Fratelli Vineyards Ltd Management Discussions

Indian economic overview

The Indian economys real GDP grew at 7.7% in FY26, compared to 7.1% in FY25. This growth was driven by strong consumption and increasing investments, reaffirming Indias position as the fastest-growing major economy.

Indias Real GDP at Constant Prices was estimated at Rs323.12 lakh crore in FY 2025-26, compared with Rs 299.89 lakh crore in FY 2024-25.

Growth of the Indian economy

E: Estimated. Note: FY24 figure restated under new base year 2022–23. (Source: MoSPI)

- The FY23 figure (7.0%) is from the old base year series (2011·12) as the new series back-data for FY23 will only be available after December 2026.

Growth of the Indian economy quarter by quarter, FY 2025-26

Note: Q2 revised upward from 8.2% and Q3 from 7.35% under the new base year 2022–23 series released February 27, 2026. Q4 remains an estimate. (Source: MoSPI)

Inflation, policy and currency dynamics

Inflation remained benign through much of FY26, with full-year CPI estimated at an exceptionally low 2.1%. This created room for 125 basis points of cumulative rate cuts, supporting consumption and investment.

However, macro stability was accompanied by currency volatility. The Indian rupee depreciated sharply by 9.88% during FY26 — its steepest fall since FY12 — touching Rs94.83 against the US dollar. This reflected global capital flows, a strong dollar environment, and geopolitical uncertainties.

Consumption and investment

During FY26, Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) maintained above~7% growth, reflecting a well-balanced demand composition across household spending and investment activity.

Growth catalysts

Policy-led consumption boost: The Union Budget FY27s tax relief measures — particularly income tax exemptions up to Rs12 lakh—are expected to stimulate discretionary spending and reinforce consumption-led growth.

Anticipatory Pay Commission impact: The 8th Pay Commission, though expected to be implemented from FY28, is already shaping consumer sentiment, creating a forward consumption impulse.

Monetary stability: The Reserve Bank of Indias calibrated stance, with the repo rate at 5.25%, balances inflation risks with growth support, ensuring macroeconomic stability.

Credit expansion: Improved banking health and liquidity conditions are expected to sustain strong credit growth across MSMEs, housing, and retail segments.

Fiscal prudence with growth focus: The Union Budget maintains fiscal discipline while prioritising infrastructure, MSME support, skilling, and innovation – key levers for long-term productivity.

Outlook

The year under review highlights a clear divergence: while the global economy faces uncertainty, India continues to demonstrate resilience, stability and structural opportunity. The World Bank expects FY27 growth at around 6.6%, supported by strong domestic demand, private consumption, low inflation, GST rationalisation, resilient exports, policy support and favourable demographics.

Risks remain, particularly from elevated energy prices, fiscal pressures and global demand uncertainty. Yet, sustained consumption, recovering investment and deeper global trade linkages are expected to reinforce Indias role as a key driver of global growth.

Indian wine industry overview

The wine industry expects a normalisation of the domestic macroeconomic environment to support growth in FY2025–26, following a setback in the previous year. The preceding financial year witnessed a slowdown in urban consumption, with the impact more pronounced in wine than in other alcohol beverage categories due to its predominantly urban consumer base. Temporary regulatory and market disruptions, including general elections, also affected demand.

Against this backdrop, the Indian wine market was valued at USD 229 million in 2024 and is projected to reach USD 803 million by 2032. Within this, the premium wine market is expected to expand from USD 71.9 million in 2024 to USD 301.7 million by 2032, reflecting rising disposable incomes, evolving lifestyles and growing preference for premium alcoholic beverages. Expanding hospitality infrastructure, wine tourism, e-commerce and increasing acceptance of wine are further supporting demand.

Urbanisation, Western lifestyle influences and premiumisation are reshaping wine consumption, particularly among young professionals and women. Improved domestic production, premium offerings and sustainable practices are further supporting the category. Meanwhile, hospitality, wine tourism and digital accessibility are taking wine beyond established metros into emerging Tier 2 cities.

Outlook

Indias wine market is poised for strong growth through 2032, supported by rising affluence, premiumisation and evolving consumer preferences.

Growing e-commerce accessibility, increasing recognition of Indian wines and a greater focus on sustainable production are broadening the markets growth potential.

Companies that strengthen their premium portfolios, develop differentiated wine tourism experiences, and expand digital distribution are well positioned to benefit from the sectors evolving opportunities.

Company overview

Fratelli Vineyards Limited is a prominent Indian winemaker with an integrated grape-to-bottle value chain, supported by one of the countrys largest actively farmed vineyard estates and a network of long-term contract farmers. Its portfolio spans luxury, super-premium, premium and value segments, alongside innovative formats aligned with evolving consumer preferences.

Key ratios

Excellence in viticulture and terroir

A strong focus on viticulture and terroir enables the production of distinctive, high-quality wines suited to Indian conditions.

1. Imported premium grape varietals

Imported 12 grape varietals from renowned wine-growing regions of France and Italy.

2. Development of indigenous clones

Grafted these varietals onto Indian rootstock to develop indigenous clones adapted to local conditions.

3. Adapted to Indian terroir

The clones are specifically suited to Indias climatic and soil conditions, supporting consistent quality and distinctive wine characteristics.

4. Difficult-to-replicate advantage

The resulting varietals and vineyard know-how provide a differentiated foundation for producing wines that are difficult for competitors to replicate in the near to medium term.

Proprietary clones supporting a differentiated wine portfolio

A collection of proprietary grape clones enables the production of distinctive wines across a diverse portfolio, including Chardonnay, Cabernet Sauvignon, Chenin Blanc, Shiraz, Cabernet Franc, Merlot, M?ller Thurgau, Gew?rztraminer, Petit Verdot, Merlot, Sangiovese Grosso, and Sauvignon Blanc.

Scale advantage and growth potential

A significant lead in business scale over the next-largest player, combined with a differentiated business model, provides a strong foundation for sustained growth and market leadership.

Risk management

Seasonal and climatic dependence on grape harvests

Mitigation

Diversifying vineyard locations, introducing climate-resilient grape varietals, and investing in advanced irrigation and crop-management systems to reduce weather-related yield variability.

Supply chain disruptions affecting raw materials and packaging

Mitigation

Establishing long-term supplier contracts, maintaining buffer inventories for critical inputs and sourcing a significant share of packaging materials domestically to reduce import dependence.

Regulatory changes in excise duties and state alcohol policies

Mitigation

Engaging with industry associations, monitoring policy developments across states, and adapting pricing, product mix and distribution strategies to regulatory changes.

Brand visibility and competitive intensity from domestic and international players

Mitigation

Continuing investments in brand building, experiential marketing and consumer engagement through events, tourism initiatives and strategic collaborations to strengthen brand equity.

Market concentration in premium segments

Mitigation

Diversifying the portfolio across price points and formats while expanding into emerging Tier-II and Tier-III markets to broaden the consumer base and revenue streams.

Foreign exchange fluctuations on imported equipment and inputs

Mitigation

Using forward contracts and natural hedging strategies to manage currency exposure associated with imports.

Human resource management

Fratelli recognises its people as central to long-term growth, fostering a culture of collaboration, learning and accountability through training in viticulture, winemaking, customer engagement and leadership. As of FY2025-26, the workforce comprised 494 permanent employees across key functions. The Company continued to prioritise employee wellbeing, diversity, inclusion and retention, building an agile, skilled and motivated workforce focused on operational excellence.

Internal control systems and their adequacy

The Companys internal control framework supports efficient operations, asset protection, accurate financial reporting and regulatory compliance. Periodic assessments, risk management, internal audits and technology-enabled processes strengthen transparency and oversight. Regular reviews by the Audit Committee and senior management help ensure controls remain effective and responsive to evolving business and regulatory requirements.

Cautionary statement

This statement made in this section describes the companys objectives, projections, expectation and estimations which may be ‘forward-looking statements within the meaning of applicable securities laws and regulations.