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Indage in Troubled Waters?

Indage Vintners, formally known as Champagne Indage seems to have run into a stormy weather with its expansion strategies doing a Titanic due to the current economic meltdown, which is being reflected in the stock price which hit another low today-the sixth continuous lower circuit breaker, reports Subhash Arora

Jury is still out on the wisdom of Tata Motors buying Jaguar and Land Rover of UK or Tisco takeover of the second largest European company Corus, but the biggest wine producer of India seems to have run into financial straits with the purchase commitments of wineries in Australia and UK.

It had purchased the Australian winery owned by Tandou two years ago (renamed as Thachi Wines). But last year's A$60m purchase of Loxton has still not been completed and though the company maintains a stoic  silence, the deal appears to be pretty much off as reported by delWine earlier- especially with the valuations of companies dropping like nine pins.

Similarly it purchased VinCrest winery in Australia and UK based Darlington wines, the Colby Bottlers division of which is helping it bottle bulk wines in the UK where it had received a contract from Fosters recently. But the purchase of another Norwich based UK company Broadland Wineries could not be completed reportedly due to paucity of funds, and has been reportedly called off by the seller.

Industry sources claim that 10 containers of grape juice imported from Australia have not been cleared by the company and are under the threat of being auctioned by the customs department. Inventories have been building up at the company and distributor's levels, adding to the company's woes. Even staff salaries have not been paid for two months, according to reliable sources.

The company had announced with much fanfare and publicity the opening of the Indian Vine and  Wine institute to be set up in Narayangaon, around 80 kilometers north of Pune in collaboration with University of Adelaide in early 2007 with a reported target opening in July 2008. The current indications are that it has been pushed into the future to at least July 2010.

The three foreign independent Directors Michael WillKomm, Le Saux Thierry and Antoine Merlaut     tendered their resignation with effect from December 30, 2008. One reason could be that the company has borrowed money against shares though the resignation was announced a week before the Satyam debacle came to limelight where the promoters had pledged their shares too. A report by the brokerage house Prabhudas Liladhar had confirmed on 28th January the pledging of its shares to borrow against them, though the exact percentage was not disclosed.

Ranjit Chougule is the MD and Arun Shah is the Vice Chairman with the founder Sham Chougule as the Chairman of the company. Other Directors are Sohrab Framjee, Murlidhar Chaini, Govind Desai, and Haresh Desai, according to the data from the Bombay Stock Exchange where the shares are traded.

The shares, after hitting a Low of 68.70 during the week ending December 12th, 2008 had recovered to Rs. 103 before starting to go south again. During the last 6 sessions, they have continued to slide, hitting the daily circuit breakers of 5% to open and close at 68.25, a 12-month low, last Friday when BSE had bounced back by over 200 points. The opening price today was 64.85.  

Interestingly, the shareholding of the promoters came down from 39.61% to 28.54% during the last quarter ending December 2008, most of the exchange of shares absorbed by banks and  financial institutes according to the figures released by the BSE. The public continues to hold about 17% whereas the Anil Dhirubhai Ambani Enterprise group has about 9% of the holding.

While most of the industry was hurting with the pangs of recession and hitting a disastrous 4th quarter, Indage managed to actually increase its sales in Sept –Dec 2008 to Rs. 804 million as compared to the similar period in 2007 of Rs. 764 million. However, the operating profits and EPS did come down from Rs. 251 millions to Rs.198 million and from Rs. 14.82 to Rs.5.99 resp. The stock is currently available at a PE ratio of 2.8

For those who want to buy a piece of vineyards in India, it may be a good opportunity to buy the share when it stops hitting the low circuit breakers- with an added satisfaction that they would be buying it at a mere fraction of what Anil Ambani paid less than a couple of years ago, and at a discount of over 90% from a year ago when it sold for as high as Rs. 748. It shot up from 64.85 in the afternoon session of the BSE to close at Rs.71.65

Ranjit Chougule, the MD was not available for clarifications. It might be warm and sunny at the Indage vineyards in Narayangaon for a good vintage, but it does not seem to be all sunshine at Indage Vintners at the present time. This may also be the right opportunity to buy a piece of the leading wine producing company.

Subhash Arora

 

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