Money in a bottle for heady returns

M. Ramesh | Updated on: May 05, 2012

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Poorni Iyer does not drink wine (or, for that matter, any alcohol). She hails from a conservative South Indian family, now settled with her businessman husband in Ahmedabad. However, for the last one year or so, wine is in her blood, thanks to Praveen Krishnamurthy.

Praveen Krishnamurthy (though also a South Indian Iyer) is not only fond of drinking wine, but is also an expert in the beverage. Most of us would uncork a bottle of wine and inhale the heady aroma, Praveen Krishnamurthy would smell something else — money. He can not only tell you in which year the wine was bottled, which vineyard the grapes came from et all—but will also tell you if you could bet on the appreciation of its financial value.

Praveen is a co-founder of Orcus Capital Advisors, a wealth management firm, and calls himself a ‘Fine Wine Investment Specialist'. Orcus has been advising Poorni's family on investments and that's how he got Poorni into it.

Poorni has invested in several asset classes, including art, and about eight months back was looking to diversify. That was when Praveen suggested wine. And now, though she does not wish to reveal her gains, she says she is glad she invested in wine.

Indian scenario

Wine, as an investment asset class, is just beginning to happen in India. Unlike other beverages, wine matures with age, and therefore its value increases. So you buy a case of wine, keep it for a few years, then sell it for a profit. Simple, right?

Wrong. To invest, you need to know wine. Praveen, come in, please.

We, in the land of sura, are no strangers to wine drinking, but the fascinating story of investing in wine begins in France, circa 1855, when Napoleon III made an epochal order, to grade the 60-odd vineyards (chateaux) in the Bordeaux region. This classification, says Praveen, is still a crucial factor in price discovery.

There are eight chateaux in the ‘investment grade'—La tour, La fite, Margaux, Haut Brion, Lynch Bages, Mouton Rothschild, Petrus and Cheval Blanc. These are geographical appellations and what is produced in one terroir cannot be produced by others. Consequently, there is a natural limit on how much each chateau produces each year. It is in the order of 15,000 cases (12 bottles of 750 ml) each year. Usually, the cases are bought en primeur even before they are bottled and there is an active future markets here.

But don't other countries produce wine too? Yes, and even India does, but they may be good for drinking, but not investment, for they don't age well. Notice that even of France we are not talking of the Burgundy wine.

There is something very special about Bordeaux region. In the words of wine and travel writer, Jane Anson, the Bordeaux region “is close enough to the Atlantic Ocean to give a gentle maritime climate, far enough north on the 45th parallel to allow a long, cool growing season to allow delicacy of flavours to develop, with the softening effect of the Gulf Stream ushering in long, warm autumns that allow the grapes to ripen fully.” And French wine is something you can put as much in the safe as in the bar.

How do you invest in wine? An expert such as Praveen Krishnamurthy will give you several options of wines with value appreciation in mind. Many factors affect the prices—vintage, of course, but also, the weather conditions of the year of bottling, availability and importantly, the rating given by a man called Robert Parker, an expert wine valuer hated in Bordeaux, for he has got it wrong only three times in the last 35 years.

So, you pay the money and your investment adviser will go to a wine merchant and buy you your case(s).

These cases are kept in a vault, under controlled temperatures and why you buy, the title to the case changes and you become its owner. Who you buy from is important to be able to “guarantee provenance” when you sell. When you want to exit (you can get price movements from the London International Vinters Exchange—LIV-EX), you either sell your title off, or you buy the case and sell the bottles one by one, to another collector, drinker, hotel or at Christie or Southeby—after perhaps keeping a bottle or two for yourself.

The fascination of “unknown” investment was partly responsible for Poorni's decision to invest in wine. For starters, Poorni invested “a small amount” but over the next few months “topped up twice”. “A small amount” for Praveen to take up is Rs 18 lakh for “below that you can't buy a decent case.” (Praveen says he has got his investors 14 per cent return in the last 8 months.)

So, today, investing in wine is an HNI game. But who knows, pretty soon, there could emerge a mutual fund that will invest in it.

mramesh@thehindu.co.in

Published on May 05, 2012
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