Ethos Watches is India’s largest chain of luxury watch boutiques holding a market share of 20% in the luxury watch retail segment and 13% in the premium and luxury watch retail segment in India. Their headquarters is situated in Himachal pradesh.
Ethos Limited is promoted by KDDL Limited. The Indian cities in which they have retail units include New Delhi, Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Chandigarh, Ahmedabad, Jaipur, Lucknow, Gurgaon, Guwahati, Ludhiana, Nagpur, Noida, Pune, and Thane
They have now decided to list their shares on both BSE and NSE. More about the company and its IPO can be found below.
About Ethos Ltd
Ethos is an authorised retailer with over 60 luxury watch brands Employing over 400 people in India. They have over 50 Physical retail stores and are also connected to their customers through their website and social media platforms. They cater to various luxury brands such as Bvlgari, H. Moser & Cie, Rado, Longines, Baume & Mercier, Oris SA, Corum, omega etc. They also sell pre-owned luxury watches through their CPO division which adds as a value addition.
You can also check IPO GMP
Ethos Ltd IPO Details
- The Company has decided to go public with an IPO size of 1,108,037 shares of 10 each
- Overall the company will raise Rs.472.3 Crores through primary route
- IPO opens on may 18 10.00 AM and closes May 20 5.00 PM IST
- Amount of investment allotted to Qualified Institutional buyers is 50% retail investors is 35% and NII quota of 15%
- Allotment date is set on May 25th
- The lot Size 17 shares with a price bandwidth of Rs.836-878
- The shares will be listed on 30th May 2022.
- An individual can maximum apply for 13 lots
Objectives of the IPO
The Proceeds is said to be used towards financing its working capital requirements.
The objectives of this IPO as per prospectus is to
- Funding working capital requirements (236.75 crores)
- Financing establishment of new stores (33.27 crores)
- Utilised for the repayment of debt (29.89 crores)
- Financing upgradation of enterprise resource planning (1.98 crores)
Key Strengths
- Leadership position and a high market share in luxury watch market
- Retail & Online modes of business
- Strategically located and well invested store network with attractive in-store experience
- No listed companies in the luxury watch retailers which mitigates competition
- Alliances with global level investors and domestic leaders
- Large Customer base
Key Risks
- Poor financial performance
- Large debt funds
- High PE Ratio
- Income Tax and Indirect tax dues from AY 2012-13
- Absence of long term contracts with customers for continual purchase
Fundamentals
Key Points on Capital Structure
- The paid up Equity share capital of the company amounts to Rs 1821.28 Lakhs and have borrowings amounting to Rs 1708.22 lakhs
- KDDL Limited, its parent company holds about 62.65% of the total shareholding and Mahen Distribution limited holds 12.59%.
- The Debt payables consist of all secured loans from banks and none from NBFCs.
- Deposits from shareholders when compared to debt from banks show a ratio of 2:1
- There were no inter corporate deposits
Revenue and Profit
The annual Revenue reported by the company has decreased by a whopping 15% when compared to the preceding year. Revenue in lakhs for FY 2020-2021 : 38,657
FY 2019-2020 : 45,785
It reported a profit after tax (PAT) of Rs 463.07 Lakhs in the financial year 2020-21. At a profit % of 1.63 which is increased when opposed to previous year % of 0.27.
Other Points
- No significant negatives found in the Auditor’s report
- Offer is available at price to earnings of around 96 times of FY21 earnings
- No Significant Legal fees or penalties
- Operations have reduced significantly during the year 2020-2021 when compared to 2019-2020
- Heavy related party transactions
- Dues to government as taxes pending for a long period of time.
Peer Comparison
Peer comparison is not possible as the luxury watch segment does not have any other listed companies
Conclusion
Being the first entrant in its segment (Luxury watch retail store, Ethos limited will surely catch the eyes of many retail investors from a naked eye. However, investors must go through the fundamentals of such new entrants as being a monopoly will also cause the industry drive to be effected by the actions of such company.
Ethos limited has displayed inconsistent financial performance over the years. There has also been a significant reduce in operations right before the year of IPO which raises concern and moreover one of the IPOs objective is to fulfill debt obligations which does not throw upon good light. The promoter’s shareholding is negligible and that would become a put off for many investors. My recommendation would be to wait on this high priced luxury brand as it is definitely not one for you medium to long term investors out there. Adios!
