Sula Vineyards rises as CLSA retains ‘buy’ tag on Maharashtra scheme extension

Shares of Sula Vineyards Limited traded almost a percent higher to Rs 566 in morning trade on February 23 after global brokerage firm CLSA retained a ‘buy’ call, citing the extension of the Maharashtra Wine Industrial Promotion Scheme (WIPS) as a positive for the company.

Introduced in 2009 to promote Maharashtra’s wine industry, the WIPS was paused during the Covid-19 pandemic but is now set to continue. The initial expectation was five years, however, the government announced that the scheme would be extended for eight years.

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“Sula has four units in Maharashtra – we await clarity on how many would be eligible for the subsidy. Based on our estimates, in case three out of the four units are eligible, the subsidy amount should be enough to cover the amount receivable in FY25 and FY26,” CLSA said in a report. Analysts have assigned a 12-month price target of Rs 826, implying an upside of 47 percent from the last close of Rs 562.

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 manufacturer.

In an interview with CNBC-TV18, Jagdish Holkar, president of the All India Wine Producers Association, explained that the scheme highlighting that wineries annually contribute approximately Rs 70-80 crore as value-added tax (VAT), with 80 percent of this amount eligible for a refund.

In the last three months, the stock has gained 17 percent on the bourses.

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