The negotiations between Grover and Zampa have reached a final stage and the companies expect to seal the deal in the coming days, setting the stage for another strategic partner to come in with fresh investment, catapulting the new joint entity to become the clear second wine company in India, behind Sula, writes Subhash Arora.
The Breaking News story reported first by delWine on April 27, 2011 has been taken up by media-both online and mainline and has generated quite an interest in an otherwise lacklustre industry at present and delWine has had several enquiries from several people. While Ravi Jain has been expectedly declining to comment , delWine has learnt that the information in the article was by and large quite correct and the negotiations have been inching ahead.
The due diligence has been carried out and the deal may be sealed by as early as the first week of June. Clarifying on the negotiations, Kapil Grover, the majority partner of Grover Vineyards says that the joint entity of Grover and Zampa would have another partner thus making it possible to bring in fresh investments in the merged entity.
Owning more vineyards would be one immediate step. Increasing the sales to rather ambitious targets might not be a problem with marketing stalwarts like Deepak Roy and Ravi Jain joining the bandwagon, but the availability of grapes may become an issue, feels Grover. Karnataka does not allow owning land to outsiders but they are already identifying land in Andhra Pradesh, with terroir which is similar to Karnataka. As reported by delWine, Zampa owns 12 acres of vineyard land near Nashik. This will become a part of the merged entity but not quite enough to help reach the targets.
The total deal, including the buying of shares of Brindco by Roy and Jain will bring the shares of Kapil Grover’s family to a precariously low 33%, with Zampa and the new strategic investor holding similar proportion but Grover is not worried. In the meantime, Brindco continues to hold around 17% shares and according to the agreement continues to handle marketing of Grover wines. Shares of Jerry Rao may also be up for grabs now as he has reportedly expressed a desire to opt out since he needs funds for personal reasons.
Valuation of Sula
Meanwhile, an article in the national daily TOI might have given the impression that the total valuation of Sula had gone up to $667 million. ‘Last year, Verlinvest SA, bought 15% stake in Sula Vineyards valued at around $100 million,’ the report had said. Seeking clarifications from Sula, Rajeev Samant confirmed that the report might have created some confusion. Referring to the report, he says, ‘that’s very misleading...what they mean to say, I believe, is that the buy valued Sula at a total 100 mill. When you read it, it seems to say that just the 15% is 100 million! Not quite yet.’
In comparison, Grover is currently valued between Rs. 700-900 million (around $20 million). The publicly traded Indage Vintners was valued at less than Rs.230 million when its shares were de-listed from the Bombay Stock Exchange, even though the company has been declared insolvent.