A full-bodied Portfolio
Indian investors are developing a nose for vintage wine, which can fetch returns that outstrip gold, equities and property.
As investment bankers in Morgan Stanley and Credit Suisse in London's Canary Wharf, Ishaan Ahuja and Ayesha Chenoy often ran into British and French colleagues who traded in fine wines. Ten years in London and frequent travelling and socialising led to an interest in vintages - wines made of grapes harvested in a single year - both in terms of taste and in their value as an investible asset. The two bankers met in 2008 and decided to take this interest further. In 2009, they quit their jobs and moved back to India. After a year of research that included data analysis, wine studies and examinations, and frequent visits to vineyards in Bordeaux in France, the duo launched Drayton Capital, India's first wine advisory and investment firm in August this year. "We know non-resident Indians who have invested more than a million pounds in wine," says Chenoy. "Wealth creation has led to an increase in the number of high net worth individuals and wine consumption in India.
We felt the time was right," she adds. Their sentiments are echoed by the London-based The Antique Wine Company, which also came calling on Indian shores in July this year. "We had been a getting a lot of queries from Indian buyers, especially after the release of the 2009 vintage, considered the best of the lot," says Sonal Holland, Country Representative at Antique Wine. The company trades in exceptionally rare vintages and also offers investment advisory services. "With India set to become the fifth largest economy in the world by 2020, consumption of fine wines is bound to increase, and so will their presence in investment portfolios," adds Holland, who by way of example points to a first-time client who has invested as much as Rs 55 lakh in top vintages.
Ravi Venkatachalam, whose company, Times of Lord, retails and distributes Swiss watch brands Breitling and Ulysse Nardin in India, is another first-time investor. Venkatachalam has always liked Italian and French red wines, but started investing in them only recently. He has a Chteau Margaux and Italian fine wine Frescobaldi in his portfolio. "Investing in fine wines is a good way to diversify your portfolio," says Venkatachalam, who also invests in equities, property and vintage cars. Concurs Tony Singh, who runs a designer studio and a wellness spa chain called Salus in Mumbai: "I had invested in art and started investing in wines this year to widen my portfolio.
I have invested in Chteaux Lafite and Haut-Brion." Ahuja and Chenoy attribute this increasing investor interest to the strong performance of fine wines in the face of the recession. "Fine wines have never lost money in any three-year rolling period. Between January 2004 and 2009, which includes the subprime crisis, an investment in the top 100 fine wines yielded an average return of 16.1 per cent per annum. A similar investment in the BSE 100 returned 10.2 per cent, and in the NASDAQ, a sorry-6.5 per cent," says Ahuja.
Even auction houses are taking note of the rising interest in India. "There has been an increase in the numbers of queries coming from Indian buyers on our online bidding platform," points out James Reed, Wine Director at Sotheby's London. Reed attributes the increasing interest to extensive media coverage and spiralling fine wine prices. He adds: "The Chinese market has grown exponentially and we see an increase in India, too." Research firm Datamonitor pegs the size of the Indian wine market at Rs 1,650 crore and expects it to nearly double to Rs 2,800 crore by 2013. There is no substantiated data that quantifies the increase in Indian investments, but Vikram Sethi, owner of Shervick Services, estimates it to be about 25 per cent per annum. His company imports and distributes wines from Italy, Spain and France. Sethi is also an avid investor.
So what is it about wine that attracts the same kinfolk who are used to getting their returns from comparatively bland assets like stocks, bonds equities and gold? The answer could well lie in the supply chain mechanism, which is critical to investments in fine wines. Like all other asset classes, a wine, too, must appreciate in value to be considered worthy of investments; most investment grade wines are red wines that come from Bordeaux. "Ninety per cent of fine wines come from Bordeaux, but the demand is global," says Ahuja. The best Bordeaux wines are referred to as the first growths, which are the blue-chip stocks of the wine world. These wines come from the top chteaux in Bordeaux that boast optimum topography, climate and superior wine-making skills. Since the produce varies every year, thanks to changing climate and temperatures, no vintage can ever be replicated. Certain vintages turn out to be more superior in quality and are, thus, more sought after than others, leading to an increase in demand that far outstrips supply.
About 80 per cent of the wine market gets traded on the Liv-ex Fine Wine Exchange and investors use the Parker's Rating System - a scale of 100 devised by American journalist Robert Parker for buying and selling wine; a score of 95 is considered investment worthy. But knowing the names of the wines and their scores is not enough. Both Holland and Ahuja lay emphasis on provenance.
"The wines should be fully insured at full replacement value and all the documents and records should be in place," says Holland. That is where entities like The Antique Wine Company, which provides buying, selling and storage services and also boasts an inventory of fine wines, come into the picture. As does Drayton Capital, which does not buy inventory, but is an advisory firm that assists in the investment process from start to finish.
"Bordeaux has over 500 chteaux and we look at the top 30. Through tie-ups with chteaux, ngociants (wholesalers), auction houses, and wine cellars in London, Hong Kong and Bordeaux, we aim to provide the best possible wine at the best possible price to our clients," says Ahuja. As wine investment companies, both firms take care of all the paperwork and documentation that entails a wine purchase or sale.
So, which are the hot picks this year as far as investments go? Holland recommends the 2009 vintage and thinks it will provide healthy returns to investors, as it is young and has not matured. Ahuja and Chenoy differ. "2009 is an exceptional vintage, but we would not recommend it to new investors as we feel it is overpriced and is still in the barrel (En Primeur)." The duo consider 2000 and 2005 to be fit for investments.
"These are equally good vintages that are being consumed daily and, in some cases, are also cheaper than 2009," says Chenoy. What do their own portfolios look like? While Holland has invested in the first five growths of the 2009 vintage, Ahuja's portfolio includes Lafite Rothschild 2003. "We purchased Lafite 2003 at the end of 2006 for 3,600 a case. It is now trading at 11,000 a case, and we are in the process of selling it soon," says Ahuja.
Investors in India, however, have their own share of deadlocks. High import duties, unfavourable weather conditions, and lack of storage facilities prevent some passionate investors from getting their stock to India. "I would like to bring some of my stock here, but I am not able to due to Indian weather conditions," laments Venkatachalam. Of course, there are investors who buy solely for returns and keep their stocks in overseas cellars for years. But for the bulk of investors it is as much about the taste of these full-bodied red wines as it is about exceptional returns. And every time they open a top vintage, there is one less for the world to enjoy, propelling prices further.
We felt the time was right," she adds. Their sentiments are echoed by the London-based The Antique Wine Company, which also came calling on Indian shores in July this year. "We had been a getting a lot of queries from Indian buyers, especially after the release of the 2009 vintage, considered the best of the lot," says Sonal Holland, Country Representative at Antique Wine. The company trades in exceptionally rare vintages and also offers investment advisory services. "With India set to become the fifth largest economy in the world by 2020, consumption of fine wines is bound to increase, and so will their presence in investment portfolios," adds Holland, who by way of example points to a first-time client who has invested as much as Rs 55 lakh in top vintages.
Ravi Venkatachalam, whose company, Times of Lord, retails and distributes Swiss watch brands Breitling and Ulysse Nardin in India, is another first-time investor. Venkatachalam has always liked Italian and French red wines, but started investing in them only recently. He has a Chteau Margaux and Italian fine wine Frescobaldi in his portfolio. "Investing in fine wines is a good way to diversify your portfolio," says Venkatachalam, who also invests in equities, property and vintage cars. Concurs Tony Singh, who runs a designer studio and a wellness spa chain called Salus in Mumbai: "I had invested in art and started investing in wines this year to widen my portfolio.
I have invested in Chteaux Lafite and Haut-Brion." Ahuja and Chenoy attribute this increasing investor interest to the strong performance of fine wines in the face of the recession. "Fine wines have never lost money in any three-year rolling period. Between January 2004 and 2009, which includes the subprime crisis, an investment in the top 100 fine wines yielded an average return of 16.1 per cent per annum. A similar investment in the BSE 100 returned 10.2 per cent, and in the NASDAQ, a sorry-6.5 per cent," says Ahuja.
Even auction houses are taking note of the rising interest in India. "There has been an increase in the numbers of queries coming from Indian buyers on our online bidding platform," points out James Reed, Wine Director at Sotheby's London. Reed attributes the increasing interest to extensive media coverage and spiralling fine wine prices. He adds: "The Chinese market has grown exponentially and we see an increase in India, too." Research firm Datamonitor pegs the size of the Indian wine market at Rs 1,650 crore and expects it to nearly double to Rs 2,800 crore by 2013. There is no substantiated data that quantifies the increase in Indian investments, but Vikram Sethi, owner of Shervick Services, estimates it to be about 25 per cent per annum. His company imports and distributes wines from Italy, Spain and France. Sethi is also an avid investor.
So what is it about wine that attracts the same kinfolk who are used to getting their returns from comparatively bland assets like stocks, bonds equities and gold? The answer could well lie in the supply chain mechanism, which is critical to investments in fine wines. Like all other asset classes, a wine, too, must appreciate in value to be considered worthy of investments; most investment grade wines are red wines that come from Bordeaux. "Ninety per cent of fine wines come from Bordeaux, but the demand is global," says Ahuja. The best Bordeaux wines are referred to as the first growths, which are the blue-chip stocks of the wine world. These wines come from the top chteaux in Bordeaux that boast optimum topography, climate and superior wine-making skills. Since the produce varies every year, thanks to changing climate and temperatures, no vintage can ever be replicated. Certain vintages turn out to be more superior in quality and are, thus, more sought after than others, leading to an increase in demand that far outstrips supply.
About 80 per cent of the wine market gets traded on the Liv-ex Fine Wine Exchange and investors use the Parker's Rating System - a scale of 100 devised by American journalist Robert Parker for buying and selling wine; a score of 95 is considered investment worthy. But knowing the names of the wines and their scores is not enough. Both Holland and Ahuja lay emphasis on provenance.
"The wines should be fully insured at full replacement value and all the documents and records should be in place," says Holland. That is where entities like The Antique Wine Company, which provides buying, selling and storage services and also boasts an inventory of fine wines, come into the picture. As does Drayton Capital, which does not buy inventory, but is an advisory firm that assists in the investment process from start to finish.
"Bordeaux has over 500 chteaux and we look at the top 30. Through tie-ups with chteaux, ngociants (wholesalers), auction houses, and wine cellars in London, Hong Kong and Bordeaux, we aim to provide the best possible wine at the best possible price to our clients," says Ahuja. As wine investment companies, both firms take care of all the paperwork and documentation that entails a wine purchase or sale.
So, which are the hot picks this year as far as investments go? Holland recommends the 2009 vintage and thinks it will provide healthy returns to investors, as it is young and has not matured. Ahuja and Chenoy differ. "2009 is an exceptional vintage, but we would not recommend it to new investors as we feel it is overpriced and is still in the barrel (En Primeur)." The duo consider 2000 and 2005 to be fit for investments.
"These are equally good vintages that are being consumed daily and, in some cases, are also cheaper than 2009," says Chenoy. What do their own portfolios look like? While Holland has invested in the first five growths of the 2009 vintage, Ahuja's portfolio includes Lafite Rothschild 2003. "We purchased Lafite 2003 at the end of 2006 for 3,600 a case. It is now trading at 11,000 a case, and we are in the process of selling it soon," says Ahuja.
Investors in India, however, have their own share of deadlocks. High import duties, unfavourable weather conditions, and lack of storage facilities prevent some passionate investors from getting their stock to India. "I would like to bring some of my stock here, but I am not able to due to Indian weather conditions," laments Venkatachalam. Of course, there are investors who buy solely for returns and keep their stocks in overseas cellars for years. But for the bulk of investors it is as much about the taste of these full-bodied red wines as it is about exceptional returns. And every time they open a top vintage, there is one less for the world to enjoy, propelling prices further.
