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Posted: Thursday, August 20 2009. 18:15

Editorial : Carry on Indage

When we carried the Breaking News story two weeks ago about the rise of Sula to the number one spot due to the fall of Indage Vintners because of financial and marketing crisis, it received a mixed reaction from viewers. The two mainstream national business dailies have since confirmed about Indage what delWine averred.

One reader commended us for the good work of reporting without any fear or taking any favours, wishing Indian companies were a little forthcoming with their numbers and didn't obfuscate matters with tall claims and doubtful figures.

But another reader was unhappy with the quality of the contents, reflecting he found it very immature for us to write without checking on the authenticity of the information. It pained him to hamper someone's reputation without knowing the facts accusing us of sensationalism.

Coincidentally neither Sula nor Indage wanted the article to be published.

ET was the first one to come out almost a week after the delWine article. ‘The company is believed to have pumped huge quantities of stocks into the market, in excess of real demand. The company’s fortunes started detonating after November 2008, when it started experiencing difficulties in paying salaries,’ read the article.

Commenting on TV-18, C H Unnikrishnan of Mint, a national business daily said, ‘The promoters have had very overambitious plan of overseas expansion and also diversification into the related areas. According to the insiders, it had gone wrong because no proper consultancy was done before jumping into these expansion plans and none of the investments especially the two acquisitions in Europe, which they did in a span of less than one year of 2007-08 which didn’t really deliver as it was expected. The company has defaulted on salaries, loan repayments and even statutory dues at least for the last ten months.’

There is not doubt that the company took a lead and put India on the world wine map with his MDP bubbly and later Riviera in the domestic market. But this also highlights the cause of the current problems. Mr. Sham Chougule has undoubtedly been an impassioned wine lover. During a chance meeting with him at the Narayangaon winery a few years ago, he spent over 3 hours showing me and my colleague around with pride, although he was getting frantic calls from Mumbai for some advice. He has also written a book or two about wine appreciation, he told us.

But when my colleague asked a simple yet perennially asked question whether there was a truth to the rumours that they were using table grapes in Riviera, Mr. Chougule lost his cool and said,’ how can you say that? Do you know that wine is produced from only wine grapes? And you claim to be wine intelligent? We do not mention in the bottle label but I can tell you we use Pinot Noir in it.’

We could not believe what we were hearing. We had not, and till this day have not heard about Pinot Noir plantation or the feasibility of it in the Maharashtra region. It has been documented even in some wine books that Indage had been using a substantial amount of Thompson Seedless grapes in the MDP, a fact always denied by the company but corroborated by many former employees.

The issue is not what they were using or how they were making their wines; there are no wine laws to speak about in this country. But when Grover and Sula came to the scene, they believed or were made to believe by their international consultants that using wine grapes was the only way going forward to make quality wines. So when Indage was going all out in increasing volumes and pushing them in the market, these two companies were busy establishing a name for themselves by improving quality and using only wine grapes. The quality perception of the market soon overtook Indage and the unsold stocks reflect the  problem, at least in part.

Quality, dumping, recession, unwise expansion-whatever the reasons, the fact remains that the company is facing a challenging time and is behind Sula and Grover in actual sales to the consumer in 2009. It is also noteworthy that they are trying to spring back into action and taking corrective measures. Mr. Sham Chougule is also apparently sympathetic to the employees’ salary problems. Ranjit Chougule is very hopeful for an early end to the whole problem as conveyed to delWine. But the most immediate problem is the liquidity and cash crunch.

‘The pledging of almost 98% shares of the Chougule family, denoting 25.42 % of the total shares according to an August analyst report of Bank of America Merrill Lynch, marks a dramatic decline for the firm, which is short of working capital and has mounting debt due to overseas acquisitions. It also faces employee ire because a majority are not getting paid since at least November,’ said the article in Mint last Thursday.

The company has experience and background to tide over the liquidity crunch and surely would be looking at consolidation to stay afloat and get back the top spot snatched away by Sula, at least for the time being. One hopes they are successful, for consumer’s sake.

However, I would be curious to know how our readers who were critical of our article, reacted to the ET and Mint Article which adds, ’According to two company managers, who spoke on condition of anonymity, at least two banks that earlier extended credit to the firm for working capital have blacklisted it due to defaults.’ Mint could not ‘independently verify this with the bankers. The company has a financial liability of Rs 450 crore (Rs. 4.5 billion) to be paid off immediately, said another executive, who is leaving the firm shortly and did not want to be named.”

Subhash Arora

Comments:

 
 

Raghunandhan Says:

Dear Mr. Subhash, Many thanks for replying on my questions. You were of great help.

Posted @ August 31, 2009 11:35

 

Girish Says:

Dear Subhash Indage incident is the better lesson for all existing and up coming players , how mad race can end up in spoiling self and also total climate. Pl tell not to make wine for only sake of money itis to be enjoyed & loved by producers as well consumers then only consumer crowd can be created.

Posted @ August 31, 2009 11:30

 

Rishi Chandra Says:

Hello Subhash, Its good to see articles from you. I have been a big fan of Indage wines and i drink them regularly and as a wine drinker what matters to me is a good quality wine. My favourite Chantilli. i don't know whats going on within the company, but as long as they deliver good wines like before, all should be fine. Best of luck to them.

Posted @ August 26, 2009 16:45

 

Seth R. Freeman Says:

As a foreign shareholder based near San Francisco and the Northern California wine industry, this would seem to be a great opportunity for Indage to find a strategic partner from Napa or Sonoma. seth.freeman@emcapitalmanagement.com

Posted @ August 25, 2009 11:40

 

Rengaswami Says:

Hi Subash, I don’t understand what is there to carry on. The company has been systematically ripped apart & ra*** by the EXTRAVAGANT top management without any accountability thus floundering the hard earned sweat of Chairman Mr. Sham Chougule. If you recollect i was one of the first persons to comment that the company is in run down condition and there is no hope unless it is put on ventilator and resuscitated We are hearing news of Arun B Shah, of PRIME SECURITIES & Asian Electronics fame taking Rs.90 Crore stake through rights issue which has not been substantiated by Ground Reports of Company revival. So the question, what is there to carry on with no employees, no marketing, no customer, no banker support, and no light since MSEB bills are not paid, no branch offices since they are shut, no dealers, or dalal st support? In God we trust for our dues as vendors to INDAGE to be repaid. Rengaswami K

These are this reader's personal views and have not been verified by us, according to our normal practise. Editor

Mr. Rangaswamy, My sympathies are with you and all the employees who have not been paid their salaries. But Carrying On also means the salary and other similar issues of non-payment would have to be resolved. Please don't forget that even a scam like Satyam is past us and the employees are getting their salaries and keeping their jobs. Besides, the wine industry and the consumer needs companies like Indage, for lower prices and better quality. I wish you all the very best and sincerely hope the salary problem is the first to be resolved on priority. Subhash Arora 

Posted @ August 25, 2009 10:26

 

S.P. Sukumaran Says:

Mr. Subhash Arora, If you don't want to publish the comment as i said and you want to correct or delete some sentence from my comment. Then better not to publish it and don't do any favour for me. Be with your client and appreciate the work of your client.

Your comments are not clear. You are insinuating we are protecting our client. Please understand only wine and wine drinkers are our clients. All comments are subject to minor editing. We do not encourage personal attacks and try to stick to facts and issues. Subhash Arora

Posted @ August 24, 2009 14:40

 

G S Rathore Says:

Thanx for the article please reply me abt Indage future plan,will come back in the market soon or not.

Posted @ August 24, 2009 12:40

 

S.P. Sukumaran Says:

If they can't think about the employees, how can they  think about the customers and quality of the product. To make money they will do anything. Management is responisble for all this issues. Now they are telling their employees to resign then only they will clear their dues. Why were they  sleeping for last 8 months. If they can't run a company without money then how the employees family will run their home. Who is suffering ?????? 

Posted @ August 21, 2009 16:40

 

Subhash Arora Says:

While it is anybody's guess on their next course of action, here are the comments received promptly from the company, which is by itself a healthy and positive sign that the company is serious in sorting out the current problems.

1) Will there be a takeover or strategic investments?
At this stage, we are unable to comment on any strategic movement but the company is looking to raise equity with long term partners who believe in the future of the business.

2) Will Indage try and sell off some of its overseas acquisitions?
The company will examine any eventualities as they may arise.

3) Will the company go bankrupt?
No, the company will not go bankrupt.
4) I am also interested in knowing whether the wine inventory which the company possess has value.
A large majority of the stocks of the company are in winery or company operated bonds which have more than adequate storage facilities

While no one should doubt the company going bust-with over 20 years of successful running operation, some tough and bitter decisions would have to be taken by them and surely they are exploring all possibilities. One thing is for sure, they would be running a tight ship for quite a while. A takeover could be possible in that a majority of shares may change hands. The capitalisation of the company has reached such low levels that the possibility is distinct and the strategic partners maybe watching from the sidelines. The loans and liabilities may be re-scheduled and cleared in parts-in short, the procedures followed by any business venture in financial trouble will logically be followed. And yes, the stocks not in temperature controlled environment are likely to be spoilt. Even if they are kept properly stored, the flavours of these young drinking wines tend to deteriorate with time and in bad storage conditions. You may see some heavy discount offerings on these stocks. Subhash Arora

Posted @ August 21, 2009 16:30

 

Raghunandhan Says:

Dear Mr. Subhash, I appreciate your work and congratulate you for the article. I and many other shareholders are interested in knowing how will the future span out for the company: 1) Will there be a takeover or strategic investments? 2) Will Indage try and sell off some of its overseas acquisitions? 3) Will the company go bankrupt? I am also interested in knowing whether the wine inventory which the company possess has value. Because I came across an article which said that due to improper storage facilities the wine inventory will get converted into vinegar.

Posted @ August 21, 2009 16:20

 

Subhash Arora Says:

But you could possibly beat the ***t out of someone with a clenched fist too-Malcolm W (joking!)

Posted @ August 21, 2009 13:20

 

Dr. Ariff Jamal Says:

Quote from Indira Gandhi: “You cannot shake hands with a clenched fist.” Message to the Indian wine producers!

Posted @ August 21, 2009 13:16

 
       

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