Experts say it never falls in value if stored long enough.
With just about one per cent of the world’s wines considered investible, wine is on its way to become the new liquid gold for Indian investors. “It is recommended that they hold on to antique wines for a minimum of three years to enjoy high returns,” advises Ayesha Chenoy, director of Drayton Capital, the country’s first fine wine collection and investment company. Backed by an international advisory council, which includes Gautam Singhania and Suhel Seth, among others, Drayton Capital estimates the fine wine market to be worth $2-3 billion annually.
Sonal Holland, a renowned wine educator and a representative of Antique Wine Company, agrees that Indians with high net worth have begun to invest in wines. “There has been a lot of interest and business coming from business industrialists, CEOs, business leaders, investment bankers and also luxury hotels that are very keen to make available valuable wines to their patrons,” she says.
Having recently picked up a case of 1998 Lafite wine, Holland believes, “I thought it is still quite undervalued. Given how much the Chinese love anything with Lafite and the No 8 on the bottles, I am expecting it to at least double in value in the near term.” Several economic studies have shown that over the past 30 years, investments in fine wines outperformed equities, bonds and even gold, and survived every recession.
‘You can’t lose’
Experts insist that in no three-year rolling period have fine wines ever lost money. “The correlation between wine and equities is less than 0.03, i.e. negligible, making it the perfect portfolio hedge,” says Ishaan Ahuja, director of Drayton Capital. He says for a five-year period to June this year, an investment in the top fine wines yielded its investors 29 per cent per annum, while a similar investment in the share market would have returned 18 per cent and in the Nasdaq, less than one per cent annually.
| DOs AND DON’Ts |
| * Stick to the wines from the best vintages; these will be the most sought in the future. |
| * Always try to buy the wine as young as possible, to reap the greatest reward |
| * Purchase full cases, with their original wooden cases; this will make them more tradable and add to resale value |
| * Store the wine correctly in wine-specific storage wherever possible; this will ensure they mature at the optimum rate and achieve the highest possible resale value |
| * Wines like cool, dark conditions, free of vibrations |
| * Many international investors avoid paying duty and sales taxes by keeping their wine in bonded warehouses; against that, you will have to pay storage fees. This can be arranged by your wine merchant |
| * Keep all records and documentation pertaining to your wine collection; provenance is an important factor in the value of your investment |
| * Make sure your wines are fully insured at full replacement value |
“If we factor out the recent bullish recovery, the facts are more startling. In the two-year period of January 2007-2009, taking the worst of the sub-prime, an investment in the Sensex would have lost 18 per cent annually and the Nasdaq would have lost 23 per cent per annum. In this same period, an investment in the top fine wines still yielded 10 per cent per annum,” says Ahuja, who is also advising several clients in India.
The only caveat here is the high taxation on spirits. An Indian is allowed up to $200,000 (Rs 80 lakh) worth of investments abroad. Holland says, “Wine imported into India gets taxed quite heavily, as duties on wines are very high. Investors who are buying and selling wines for speculative purposes are advised to keep their wines overseas, either in London, France or Hong Kong, in bonded warehouses where they do not attract any VAT (value-added tax) or duty.”
