Ethos Ltd, one of the largest watch retailers in the Indian premium and luxury watch industry, made its market debut on Monday, May 30. Shares of Ethos got listed at a discount on the NSE at Rs 825 per share, down 6 per cent from the IPO price of Rs 836-878 apiece per share. On BSE, the stock debuted at Rs 830 apiece. The company had launched its initial public offering on May 18 and the last day to subscribe to the IPO was May 20. The company, in the IPO garnered Rs 472 crore at Rs 878 per share through fresh issue of shares aggregating up to Rs 375 crore and an offer for sale of 1,108,037 shares by shareholders and promoters aggregating up to Rs 97.29 crore.
Ethos has a sizeable portfolio of premium and luxury watches in India, enabling it to retail 50 premium and luxury watch brands like Rolex, Omega, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Bvlgari, Rado, Longines, Tissot. The company enjoys a market share of 13% in the ‘premium and luxury watch retail’ segment in India.
“Over the last five years, revenues have grown at a moderate pace of 11 per cent CAGR in FY17-22 (annualising 9MFY22 sales). The company has clocked in average PAT margins of 2-2.5 per cent (except for 9MFY22 wherein the company reported higher PAT margins of 3.8 per cent). Despite Ethos following an asset-light business model, higher capital blockage in inventory (Inventory days: 170+) and lower margins have translated into the company reporting single-digit RoE (7-8 per cent). At the upper end of the price band, Ethos is valued at 95x P/E on annualised FY22E basis,” ICICI Securities said in a note.
What Should Investors Do?
For investors, Ravi Singh, vice president and head of research at Share India advised, “Ethos issue price seems expensive if we compare it with the company’s performance in the past year. The prevailing market conditions and valuations suggest that the IPO may list around the issue price or at a minor discount. Investors may book their positions and wait to re-enter at lower levels for short term gains or till the market sentiments stabilize. Much will depend upon the kind of opening the stock market gets on Monday.”
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