Explains the reasons behind the significant 13% volume drop in FY25, highlighting external policy changes, elections, and internal operational transitions.

Asked by Smith Gala

FY26 Growth Outlook and Macroeconomic Factors Direct
So the macro factors is that we have refer to is -- generally, we are seeing a slowdown in any kind of discretionary spending, whether it is apparels or it is alcohol, etc. ... And our way of tackling it is as follows. We see wine still at a very small base. And I think there is an opportunity to expand TAM. And our focus in expanding TAM is the launch of product like Shotgun, which will help us, to some extent, mitigate this resistance because it's a whole new product from us. ... And second, in the ultra-premium segment, we are not really seeing any slowdown. And that is giving us this confidence that we can achieve our desired growth rate.

Addresses the broader economic slowdown and outlines the company's strategy (TAM expansion with new products like Shotgun, focus on ultra-premium segment) to achieve its 20-25% growth target despite these headwinds.

Asked by Smith Gala

Impact of EU-India FTA on Domestic Wines Direct
See, at this point of time, the FTA, which is being negotiated, it will be along the lines of what has already been done and achieved with Australia. That FTA provides sufficient protection to domestic wines. I don't see any impact of the FTA at this point of time. In fact, more wines becoming available probably helps in expanding TAM and general preference of people. At the same time, I think we have we are very aware and we are watching it closely. But the way the FTA provisions are today, we feel comfortable that it will not have any impact on us.

Clarifies management's view on a significant potential regulatory change, reassuring investors that the FTA is not expected to negatively impact domestic wines due to protective provisions.

Asked by Smith Gala

FY25 EBITDA Pressure and Expense Nature Direct
So broadly, there are two or three categories of expenses, which have adversely impacted EBITDA in this financial year. We -- some are, of course, recurring in nature in the sense that we continue to be very focused on brand building. And we don't wish to slow down on those kind of initiatives because it does expand the total addressable market and recruiting new consumers, etc. Our brand investments in FY '25 went to about 8% of our top line from 6% in the previous year. ... Secondly, in terms of one-off expenses, we have done a lot of work in this financial year to make the company future-ready. We redesigned our planned playbook. We worked on rebranding of our Master Selection range. We have just completed our work on a new bottle and new design for our Gran Cuvée Brut... And of course, Shotgun, which is our new product launch.

Provides a detailed breakdown of the expenses that impacted EBITDA, distinguishing between recurring brand-building investments and one-off strategic initiatives, which helps in forecasting future profitability.

Asked by Amit Mehendale

Shotgun Product Strategy and Market Potential Direct
Yes. So this is Aditya. So Shotgun falls in the RTD segment, as I mentioned. The total market size as of today is roughly about $150 million. ... With respect to Fratelli launching Shotgun, we already have a very, very robust distribution channel across the country. We are available in 25,000 touch points already. In alcobev, potentially, there are 70,000-plus touch points available across the country. And with the launch of Shotgun, we believe we can foray into a lot of these other touch points which would traditionally not be available for wine sales. So that's really the key objective for Shotgun.

Details the company's strategy for its new RTD product, Shotgun, highlighting its target market, the size of the opportunity, and how it leverages existing distribution to reach new consumer segments.

Asked by Amit Mehendale

Capital Allocation (Capex, Debt, Cost of Debt) Direct
We are done with most of our capex that was needed on the winemaking side of things. Some routine expenditures for efficiency improvement, both at the vineyard level as well as winemaking will continue to happen. We expect that number for this financial year to be under INR15-odd crores for this financial year. So nothing major. Last year, we were approximately INR40-odd crores that we spent. ... So right now, we have borrowings of around INR100 crore, and out of which two third is the working capital and one third is the term debt. ... 10%.

Provides clear figures for past and projected capex, current debt levels, and the cost of debt, offering transparency into the company's financial structure and future investment plans.

Asked by Dipesh Sancheti

Strategy to Increase Wine Acceptance in India Direct
How to make wine more approachable, acceptable is the not million but billion-dollar question. And if you have any suggestions, I will welcome it. But for us, the way is to make more people try it, sample it, make wine more approachable. Wine-in-a-can was an idea to make wine more approachable by reducing the formality around drinking wine. With Shotgun, we made it more approachable by getting the right price point, the right kind of packaging, etc. So these are the tools. And of course, sampling and tasting eventually works really well.

Explains the company's multi-pronged approach to expand the wine market in India, focusing on making wine more accessible and less formal through product innovation (TiLT, Shotgun) and direct consumer engagement.

Asked by Dipesh Sancheti

Margin Improvement Drivers and Timeline Direct
So as you rightly said, our gross margins remain extremely robust. In fact, there was an improvement in the last year as well. We're operating at about 79% and we believe that's a good figure which we want to remain consistent with in the years to come as well. With respect to the EBITDA expansion over the next few years, as mentioned in, our outlook as well where we're targeting the roughly 20%, a lot of it will come from the operating leverage as well as you scale up. And this year as we are planning about INR250 crores in terms of our overall revenue. You will see a major recovery with respect to EBITDA on that basis.

Clarifies the company's strategy for EBITDA expansion, emphasizing operating leverage from scaling up and maintaining strong gross margins, providing a roadmap for future profitability.

Asked by Madhur Rathi

2 min read 6 chapters

Detailed narrative

Q4 FY25 Performance and Challenges

Fratelli Vineyards reported FY25 revenue of INR 182 crores, experiencing a 13% year-on-year volume decline. This degrowth was primarily attributed to policy changes in key states like Karnataka, Andhra Pradesh, and Delhi, election-related dry days, and internal supply chain disruptions during a unit transition in Q4. Despite these headwinds, the company's premium and above segment continued to drive revenue, contributing 73% of the total.

Strategic Investments and Innovation

The company focused on strategic execution in FY25, investing in robust systems, category development, and brand building. Brand investments increased to 8% of the top line from 6% in the previous year, contributing to EBITDA pressure. Key innovations included the launch of Shotgun, a ready-to-drink product targeting younger consumers, and strengthening its wine-in-a-can segment (TiLT). The company also upgraded its tech stack and introduced new wine varietals like Pinot Noir and Master Selection Late Harvest.

Capacity Expansion and Vineyard Ecosystem

Fratelli increased its total installed capacity by one-third, reaching 5.4 million liters across its Akluj (Maharashtra) and Bijapur (Karnataka) facilities. The company's integrated model, anchored in 400 acres of owned vineyards and supported by over 1,000 acres under contract farming, ensures quality and supply resilience. A capital expenditure of approximately INR 40 crores was incurred in FY25, with a planned capex of under INR 15 crores for FY26, primarily for vineyard expansion (100 acres, with 40 acres already planted).

Financial Outlook and Margin Management

For FY26, Fratelli projects a top-line growth of 20-25%, targeting a revenue of approximately INR 250 crores (excluding Shotgun). Gross margins remained strong at around 79%, improving by 200 basis points year-on-year. The company anticipates EBITDA recovery in FY26, driven by operating leverage from increased scale and a gradual stabilization of brand investments to 5-6% of top line by 2028-2030.

Market Expansion and Consumer Engagement

Fratelli's wines are available across 25,000 touch points nationwide, with international expansion in markets like the U.K., U.S., Italy, Japan, Dubai, and Australia. The company is actively expanding its presence in Tier 2 and Tier 3 cities and leveraging new products like Shotgun to penetrate new consumption occasions. A new 'Pour Room Bar and Coffee place' in Bangalore, in partnership with Blue Tokai, was launched to engage urban consumers immersively.

Capital Structure and Debt Profile

The company currently has borrowings of approximately INR 100 crores, with two-thirds allocated to working capital and one-third to term debt. The cost of debt stands at 10%, and the company's rating was upgraded to BBB- last year. Management indicated that they are exploring options to potentially reduce the cost of debt further.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Fast Moving Consumer Goods earnings calls