Chandigarh-based luxury watch retailer, Ethos, is set to open its initial public offering (IPO) from today, May 18 till May 20. The Ethos IPO consists of Rs 472 crore including a fresh issue of equity shares worth Rs 375 crore and an offer for sale (OFS) of up to 11.08 lakh equity shares by the promoters and shareholders of the company. The company has a portfolio of 50 premium and luxury watch brands like Omega, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Bvlgari, H. Moser & Cie, Rado, Longines, Baume & Mercier, Oris SA, Corum, Carl F. Bucherer, Tissot, Raymond Weil, Louis Moinet and Balmain. It has a market share of 20 per cent in the exclusive luxury segment and 13 per cent share in the total retail sales in the premium and luxury segments.
Ethos IPO: Price Band
The price band for the offer has been fixed at Rs 836-878 per equity share of face value Rs 10 each.
After the issue, the promoter shareholding will decline 19.36 percent and come down to 61.65 percent from 81.01 percent stake held by the them currently in the company.
Ethos IPO: Financials
The brokerages are optimistic about the growth prospects of the company as the Indian watch market is sizeable and pegged at Rs 13,500 crore in FY 2020. It is expected to grow at a ~10.6 percent CAGR over FY20-25 to reach Rs 22,300 crore on the back of several factors like higher brand consciousness, greater purchasing power, digitization, and increasing urbanization.
According to a report from the research firm Anand Rathi Research, revenue of the company grew 3 percent in FY20 and fell 16 percent in FY21 (impacted by Covid-19).
The EBITDA (earnings before interest, tax, depreciation and amortization) margins ranged from 13 percent to 2 percent while PAT (profit after tax) margins ranged from 10 percent to -0.3 percent over FY19-21. For the first nine months of FY22, revenue was Rs 420 crore and the EBITDA margin came at 10.9 percent.
Ethos IPO: Objective
The largest luxury and premium watch retailer aims to utilize the net proceeds of the public offer towards repayment or pre-payment of its debt, funding the working capital required for the company and financing the capital expenditure for establishing new stores.
Ethos IPO: Lot size
A bidder will be able to apply in lots and one lot will comprise 17 shares of the company.
Ethos IPO: GMP today
Shares of Ethos are yet to make its debut in grey market. Hence, Ethos IPO GMP is not available.
Ethos IPO: Should You Subscribe?
“At the high of the issue price-band (Rs878), the stock is valued at 285x FY21 P/E and 55x FY21 EV/EBITDA and we reckon a high and rising market share and unique brand partnerships to be positives,” a report from Anand Rathi Research said while recommending investors to ‘subscribe’ to the issue.
However, the brokerage highlights the concern of reduction in discretionary spending, Covid-19 or any future pandemic and most of its suppliers being non-exclusive.
According to Nirmal Bang Equity Research, going forward, the company is expanding its stores (13 new stores over the existing 50 stores in the next three years) and with new categories it believes, Ethos can grow strongly.
“We understand that the company is very small as compared to other listed retail players and focused on one category (currently), we believe that there is scope for growth in the future, and on current valuations, it looks attractive on EV/EBITDA and EV/Sales basis and therefore, we recommend “Subscribe for Long Term”, a report from Nirmal Bang said.
It has 50 physical retail stores in 17 cities in India and offers an omnichannel experience to its customers via website and social media platforms. As of December 31, 2021, the company’s website had 2.18 crore visitor sessions.
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