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When this writer met Praveen Krishnamurthy, the wine-guru was studying a problematic order from a customer. Somebody was to soon celebrate his 50th birthday and wanted Krishnamurthy to get him three cases of 1963 Beychavelle La Chateau, worth about Rs 18 lakh.
“I am getting information that the stock is available in China,” says Krishnamurthy, “but I am not comfortable with it.”
That “comfort” was about genuineness of the stock which, in Praveen’s business, is of critical importance.
But the birthday boy is an odd customer. Most of Krishnamurthy’s customers are high net worth individuals (HNIs) for whom wine is more than a bottled pleasure — it is an asset class. They invest in wine in anticipation of appreciation in value.
Ownership
Most of them do not ever see the bottles they own. The bottles lie in a climate-controlled vault in France. Unless an odd customer, who might want it for a birthday bash, asks for delivery, the ‘assets’ sit in the vault, for decades, or even centuries, and only the title to their ownership changes hands.
Ever since a research project for his dissertation for his management degree took him to the vaults of Berry Bros & Rudd of Basingstoke, UK (“since 1698”), Krishnamurthy has made wine his business. Orcus Capital Advisors, his wealth management firm, advises HNIs on putting money in wine. Orcus has opened a new asset class to Indian HNIs.
Praveen says he has been able to get his investors 14 per cent return in eight months — though such returns may not be regular feature.
Investment
What is this business of ‘investing in wine’? For a proper answer, you not only have to go to France, but also travel back in time, to the days of Napoleon III, circa 1855, when the king ordered grading of the 60-odd vineyards (chateaux) in the Bordeaux region.
Due to a combination of geographical and climatic reasons, the wine from this region ages like none other, and in Berry Bros & Rudd, there sits a bottle of wine that was bottled in 1775, with a handwritten label. But the ‘grading exercise’ made the wines ‘investment grade’. There are eight investment grade chateaux – la tour, la fite, margaux, haut brion, lynch bages and mouton rothschild, petrus and cheval blanc.
These are geographical appellations and what is produced in one terroir cannot be produced elsewhere. Each chateaux produces about 15,000 cases (12 bottles of 750 ml) annually. Usually, the cases are bought en primeur even before they are bottled.
These cases then sit in vaults and the title to them is actively traded. You get price movement information from the London International Vinters Exchange, or LIV-EX. Prices are affected by a number of factors – vintage, demand and supply, weather conditions of the year of bottling and ratings.
New concept here
While wine as an asset class is common in many parts of the world, it is just beginning to gain ground in India. Abroad, there are ‘wine funds’ such as The Wine Investment Fund of London or The Fine Wine Fund.
The fund managers stipulate a lock-in period for the investors and usually allow redemption during a pre-specified two-week window. But in India, at the moment the asset is available only to select HNI investors, assisted by wealth advisors.
There are advantages of a wine fund. Today, for Praveen Krishnamurthy to make a “decent buy” of wine, his customer has to invest about Rs 20 lakh at the least. If there was a fund, you could invest, say, Rs 5 lakh. More importantly, when an individual is investing, right-timing is a bit difficult — by the time the investment decision is made, a good buy opportunity is gone. Furthermore, a fund can possibly buy en premieur – before bottling.
Now that wine investing is beginning to happen, presumably it is only a matter of time before wine funds evolve in India. But till such time, this asset class will inevitably be confined to the super-rich.
Still the good news is that today it is possible to put some money in a case of wine when you are 25, and another quarter century later, have a bottle delivered home for your birthday and take an early retirement with the cash obtained from the rest.
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