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Ethos IPO review (Avoid)

Review By Dilip Davda on May 11, 2022

•    Ethos is engaged in the luxury and premium watch retail segment. 
•    It has posted inconsistent financial data so far.
•    Super profits for 9M-FY22 raise eyebrows and concern over sustainability.
•    Even on the basis of super earnings, IPO is priced exorbitantly.
•    No harm in skipping this pricy issue. 

Ethos Ltd. (Ethos) is the second company going public from KDDL (erstwhile known as Kamala Dials  & Devices Ltd.) It is India's one of the largest luxury and premium watch retail players having a 13% share of the total retail sales in the premium and luxury segment and a share of 20% when seen in the exclusive luxury segment in the financial year 2020, (Source: 'Industry Report on Premium and Luxury Watch Retail in India dated April 26, 2022, prepared by Technopak Advisors Private Limited' available on the company's website, delivering a content-led luxury retail experience to customers through online and physical presence. 

In addition to its chain of 50 physical retail stores in 17 cities in India in a multi-store format, Ethos offers an Omnichannel experience to customers through its website and social media platforms. It has a sizeable portfolio of premium and luxury watches in India enabling it to retail 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. 

In addition to premium and luxury watch retail, it has also undertaken retail of certified pre-owned luxury watches since Fiscal 2019. Ethos's Omnichannel approach is premised on an endeavour to provide experience, content, customisation, reach and convenience to customers. Its website "" is India's largest website for premium and luxury watches in terms of the number of brands and watches offered (Source: 'Industry Report on Premium and Luxury Watch Retail in India dated April 26, 2022, prepared by Technopak Advisors Private Limited' available on the Ethos website.

As of the date of Red Herring Prospectus, it has an extensive network of 50 (fifty) retail stores spread across 17 cities of the National Capital Territory of Delhi Mumbai, Maharashtra; Bengaluru, Karnataka; Hyderabad, Telangana; Chennai, Tamil Nadu; Kolkata, West Bengal; union territory of Chandigarh; Ahmedabad, Gujarat; Jaipur, Rajasthan; Lucknow, Uttar Pradesh; Gurgaon, Haryana; Guwahati, Assam; Ludhiana, Punjab; Nagpur, Maharashtra; Noida, Uttar Pradesh; Pune, Maharashtra and Thane, Maharashtra in India. As of March 31, 2022, Ethos has 424 employees, out of which 79 are women representing 18.63% of total employees.

To part finance its funding needs for repayment/pre-payment of certain borrowings (Rs. 29.89 cr.), working capital (Rs. 234.96 cr.), the establishment of new stores/renovation of existing stores (Rs. 33.27 cr.), up-gradation of ERP (Rs. 1.98 cr.), Ethos is coming out with a maiden combo offer via book building route to mobilize Rs. 472.29 cr. at the upper price band of the IPO. The company has fixed a price band of Rs. 836 to Rs. 878 per share of Rs. 10 each. It will issue fresh equity (approx. 4271080 shares) worth Rs. 375 cr. and an offer for sale of 1108037 shares (worth approx. Rs. 97.29 cr.). The issue opens for subscription on May 18, 2022, and will close on May 20, 2022. Minimum application is to be made for 17 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 23.04% of the post issue paid-up capital of the company. The issue is allocated as 50% for QIBs, 15% for HNIs and 35% for the Retail category. 

The company has done a pre-IPO placement of 302663 shares at Rs. 826.00 per share (i.e. approx. Rs. 25 cr.) in the month of March 2022. Hence the fresh issue size is reduced from Rs. 400 cr. to Rs. 375 cr. Surprisingly, it is asking more price at the upper cap from the new investors. 

The issue is jointly lead managed by Emkay Global Financial Services Ltd. and InCred Capital Wealth Portfolio Managers Pvt. Ltd. while KFin Technologies Ltd. is the registrar to the issue.  

Having issued initial equity at par, Ethos issued further equity in the price range of Rs. 22.50 to Rs. 826 between February 2009 to March 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 28.86, Rs. 36.38, Rs. 93.51, Rs. 99.09, Rs. 100.95, Rs. 121.96, Rs. 130.80, Rs. 140.24, Rs. 141.36, Rs. 180.56 and Rs. 186.24 per share. 

Post-IPO, Ethos paid-up equity capital will stand enhanced from Rs. 19.08 cr. to Rs. 23.35 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 2050.06 cr. 

On the financial performance front, for the last three fiscals, Ethos has posted turnover/net profits of Rs. 445.10 cr. / Rs. 9.89 cr. (FY19), Rs. 461.01 cr. / Rs. - (1.33) cr. (FY20), Rs. 403.14 cr. / Rs. 5.79 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 15.99 cr. on a turnover of Rs. 429.35 cr. Thus while its top-line posted inconsistency, its bottom line marking a sharp jump in pre-IPO periods raises eyebrows. 

For the last three fiscals, Ethos has posted an average EPS of Rs. 2.20 and an average RoNW of 2.83%. The issue is priced at a P/BV of 8.32 based on its NAV of Rs. 105.48 and at a P/BV of 3.43 based on its post-IPO NAV of Rs. 256.13. 

If we annualize super earnings of 9M-FY22 and attribute it to post IPO fully diluted equity, then the asking price is at a P/E of around 96 plus. Based on FY21 earnings, it comes to 354 P/E. Thus the IPO is priced exorbitantly. The sustainability of such superprofits going forward is the main concern. 

The company has not paid any dividends for the reported periods of the offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

As per offer documents, Ethos has no listed peers to compare with. 

The two merchant bankers associated with this issue have the following track records:

Emkay Global Financial Services Ltd.: This is the 2nd mandate from Emkay in the last three fiscals (including the ongoing one). The only listing that took place so far opened with a premium of 43.54% on the day of listing.

InCred Capital Wealth Portfolio Managers Pvt. Ltd.: This is the 1st mandate from InCred in the last three fiscals (including the ongoing one) and has no past track records.

Conclusion / Investment Strategy

The company has posted inconsistency in its financial performance and the super earnings for 9M-FY22 raise eyebrows as well as concern over sustainability going forward. It is asking for a higher price at the upper band against pre-IPO placement done at Rs. 826 in March 2022. Even if we arrive at the P/E based on its super earnings, the issue is highly priced at 96 plus and based on its FY21 earnings, it stands at 354. There is no harm in skipping this pricy IPO.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 11, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Ethos Limited IPO FAQs

  1. 1. Why Ethos Limited IPO?

    The initial public offer (IPO) of Ethos Limited offers an early investment opportunity in Ethos Limited. A stock market investor can buy Ethos Limited IPO shares by applying in IPO before Ethos Limited shares get listed at the stock exchanges. An investor could invest in Ethos Limited IPO for short term listing gain or a long term.

  2. 3. Ethos Limited IPO what should investors do?

    Ethos Limited IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Ethos Limited IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Ethos Limited IPO good?

    Our recommendation for Ethos Limited IPO is to avoid.

  4. 5. Is Ethos Limited IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Ethos Limited IPO.

  5. 6. When will Ethos Limited IPO allotment status?

    The Ethos Limited IPO allotment status will be available on or around May 25, 2022. The allotted shares will be credited in demat account by May 27, 2022. Visit Ethos Limited IPO allotment status to check.

  6. 7. When will Ethos Limited IPO list?

    The Ethos Limited IPO will list on Monday, May 30, 2022, at BSE, NSE.