Did Indage over-stretch?

Did Indage over-stretch?

India was today (1 April) given the honour of becoming the first Asian nation to join the Paris-based Organisation of Vine and Wine (OIV), which looks after the global rulebook on do's and don't's for the wine fraternity.

The news comes only a few weeks after a Vinexpo/IWSR survey predicted that Indian wine consumption will double over the next four years, to around 5m bottles.

Yet, as India's star rises over the global wine village, one of the country's key players is on life support.

Indage Vintners, which a year ago changed its name from Champagne Indage due to a run-in with France's Champagne heavyweights, has turned from pioneer to drop-out.

The High Court in Mumbai has ordered the firm to be wound up and the group has less than a week to prove that it has a credible plan to pay off spiralling debts of INR4bn (US$89m).

Full-year figures from fiscal 2009 have not been published, but we know from Indage accounts that net sales for the nine months to the end of December collapsed to INR138m, against INR1.4bn in the same period a year earlier.

The group also sank to net losses of INR483.7m for the period. It reported profits of INR183m in the prior year. Given the subsequent court order, it looks unlikely that the fourth quarter has provided a miracle reprieve.

Such a souring of the figures has come as a shock, particularly to those outside of India, given that Indage is credited as the company that took Indian wine global for the first time. It has more than 40 brands, 2,500 hectares of vineyards and its Marquise de Pompadour wine has won multiple international awards. 

We got an idea that the company needed some serious investment after it announced in June 2009 a plan to raise INR2bn ($42m) via a share rights issue.

However, the scale of Indage's decay became public shortly afterwards, when the Indian Wine Academy reported that rival firm Sula had taken over number one spot in India.

Its report of Indage's financial troubles was taken up by India's business press, which subsequently reported a cocktail of misgivings on the firm, including heavy debts, tumbling sales, defaulting on wage payments to staff and rapidly diminishing investor confidence.     
According to Subhash Arora, president of the Indian Wine Academy, Indage Vintners is a tale of a company living beyond its means.

"The going was good till they got too ambitious and started dreaming of becoming global, buying wineries in Australia and UK," Arora told just-drinks.

"This put eventually a tremendous strain on their financial resources, but they kept on hoping to come out of it by roping in fresh set of investors. That never happened.

"In order to show an improved top-line, the company started giving deals after deals, which were not directly passed on to the consumers," said Arora, who was first to report on Indage's financial difficulties in his Delwine newsletter on the Indian wine industry.

Distributors caught wind of the company's delicate finances and stopped selling the firm's products, leaving cases in limbo in humid warehouses across the country.

Arora said that the company has been forced to close offices in many cities. "Now they are straitjacketed."

The adventure is, however, not quite at an end for Indage. The firm was insistent in a statement last week that it is "ready and willing" to submit a plan "to restructure its outstanding liabilities".

Whatever the plan is, the company needs to submit it fast.

One report by business news channel CNBC this week cited sources as saying that a majority of creditors are set to officially support Indage's debt repayment scheme. This could not be confirmed.

Even if true, however, the company faces a long, hard road back to its former grandeur.

Indage did not return a just-drinks request for comment on the current situation.