Sula Vineyards Ltd (NSE: SULA) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Mandar Kapse — Investor Relations Head
Rajeev Samant — Chief Executive Officer
Abhishek Kapoor — Chief Financial Officer
Analysts:
Viresh Sangwan — Analyst
Vinamra Hirawat — Analyst
Naman Shah — Analyst
Alisha Mahawla — Analyst
Siddhant Dand — Analyst
Priyanka Laroiya — Analyst
Yashodhan Nerurkar — Analyst
Aditya Soman — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q3 FY ’25 Earnings Conference Call for Sula Vineyards Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should any assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Mandar Kapse, Head of Investor Relations. Thank you, and over to you, sir.
Mandar Kapse — Investor Relations Head
Thank you. Thank you, Rupujam. Good afternoon, everyone. On behalf of the management team at, I would like to welcome you all to the Q3 FY ’25 earnings call of. I request all of you to please refer to the Q3 press release and investor presentation available on the stock exchange and on the company’s website. Today on this call, we have with us from the management team, Mr Rajeesh Sawan, Founder and CEO, who is joined by our CFO, Mr Abhishek Kapoor. They will take us through the results and-answer your questions. As always, we will kick-off today’s call with Rajiv sharing his thoughts on the operating environment and the business performance. This will be followed by Abhishek taking us through the financial highlights of the quarter, post which we will open the forum for Q&A. Lastly, before we begin, please make sure to check-out the Safe-Harbor statement about the forward-looking statements. With that, I now request Rajiv to commence today’s call.
Rajeev Samant — Chief Executive Officer
Thank you,. Good afternoon, everyone, and thank you all for joining us today for our Q3 FY ’25 earnings conference call. I hope that you’ve all had a chance to review our financial release for Q3, which are available on our website and the exchanges. Coming to our Q3 performance, our own brands business recorded its 11th straight quarter of growth. However, I must admit that growth this quarter was subdued and softer than our own expectations due to a multitude of factors, including a broad-based slowdown in urban consumption especially with the urban markets accounting for more than 90% of our business, we did face a significant impact from this ongoing slowdown, especially in our two key markets of Mumbai and Pune.
Additionally, state elections in our most important state market, Maharashtra with a number of dry days and very strict code of conduct restrictions also had an impact on-sales in our largest state. And in Telangana too, which is now our third-largest state and in fact challenging Karnataka for second-largest status and which has been growing really well, we consciously slowed down our placement in Q3 due to a delay in receivables from state authorities. However, on this front, I’m pleased to say things are getting better and we are beginning to see more timely payments. So going-forward, we expect to normalize our shipments to Telangana. Apart from these macro challenges, in our case, our Maharashtra WIPS credit in Q3 this year was capped. Hence, it was lower by INR4.7 crores compared to Q3 last year, given the capping of WIPS at INR20 crores annually at our largest unit domain.
In fact, the lower WIPS credit by INR4.7 crores also flows directly to the EBITDA. So this has impacted our EBITDA margin by around 200 basis-points. Having said that, again, on this front, we have some good news. We have now kicked-off production at our Nashik unit and we have received a positive clarification on unit definitions. So this is our fourth bottling unit in Maharashtra, which will ensure that from FY ’26 onwards, we can garner 100% of the maximum potential WIPS in our case compared to only 80% this year. Year though I should note that we will face a small hit on this aspect in Q4 as well. Moving on, we are witnessing a couple of really positive longer-term trends playing out. First, our elite and premium portfolio continued to do well, even in the current subdued environment, growing by 6% versus last year and especially with our iconic elite brands, the Source and Rasa recording double-digit growth this quarter, building on-top of a solid H1 performance. So that is definitely — it bodes very well and it continues to be our strongest point in our portfolio. Secondly, an even more exciting trend is the growing pan-India appeal of wine in Tier-1 and Tier-2 cities outside of our top two states. So our revenue outside Maharashtra and Karnataka continued to see healthy traction in Q3 as well, growing by 8% after recording a high single-digit growth also in H1.
This is very encouraging and reinforces the confidence that we are taking strides towards our goal of building a truly pan-India brand for our wines. We expect both these drivers to continue to power our growth journey even more meaningfully as we move forward. Coming now to our wine tourism business, I’m very pleased to say that this segment performed strongly in this all-important festive season and we have ended-up with our highest-ever quarterly revenue. In fact, I should note in this that the month of December was our highest-ever monthly revenue. Wine tourism grew — revenues grew by 12% over last year, led by improved occupancy rates, which stood at 81% in the quarter versus 76% last year and higher ARRs driven also by a record number of wedding bookings where the entire resort was taken over. I should note here that in these weddings we make it a non-negotiable point that the wedding organizers have to buy a certain amount of wine, quite a bit of wine. And a few years ago, we used to face fair amount of resistance here, but recently, we have noted a boom in wedding bookings at our vineyard resorts with all the guests perfectly happy to meet our condition in this regard, which bodes very well. So overall visitor numbers were slightly down, we should remember that we have set records in the past as the most visited vineyard in the world and that was perhaps a slightly unsustainable number coming out of COVID with revenge tourism. So numbers are slightly down, but the spend per visitor, which is a very key focus area for us, has grown by double-digits over last year. So that’s an excellent trend. And this is a testament to the hard work we are doing to provide more excitement on our campuses and more avenues to taste and buy our most expensive and luxurious wines, which more-and-more people are reaching out for.
So this highlights the way forward for us as we focus on constantly elevating our guest experience. We also have some exciting new openings coming up on the wine tourism front in Q4 and FY ’26, which I had alluded to in earlier calls and I’d like to provide an update on.f First, within Q4 itself, we have the Dindori tasting room and bottle shop opening up at the erstwhile wines we’re building up something really nice there and this facility is located close to Gujarat border. So we do see a strong potential for our footfalls here.
We do get a lot of visitors from Gujarat coming to our main campus, which is quite a bit of a drive further from the border and this will give a lot of people a further opportunity to taste and buy India’s finest wines. Second, the expansion of our wine tourism facilities at Domain Sula outside Bangalore. Here we are opening a new tasting room and expanding our existing bottle shop and restaurant. The expansion of the bottle shop was completed in Q3 and we expect to complete a really beautiful tasting room with a spectacular view and the restaurant expansion in H1 of FY ’26. Third, probably most significant out of our expansion plans is the 30 key resort coming up near our York winery in Nashik. This will expand our total room capacity in Nashik by 30% from 104 keys to 134 keys, so quite significant. And it will also be our first resort to have dedicated convention facilities, which will have a boon for all the — all our resorts in the area. So we do expect a big pickup in corporate offsite business once this is completed. And we expect to launch this resort in H2 of FY ’26, work is in-full swing and is well on-schedule. So these expansions and especially the new resort will give us a significant boost to our wine tourism business in FY ’26.
Moving on, as most of you are aware, we recently promoted Gaiqua to the position of Chief Operating Officer at. Has been with us for the last 16 years and has worked in various operational capacities including most recently as chief winemaker. He has already very firmly taken over the reins from Karan Vasani and the transition, I’m happy to say has been super smooth. Key functions including wine making, veticulture, winery operations, projects and procurement are now all reporting to Gorak. So he is a COO in the truest sense of the word and we wish him all the best. I have an update from on the current harvest, which we are right in the middle of harvest 2025. The harvest is looking excellent in terms of quantity and quality.
So I’m very pleased to say that it is our fifth excellent harvest in a row. And we — as we have really proven in the last five-plus years, for us the supply-side has been largely seamless. This is a tribute and testament to the hard work that our teams have been putting in. We have been working extremely hard over the last decade to mitigate the impact of climate change and global warming and I must say today, we have a very robust and resilient system in-place for our vineyards and great procurement that to a large extent insulates Sula from the worst impacts of climate change. It is no coincidence that this is our 5th good harvest in a row when across the rest of the wine world there have been significant impacts on at least one harvest in the last three, four years and I would say in sort of every three years or so these days.
Talking about another very positive development and something that is hot off the press you can say. I am delighted to say that we held a 2025 edition of Sula Fest this past weekend after a long wait of five years well I would say that it was well worth the wait. The much-anticipated event set new benchmarks for us as we witnessed an incredibly turn an incredible turnout of around 12,000 people who thong the festival across two days at our Nasik vineyard. As per our ticketing partners book my show this was possibly the only sold-out music festival in India of this size over the past year. So that’s really a tribute to the hard work put in by the team and the curation of the — of the acts and the musical talent on display. The attendees had a great time enjoying the life performances, our award-winning wines, gourmet food and other unique experiences. This was also very notably the first Sula Fest where we did not have spirits available.
Some of you may recall that in the past, we were also an importer of some prestigious spirits from across the globe, which also used to be available at SulaFest. We have walked away from that business in recent years and hence we took a decision that for this Sula Fest and going-forward, there will be no spirits. We had only wine and beer. Not a single attendee as far as we could tell, missed the lack of spirits. We also had only Indian artists this time, I would say the best of Indian music and the crowd loved it, no one missed the absence of expensive international acts.
Our recently launched Sula cans, our Shennon Blanc in a can, the Zinfandel ros, the Reds in were a huge hit with the crowd and I would say that those were our highest-selling wines were the wines in a can. So that was some tremendous exposure for this format, which is — which we see as so exciting in the future the fest also garnered fantastic media coverage. We are still measuring it at this point, but it’s headed out-of-the stadium across platforms and formats, including well-known national media houses and all over digital media. So it’s been a great event for brand Sula.
Overall, Sula was a grand success and we believe it offers us a great platform to attract more wine enthusiasts as well as first-hand consumers alike and thus foster both category development and branding in the future. Going-forward, we plan to host biannually instead of annually, so once every two years, not every year and not every five years.
Finally, to conclude, yes, it has been a challenging year, but I do believe that in many ways, we have hit a trough now and we should start seeing a revival from here on. On. Moving ahead, our focus over the next 18 months is to target quality growth with greater emphasis on improving our profitability and margins. While softness in urban consumption might last a bit longer, we expect Q4 to be largely in-line with Q4 of last year. And for next year FY ’26, we are targeting a significant expansion in earnings. With that, I would like to call on our CFO, Abhishek Kapoor, to take you through our financial performance and metrics in greater detail. Over to you, Abhishek.
Abhishek Kapoor — Chief Financial Officer
Thank you, Rajeev. Good evening, everyone. Following Rajiv’s overview of our business performance and key initiatives, I will now take you through the financial highlights for quarter three and first-nine months of fiscal ’25. First, talking on the revenue performance. As Rajiv already mentioned, this quarter marked the 11th straight quarter of growth in our own brands segment.
Revenue from our own brands increased 1% over previous year with our Elite and premium segment posting volume growth of 3% and a value growth of 5.5%. The contribution of ELITE and Premium to our own brands portfolio expanded by 300 basis-points, reaching an all-time high of 80% in-quarter three. However, overall revenue growth was impacted by subdued consumer spending in urban India and election-related disruptions in Maharashtra, which happens to be our largest market. Additionally, a significant factor, as Rajiv mentioned earlier, was the reduced credit of around INR5 crores as our domain unit hit the INR20 crore cap in-quarter three. This contributed to a 250 basis-point decline in our own brands revenue growth with the impact primarily seen in our economy and popular wines, which were largely serviced through the Dinur unit. As a result, our economy and popular portfolio recorded a 15% decline in revenue for quarter three against a 5.5% volume decline.
On a positive note, we commenced bottling unit at our Nashik unit, which is refined as our Unit 1, which has now been certified as a separate entity eligible for this credit. And moving forward, this will enable us to capture 100% of potential benefit compared to expected 80% in fiscal ’25. Geographic diversification played a key role in mitigating the impact of challenges in Maharashtra and Karnataka in Q3. Excluding these two states, our other markets collectively grew 8% in-quarter three with over 10 states recording double-digit growth.
Consequently, the share of non-core markets in our own brands portfolio increased by 300 basis-points to 50%. On the wine tourism, as Sajiv mentioned earlier, in-quarter three, our revenues grew 12% over previous year. This growth was driven by improved occupancy rates, which were clocked at 81% versus 76% last year, a higher average room rates, which increased by 34% and increased guest spending during a robust wedding season. Encouragingly, wedding demand remains strong in-quarter four as well.
Our gross margin for quarter three stood at 62.5%, which was down around 450 basis-points over last year, primarily driven by the lower WIPS credit, which I mentioned earlier that impacted 100 basis-points decline in the gross margins. Also, we had a change in our route-to-market for our direct-to-consumer wines, which we sell from our own-retail shop. To streamline the supply for wine tourism, we now source these wines to a distributor with a nominal handling fee for stock management. While this adjustment impacted the gross profit by around INR5 crores, the corresponding increase in sales meant no absolute impact on our EBITDA. However, this change resulted in a 200 basis-point reduction in gross margin. Employee costs increased by 11.5% with 300 basis-points attributable to the ESOP cost under the 2023 ESOP scheme, which had no comparable cost last year. Excluding the ESOP costs, the employee cost grew 8.5%.
During the festive season, we invested in consumer engagement, tastings, gift paths and point-of-sale materials. Additionally, our expanding presence in non-core markets outside of Maharashtra and Karnata led to a 16% increase in selling, distribution and marketing expenses in-quarter three. EBITDA for quarter three declined by 26% to INR54 crores as lower gross profit and higher market spend weighed on the operating profitability. The EBITDA margin for the quarter stood at 25% with a 200 basis-points impact from lower mixed credit. EBITDA margin also had an adverse impact from geographic diversification with higher revenue contribution from non-core markets having lower margins versus Maharashtra and Karnataka due to the higher instance of duties and taxes. As of April 1, 2024, our outstanding dips balance was INR73 crores. We accrued INR44 crores during the first-nine months of fiscal ’25 and we also received INR32 crores from the government of Maharashtra towards the earlier outstanding. In January 2025, we secured an additional INR24 crores, reducing the outstanding balance to INR63 crores.
While the interest cost for quarter three shows a decline of 3%, which is mainly on account of a one-off in last year cost on account of interest on custom duty. The underlying interest cost has seen a 9% growth as the gross borrowing has increased by around INR75 crores versus last year. The increase in borrowing is due to higher working capital due to expansion in DSOs by 30 days as the revenue contribution from corporation markets have expanded by 110 basis-points. While we are receiving pending payments from the Telangana Corporation at regular intervals, the relative DSO is still significantly higher versus other markets. We expect DSOs to moderate downward by the end of this fiscal. On capex front, we are likely to-end this fiscal with INR55 crores of investment majorly composed of our low-cost sellers, which expands 2.5 million liter capacity and a renewables infrastructure expansion to increase our solar energy contribution from 60% in FY ’24 to 70% by end of FY ’25. We shall be utilizing 1.5 million liters capacity of low-cost sellers for the current harvest, which is underway for storing our economy and popular wines. Looking ahead, as Rajiv emphasized, our focus remains on quality of growth. To improve margins, we have started pulling back selling and distribution expenses while continuing to strengthen geographic diversification. We shall be completing implementation of our second fourth strategy in-quarter four ’25, helping to reduce the cost to sell for our economy and popular brands.
Also, as shared by Rajeev earlier, our 14th edition of, which was held earlier this month, saw a huge success scoring beyond on all the KPIs which we set internally and also adding huge branding mileage. We believe that the first shall contribute meaningfully to the wine tourism revenue in-quarter four and shall also be EBITDA accretive. It’s great platform for the brand and we shall also be exploring more potential for expansion of wine music sales going-forward. Overall, we expect strong earnings growth from the next fiscal. With that, I would like to now ask the moderator to open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles have we lost them our first question is from the line of Viresh Sangwan, an Individual investor. Please go-ahead., please go-ahead with your question. Your line is unmuted.
Viresh Sangwan
Hi, am I audible?
Operator
Yes, you are.
Viresh Sangwan
Yeah, yeah. Hi, everyone. So I just had two questions actually. One was related to the recent tasting room that we opened outside our winery. I think it’s the I referred Google. It’s called milestone seller or something so how is that performing if I just want to know?
Rajeev Samant
That is doing okay, I would put it like that, a little bit below our expectations and we are figuring out how to boost the sales there. We have much better hopes for our ND winery, which is on our campus and where we will be able to do a much better job with a bottle shop, etc. But I must confess that sales at milestone sellers have not been up to the mark.
Viresh Sangwan
Okay. And any improvements or any learnings that we are taking out of it or any like any —
Rajeev Samant
Yes, absolutely. We took a risk here. We — we took a chance. It’s in the middle of a purely rural area, you can say rural heartland, Maharashtra near the town of Pimple Gao and we wanted to take a chance to see how it can work-in an area not close to the city. I think we are taking some learnings from it that probably the next one we put up apart from at our own campus, which of course has its own benefits in terms of tours and tastings and all that we can’t really do on a standalone or should be closer to an urban area? I think that that’s one of the chief learnings that we have here.
Viresh Sangwan
Okay. Okay. Best of luck on that. And my last question is related to — I happen to hear the conference or the earnings call of our competitor. And what I learned is that they are very much — they — they have a very big market-share in. Just wanted to know like our approach on that and why because I certainly know that Sula is very, very well-known and very-high in the — I would say, what should I say a recognition amongst the people. But why we are not into? Is there anything stopping us or we don’t want to.
Rajeev Samant
I can just — I can answer that — I can answer that. So Sula is by far and away the number-one consumer choice in wine brands. Now there is a very big difference between retail and. We are by far dominant in retail. That is because no retailer can afford not to stock the consumer’s number-one choice. And at a retailer, the consumer gets to choose exactly what they want. And hence the — you can say the best brands and the leading brands will always win. Is very different. The buyer at the gets to for everyone’s listening, of course, we’re talking about hotels, restaurants, cafes, bars. The buyer gets to decide what the wine list is and there are many factors that come into play. And the factor of it being the number-one consumer choice gets pushed down. The main factor for better or worse in India is how much discount are you giving me. And does not play that game in the way that our competitors do. We — I will state explicitly that we are willing to give lesser discounts. And hence, you will always find that in, the brands that are not necessarily the consumer’s number-one choice, they will have a better market-share. Having said that, there is no way that any of our competitors has a higher market-share even in than Sula. We continue to have a higher market-share even in. However, our market-share in retail is far higher. I hope that answers your question. Yeah, maybe Mr.
Operator
MR., may we request to please rejoin the queue. We have participants waiting for their turn. Thank you. The next question is from the line of from JM Financial. Please go-ahead.
Vinamra Hirawat
Hi, sir. I hope I’m audible. So if I look at the distance between the three results, the two that we have and the one that’s coming up, they are maybe 10 to 15 minutes away from each other. Because of this, do we see the 75%, 80% occupancy that we have coming down because now there are 30 more rooms coming in the same greater Nashik region.
Rajeev Samant
It’s a good question. The same question was there when we built the new beyond that will it impact and it has not impacted at all. If you see the occupancy this quarter versus one year-ago, in fact, occupancy has jumped. We don’t believe that 130 rooms is enough to sort of cannibalize our own. Each one of our resorts has a sort of a distinct proposition and they work — they function really well together as a unit. I would like to point out that on weekends, typically we are 100% occupied. So when you are at 100%, that means that on most of those weekends, you actually have demand that you are not able to meet. So that’s where the benefit really comes. And of course, our weekend rates are much higher than our weekday rates. During weekdays, there is — there is some possibility that to some extent in the beginning, you might have a small hit on occupancy. But overall, definitely this is going to contribute plus the conference facilities, which is unique in our new property that we don’t have in the other two and that is only going to be an accretive. I hope that answers your question.
Vinamra Hirawat
Yes. Yes, sir. So we spoke about each resort being a little bit unique. So this — the New York resort be more targeted towards corporates than individual goals. Is that — is that fair?
Rajeev Samant
That’s fair to say, but corporates also you have different sizes of corporates and of requirements. So you know, if you have a corporate that only needs 30 rooms, then they will only occupy York. However, if you have a corporate, that means 100 or 200 rooms, but they absolutely need confidence facilities, then the fact that these resorts are only 10 minutes from each other becomes a big advantage there. So they can be a little distributed, some at this resort, some in that resort. We have done that in the past four, four bigger corporates. And so that works very well. So the main conference can happen here, but people are spread-out over the — over the three results.
Vinamra Hirawat
Okay, okay. Got it. Sir, we’ve also mentioned multiple times in the past that road infrastructure to is causing issues for us. I was looking at the Q4 call, you had stated that there would be plans for a resort in domain Vineyard in Karnataka. Is there any update on this because it would go a long way in reducing our dependence in one area we have faced certain issues.
Rajeev Samant
I must confess with permissions for building out our resort. We are in touch with the authorities. We come under the Bangalore Industrial Corridor and we are facing certain issues there. Hence, we took a call to build a big beautiful tasting room for the time-being and that what I mentioned earlier, and that’s really stunning the architecture there and it overlooks a vineyard a little bit like Nashik. It’s a little smaller in that way, the vineyard in front. But I do believe that is going to give us a nice boost there. Plus we are going to have a roster of events, especially musical events, Alla, Mini Sula Fest that we plan to roll-out there. Unfortunately, no good news yet on a resort at our Bangalore property. If I could just fit-in one more question, sir. We said other states have lower margins than Harastra and Karnataka. If you could just break-down Maharashtra and Karnataka margins versus other states. So both elite and economy separately, that would go a long way in helping analysis.
Abhishek Kapoor
Sorry, well, I’ll take this question. This is Abhishek here. So in fact, this question we have answered in the past as well that due to the duties benefit, the lower duties in these two states, we get a benefit in terms of the operating margins in these two states. In terms of the variation between the margins, it ranges between 500 basis-points to 700 basis-points between these two markets versus others. I must also mentioned that some of the newer markets outside of even Telangana, Rajasthan and West Bengal, which have been well penetrated by us, the others continue to be sort of a focus wherein our spends with respect to building the market, they continue to be high, but which tend to once we penetrate these markets further, the spends will get restricted and the margins will improve over there. That answers your question.
Vinamra Hirawat
Yeah. So this 500 bps, 700 bps difference in EBITDA margin is the same for ELITE and premium and economy as well or is it higher difference for ELITE? Any word on that?
Abhishek Kapoor
Yeah. So just to answer this, in fact, outside of Maharashtra and Karnataka, the percentage of, the economy and the popular brands is much lower versus what we have in Maharashtra and Karnataka. This is because of the economics as the duties are higher. So we have larger contribution of revenue coming in from and Premium in the market outside of these two core markets for us.
Vinamra Hirawat
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Naman Shah from Monarch Networth Capital. Please go-ahead. Hi, sir. I just had two questions. First of all, I wanted to ask about the selling and distribution cost. We have repeatedly mentioned in the presentation that we had high S&D spend. So what will that amount be?
Rajeev Samant
So Raman, the S&D costs, which has been mentioned in our presentation that pertains to our distribution markets, the direct distribution markets, where this cost typically ranges between 35% to 36%. There has been a bit of an elevation in these costs by a couple of hundred basis-points. But as Rajiv alluded to earlier and I also mentioned in my piece as well that now we are pulling back these costs as we want to focus a lot more on the quality of growth vis-a-vis more sort of presence and penetration in the market where we already have a good depth in terms of our business.
Naman Shah
Right. And one more question, sir. So you talked about discounting, you talked about offering discounts. So since competitors are also offering discount, how much discounts are we offering to the retailers in that sense?
Rajeev Samant
Yeah. I will answer this. Generally, we offer a less discount than our competition. So we’ve been holding this line and we do believe that this is the right way. We are already offering adequate, I would say, more than adequate discount to the retailers, but some of our competitors offer even more, I would say, to a really an unnecessary and unsustainable extent. But we are a fairly significantly lower in most markets. And still I’m happy to note that in most markets, we continue to gain market-share, albeit a small way, but we are still gaining market-share in India.
Naman Shah
Right. Sir, but could you kind of quantify this discount that we so as I mentioned,
Abhishek Kapoor
Rawan, earlier, I was alluding earlier to our distribution markets. If we talk about our other markets where this is appearing in our selling, distribution and marketing line, this is typically around 17% to 18% of our revenue — the net revenue. As Rajiv was just mentioning that we prefer to, you know, offer less margin — less discounts to the retailers. Instead, we prefer more in terms of our reach to the consumer by its means of holding more tasting sessions and offering consumer offers, which helps in terms of building the full effect as against just a push to the trade.
Naman Shah
Right. Thank you, sir. That’s all from my side. Thank you.
Operator
The next question is from the line of Alisha Mhawla from Envision Capital. Please go-ahead.
Alisha Mahawla
Hi, sir, good evening. Sir, just some questions on your margins. In this quarter, we said that our gross margin was impacted because of the gap in the subsidy, which means that we will probably have a similar kind of gross margin for the next quarter also before we turn to FY ’26 when you’ll get the benefit of the new plan that we have. In light of this, how can one work with margins for Q4 because it’s a smaller quarter versus Q3.
Rajeev Samant
So good question, Abhisha. I may inform you that as part of our transitioning of our bottling arrangements, which was largely concentrated in our Dinduri facility. At the beginning of this year itself, we started setting up the bottling infrastructure at other three units of ours as well, which are in Nashik and, which also gets the similar benefits of as the Dinduri unit. Now as the unit has been capped in-quarter three and I mentioned earlier that it was only the economy and popular brand which sort of got deprived of this benefit because of this INR5 crore INR5 crore restrictions which this unit faced, the economy brands have also now been moved out of for quarter-four because of beefing up of our bottling arrangements in the Unit 1. And hence, we do not see the kind of impact what we saw in-quarter three.
Having said that, as far as Q4 is concerned, with our improved focus on the margins. We don’t see much decline in terms of the operating margins versus what we clocked in Q4 last year. So what I’m understanding is that both in terms of top-line and margins, we should mirror what we did in Q4 of last year. Since you asked about the operating margins, so my answer was more oriented towards that.
Alisha Mahawla
Sure. Understood. And going-forward, last two years, ’23, ’24, we were circling at the 30% of margins, which have slid this year for multiple reasons that you highlighted. Going-forward — and this is despite the fact that Elite and premium, the share of that has gone up and the premiumization margin should also improve. That’s our understanding. But now we’ll have incremental costs for all the bottling plants and the tasting rooms that we’re setting up. There is the incremental spend that we’re doing on S&D. There is also third-party distribution for popular and economy, etc. How do we expect long-term these margins to now start moving?
Rajeev Samant
Yeah,. See, we have been mentioning that the margins what we saw in FY ’24, we ourselves didn’t expect them to be sustainable, which was upwards of 30-odd percent. The reason was very clear that geographic diversification was very much on our radar. We wanted to drive that and that is the right thing to do. With that, there was an expectation of slight moderation in the margins. Now key factors which kind of impacted this in the current year, one is largely the muted revenue growth, which once it’s clawed back is going to add impetus to the margins. Apart from that, with the various initiatives which are being taken, mainly in terms of reducing the SMD spend, we expect the margins should claw-back a couple of hundred to 300 basis-points from where we sort of ended our YTD nine months period.
Alisha Mahawla
Understood. And just one last question again with respect to margins, if I may. You mentioned in your opening commentary that demand is weak, especially urban consumption seems to be tepid this quarter, last quarter. And while you’re at the best Fit, would this be the most appropriate time to pull-back on S&D spend when demand itself is weak and we may need to incentivize the channel a little bit more displacement to sales of any kind of format.
Rajeev Samant
Abhisha, we have witnessed very clearly that offering more channel margins or discounts actually doesn’t help in terms of the consumer offtake. It only helps in a short while to you know [Technical Issues]
Operator
Please hold-on for a moment you are sounding from a distance.
Rajeev Samant
Am I audible?
Operator
Yes, you are now. Please go-ahead.
Rajeev Samant
Okay. Sure. So I was answering that with this moderation in the discounts, we see that the margins to improve. And to your question in terms of whether there would be any kind of a downside impact? The answer is no, because in terms of building the connect with the consumer through various offerings, holding more number of tasting sessions and also the Sula Fest is also going to come to benefit in terms of getting some of this demand back. So the right measures are being put in-place as against relying on more discounts being offered to the trade.
Alisha Mahawla
Understood, sir. Thank you.
Operator
Thank you. The next question is from the line of Siddhant Dant from Goodwell. Please go-ahead.
Siddhant Dand
Yeah. Hi, am I audible? Yeah. So my first question was regarding our working capital. So working capital seems a little tight and so we’ve been — we have aspirational growth plans, setting up new facilities, you know, growing sales and aging requirements of wine. So what kind of dividend payout do you expect to give in the future? Because it felt like you are funding dividend from working capital in the past couple of years?
Rajeev Samant
Sure. So fair question. I think in terms of the past, if I were to talk about FY till FY ’24, till the time the policy was awaited and there was a huge accumulation of the past with balances, the accruals, there was a situation which was more tight on account of the monies being expected from the government. However, having said that, with the regular inflow of funds, if I were to tell you in terms of our YTD that we have received is close to around INR57 crore this year thus far. Last year, we received around INR100 crore. You like assume that why is it that the working capital scenario continues to be a little bit on a tighter side, that’s mainly because our revenue contribution coming in from the corporation market that has been inching up. As I mentioned earlier, it has increased this quarter as well by 110 basis-points.
Now the relative DSOs, which we have from the corporation market whether versus the distributor market, they are higher. And hence there is a more requirement of working capital. But that is not a scenario what we see, I mean, in terms of the period ahead. There is a moderation which is happening as the path outstanding from the Telangana Corporation state, they are coming down and it will help in terms of, you know, reducing this gap of working capital funding. And to answer your question on the dividends, I mean, it’s clearly related to the strong reserve that we have. So we don’t see any challenge with respect to the kind of trends we have been maintaining on dividends.
Siddhant Dand
Okay, perfect. My next question was regarding, you know, the correlation of wine shop quality and the sale of wine. Could you just comment something on that? And what is any policy in our key markets? I read about some wine shop license in Karnataka, we are going to open that again. So the quality of wine shops and the quality and the sale of wine within these cities.
Rajeev Samant
So if I understand your question correctly, you’re talking about the demand and the quality relation, the quality of, quality of the retailers. Sorry, I didn’t get your second part of the question.
Siddhant Dand
So the call — what is the correlation between the sale of wine, the percentage of wine store in a shop to a better-quality store compared to one of the older stores where you have to queue-up in a line.
Rajeev Samant
A deserning consumer who is a wine enthusias will always appreciate a quality wine versus going-in for the cheaper wines, which are available diamond doesn’t. Now one thing which we have been consistently maintaining is in terms of offering the quality of wine at the appropriate price so that the designing consumer is not left of wanting.
Siddhant Dand
So I was referring to the quality of the retail store, you know because we are seeing 7, 11 and others starting to keep wine. So is that improving our sales to wine as a percentage of liquor consumption?
Rajeev Samant
So I would say, see, early to say that. I mean in terms of the further penetration into the retail shops and particularly in the organized state, which are basically full format stores. It’s not so prevalent till and that too from state-to-state, it actually differs a lot. But yes, I mean in terms of its presence, we clearly see that there is a positive impact on the offtake of the mine.
Operator
Sorry,, may we request you to please rejoin the queue, sir. We have participants waiting for their turn. Thank you. The next question is from the line of Priyanka from Value Prolifit. Please go-ahead.
Priyanka Laroiya
Yeah, hi. Thanks for the opportunity. I just want to understand the wine landscape in India because it’s still at a very nascent stage and what is the percentage of domestic wine consumption versus the international mine? And what percentage of that is captured by Sola and it’s a immediate competitor, which is? Thank you.
Abhishek Kapoor
So in terms of the landscape, the overall wine market is expected to be closer to INR1,500 crores, of which around INR1,000 crore is captured by the domestic wine and INR500 crore by the imported wine. Within that, if you see in the and premium category, Sula enjoys around INR60 shares. This is basis our own assessment and the data which we get from various corporation markets. Now in terms of the overall space, if you were to see, wine continues to be contributing lesser than 1% to the overall market in India. However, with this, the growth potential definitely is wide. The right measures of expanding in terms of the reach to the consumer is by means of, you know, making people to taste one which is driven by through holding various tasting sessions across the length and depth of the country. So that’s the right way we believe instead of calling the trade route and sort of opening the retail with just the bottles of wine.
Priyanka Laroiya
So what what percentage are we expecting in the coming like four, 4-5 years that what percentage of wine will be in the overall alcohol space?
Rajeev Samant
Even if this 1% gets converted to 2%, I think it’s going to be a big boom given the market-leader with a 60 share is going to be a significant jump-in.
Priyanka Laroiya
Okay. My next question is like over the past one year, the share price has fallen down by 50%. What are the like main key reasons behind it? I can understand like probably because of this Maharashtra elections that Friday the investors must-have anticipated bad financials, but what are the other reasons you think?
Rajeev Samant
So, as relating to your previous question, while the penetration is a journey and that’s where-is taking the lead rising so being the market-leader, it’s going to take a bit of a time and particularly in a challenging environment where wine being more of an urban phenomenon and urban demand continuing to be tipid, that has basically given a temporary sort of a pause if I can say so. But that doesn’t stop us from holding back our initiatives in terms of new launches, in terms of innovating further. And one of the testament to that was the response to our recently conducted the Sula Fest where we saw tens of thousands of people over this two-day fest, which really showcases that there is a demand, but probably they are holding — the consumer is holding back given the tight scenario which is there on the liquidity front in terms of their consumer spending potential. Once this is back and government is also taking all the right measures to give more money in consumers’ pocket, we are very, very confident that this is going to help in terms of pushing the wine growth back on-track.
Operator
Sorry to interrupt, may we request you, Priyanka to please rejoin the queue. We have participants waiting for the turn. Thank you. The next question is from the line of from Iconic Wealth. Please go-ahead.
Yashodhan Nerurkar
Yeah, hi. Thanks for the opportunity. So basically, I’ll just continue the question from previous participants. So I just wanted to understand, I mean, we are significantly lower than the per-capita consumption of buying across India versus the Western peers. And obviously, there are reasons for the same. But I just want to understand what sort of drivers do you think would that our per-capita consumption to nearly double in the next five, 10 years possibly or do you think that’s really possible? And what is current capacity and like put in — what is the current capacity and how much are you targeting it to be, say, over the next five or seven odd years?
Rajeev Samant
Your first question. Yes, definitely. So first, in terms of the demand, let me give you a competitive. I mean, we are where probably China was 30 years back. Why the right competitive China market because 30 years back. Again, a non-native one consuming market per-capita for us is slightly over 40 ml per person per year and China currently is close to a liter per person per year. And 30 years back, this is where they were and 30 to 40 ml per person per annum. So we are on the right track, I would say that because more-and-more consumers today are demanding. As people are traveling to Far East, traveling to Europe, they come back with the experiences and they want those same experiences over here back-in India, which is where we are right there with the right set of offerings, the quality wine for them to taste and get sort of you know, to versus this reference over spirits and other alco.
On your other question in terms of capacity, we are close to around 17 million liter, 16.6 million liter annual capacity. We are also adding the low-cost seller this year, which is going to be commencing the commercial production very soon in Feb. This is going to add another 100 — around 2.5 million liters capacity. This new capacity is dedicated to our lower-cost wine. We wanted to bring down the capex cost for our economy and popular wine and hence we segregated the back-end infrastructure for the producing and storing wine.
Yashodhan Nerurkar
Okay. That’s helpful. So I mean the question was about your capacity, what would your target be in the next five years? So that was the other part of the question. And the second question is about your current ASP taken as a portfolio together. And I mean, you have introduced the wine in a can as well. Well. So how has that taken off? And are you seeing incremental demand for that particular product as well?
Rajeev Samant
Sure. So first and foremost, in terms of the capacity and we are having the infrastructure good enough to meet the future demand. Our sellers, as far as the infrastructure the civil infrastructure is concerned, we have built that keeping the future demand in consideration. What we need to do is just put up more tank so that our installed capacity gets expanded and which is a big enabler in case we on our demand-side, we are able to drive it more aggressively and get the results of that as well. Now coming to your other question, which is in terms of the growth part. So growth — sorry, if I may ask you, what was your second question?, are you there on the line?
Operator
Yes, sir. We will move to the next question, which is from the line of Aditya Soman from CLSA. Please go-ahead. Hi, good evening, Rajiv and Abhishek. So two questions. Firstly, on the subsidy, which you said there was a shortfall of INR4.7 crores in this quarter. What — did you give a number on what the shortfall we expect for the next quarter would be? And then you said that for ’26, there should be no shortfall, right?
Rajeev Samant
Yes, mentioned earlier that this year, we are likely to capture around 80% of eligible width. We had informed this earlier as well that this is a year where we are going to expand our bottling infrastructure across our four units. Good news, which we got in Q3 through our constant working with the authorities and officials was we got the certificate for our unit as well. And Q4 particularly probably will be closer to 100%, but yeah, in next financial, we will be able to capture definitely 100% of the eligible mix.
Aditya Soman
Understand. So in 4Q, basically, it will be a lot lower than INR4.7 crores. That’s understanding would be fair.
Rajeev Samant
Yes.
Aditya Soman
Okay. Okay, understand. And then the second question on wine tourism. So again, in 4Q, we should see a big bump because of. Would that be the right assumption because I wasn’t there in the base quarter last year, right
Rajeev Samant
Yes, definitely, this will give us a boost in terms of the revenue and we are also expecting this event will be EBITDA accretive for us, while the numbers are yet to be aggregated, but it has clearly scored on all the APIs that we set for the period. So it augurs really well for our quarter-four as far as the INR12 revenues is concerned.
Aditya Soman
Okay, understand very clear.
Operator
Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Rajeev Samant
Thank you. Thank you all for joining us on this call. As Rajiv mentioned earlier, definitely this has been a tough year for us, but we really expect a rebound from there as various measures for the government are being rolled-out to get more money into the consumer’s pocket and that definitely is going to augur well for our growth onwards. Thank you once again.
Operator
Thank you. On behalf of Sila Vineyards Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.