Chandigarh-based luxury watch retailer, Ethos, is set to open its initial public offering (IPO) from today May 18 to May 20. The Ethos IPO consists of Rs 472 crore, including a new number of common shares worth of Rs 375 crore and an offer for sale (OFS) of up to 11.08 lakh common shares by the promoters and shareholders of the company. The company has a portfolio of 50 premium and luxury watch brands such as 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 20 percent share of the exclusive luxury segment and a 13 percent share of total retail sales in the premium and luxury segments.
Ethos IPO: Price Band
The price range for the offering is set at Rs 836-878 per share of shares with a par value of Rs 10 each.
After the issuance, the promoter’s stock will fall 19.36 percent to 61.65 percent, from the 81.01 percent they currently hold in the company.
Ethos IPO: Finance
The brokers are optimistic about the growth prospects of the company, as the Indian watch market is extensive and stuck at Rs 13,500 crore in FY 2020. It is expected to grow at a CAGR of ~ 10.6 percent over FY20-25 to Rs 22,300 crore be reached at the back of a number of factors, such as higher brand awareness, a greater buying power, digitization, and the increasing urbanization.
According to a report by research firm Anand Rathi Research, the company’s revenue grew 3 percent in FY20 and fell 16 percent in FY21 (affected by Covid-19).
EBITDA (earnings before interest, taxes, depreciation and amortization) margin ranged from 13 percent to 2 percent, while PAT (earnings after tax) margins ranged from 10 percent to -0.3 percent from FY19-21. For the first nine months of FY22, revenue was Rs 420 crore and EBITDA margin was 10.9 percent.
Ethos IPO: target
The largest retailer of luxury and premium watches aims to use the net proceeds of the tender offer to repay or prepay its debt, finance the working capital needed for the business and finance the capital expenditures to set up new stores.
Ethos IPO: Lot Size
A bidder can apply in lots and one lot will contain 17 shares of the company.
Ethos IPO: GMP Today
Shares of Ethos have yet to make its debut in the gray market. Therefore Ethos IPO GMP is not available.
Ethos IPO: Should You Subscribe?
“At the peak of the issue price band (Rs878), the stock is valued at 285x FY21 P/E and 55x FY21 EV/EBITDA and we reckon 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 concerns about reductions in discretionary spending, Covid-19 or a future pandemic and the fact that most of its suppliers are non-exclusive.
According to Nirmal Bang Equity Research, going forward, the company is expanding its stores (13 new stores across the existing 50 stores over the next three years) and with new categories it believes, Ethos can grow strongly.
“We understand that the company is very small compared to other listed retail players and focused on one category (currently), we believe that in the future there is room for growth, and given the current valuations it looks attractive from what concerns EV / EBITDA and EV / Sales-based and therefore we recommend “Subscribe long-term” to, according to a report by Nirmal Bang.
It has 50 brick and mortar stores in 17 cities in India and offers an omnichannel experience to its customers through its website and social media platforms. As of December 31, 2021, the company’s website had 2.18 crore visitor sessions.
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