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Ethos, a luxury watch retailer located in Chandigarh, will launch its initial public offering (IPO) on May 18 and 20. The Ethos IPO has valued at Rs 472 crore and includes a fresh issue of equity shares worth Rs 375 crore as well as an offer for sale (OFS) of up to 11.08 lakh equity shares by the company’s promoters and shareholders. 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 are among the company’s 50 premium and luxury watch brands.
Price Band for Ethos IPO
The offer’s price range has been set at Rs 836-878 per equity share with a face value of Rs 10 apiece.
Following the issue, the promoters’ shareholding in the company will drop 19.36 percent to 61.65 percent, down from their existing 81.01 percent stake.
IPO Financials for Ethos
The brokerages are confident about the company’s future prospects, citing the substantial Indian watch market, which is expected to reach Rs 13,500 crore in FY 2020. On the back of many factors like improved brand awareness, greater purchasing power, digitization, and growing urbanization, it is predicted to rise at a 10.6% CAGR over FY20-25 to reach Rs 22,300 crore.
According to a report by the research firm Anand Rathi Research, the company’s sales increased by 3% in FY20 but decreased by 16% in FY21 (impacted by Covid-19).
During FY19-21, EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins ranged from 13% to 2%, while PAT (profit after tax) margins ranged from 10% to -0.3%. Revenue was Rs 420 crore in the first nine months of FY22, with an EBITDA margin of 10.9 percent.
Objectives of Ethos IPO
The world’s leading luxury and premium watch retailer plans to use the net proceeds of the public offering to repay or prepay its debt, support the company’s working capital needs, and fund capital expenditures for new shop openings.
Lot size in the Ethos IPO
A bidder can apply in lots, with each lot containing 17 shares of the corporation.
GMP today for Ethos IPO
Ethos shares have yet to be listed on the grey market. As a result, Ethos IPO GMP is unavailable.
Should You Invest in the Ethos IPO?
“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,” Anand Rathi Research wrote in research advising investors to “subscribe” to the issue.
However, the brokerage expresses concern about a decline in discretionary spending, Covid-19 or any future pandemic, and the non-exclusive nature of most of its suppliers.
According to Nirmal Bang Equity Research, the company is increasing its outlets in the future (13 additional locations over the existing 50 in the next three years) and believes Ethos can grow strongly with new categories.
“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”, according to a Nirmal Bang report.
It operates 50 physical retail outlets in 17 Indian cities and provides clients with an omnichannel experience via its website and social media platforms. The company’s website had 2.18 crore visitor sessions as of December 31, 2021.