Ethos’ Rs 472 crore IPO opened for subscription on Wednesday and will close on May 20. Chandigarh-based Eths has raised Rs 141.69 crore from nine anchor investors before selling its initial shares. The company informed the exchanges that it had allotted 16.13 lakh shares at Rs 878 per share for anchor investors on Tuesday, May 17, 2022. Anchor investors in Ethos IPO include ICICI Prudential Flexicap Fund, Jupiter India Fund, St. Capital Fund, Cohesion MK Best Ideas Sub-Trust, Jupiter South Asia Investment Company Limited-South Asia Accessz Fund, South Asia Accessz Fund. Ended Fund Series 2, UPS Group Trust and Nomura Singapore Limited ODI.
Out of the total allocation of 16,13,725 equity shares to anchor investors, 5,29,601 equity shares (i.e. 32.82% of the total allocation of anchor investors) were allotted to a domestic mutual fund through a total scheme. There are no listed companies in India that engage in business like Ethos.
Ethos has a large portfolio of premium and luxury watches in India, enabling it to retail 50 premium and luxury watch brands such as Rolex, Omega, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Bvlgari, Rado, Longines, Tissot. The company enjoys a 13% market share in India in the ‘premium and luxury watch retail’ segment.
Should you subscribe to Ethos IPO?
Nirmal Bank advised investors to subscribe to Ethos IPO in the long run, while ICICI Direct advised to avoid this problem. Nirmal Bang says he is expanding his company’s stores (13 new stores, more than 50 existing in the next three years). “With the new divisions we believe this could grow exponentially. We understand that the company is very small compared to other listed retail players and focusing on one segment (currently), we believe that there is potential for growth in the future, ”it says.
Despite Ethos following an asset light business model, more capital blockages in inventory (inventory days: 170+) and lower margin companies reporting single digit RoE (~ 7-8%), ICICI Direct said. At the top end of the price band, Ethos is priced at 95x P / E on an annual FY22E basis. “Sustainable growth in profitable growth and improved return ratios will be key, observable, moving forward,” the research firm added.
Analysts at Marwadi Financial Services have suggested subscribing to the issue, but with caution. When Angel One gave it a ‘neutral’ rating. Analysts at Angel One say that in terms of valuation, the post-issue TTM P / E operates at 96.2x (the upper end of the issue price band), which is high considering the company’s historical top-line and bottom-line negatives. CAGR of ~ 7% and ~ 24% for FY19-21, respectively. “However, Ethos has a healthy market share in total retail sales in the premium and luxury segments. Ethos also has strong brands and a wide range of products, but we believe that these positive aspects are reflected in the evaluations directed by the company, ”he added.
Marwadi Financial Services has assigned a subscription (caution) rating to the IPO as the company is one of the top luxury watch omnichannel retail players in India. “However, the price of the IPO is very high and the company needs to continue to improve its business at a high growth rate to justify its valuation, which warns us from a long-term perspective,” it added.