Ethos IPO Review and Analysis – Should you Invest?
Ethos IPO (Ethos Limited IPO) Details
Ethos Limited is coming up with an IPO, which would open for subscription on 18th May, 2022. Ethos Limited is one of the largest luxury and premium watch retailer in India. Company generated stable revenues in the last 3 years and 9 months. Its margins fluctuating during the similar period. Should you invest in Ethos IPO? What are the risk factors in this IPO? Is the IPO Valuation justified? Let me do IPO review and provide complete analysis.
About Ethos Limited
Ethos Limited is one of the largest luxury and premium watch retailer in India.
Company had 13% share of the total retail sales in premium and luxury segment and 20% if we see exclusively luxury segment for FY20.
Company delivers these products through online and physical presence. It has 50 physical retail stores in 17 cities in India (including New Delhi Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Chandigarh, Ahmedabad, Jaipur, Lucknow, Gurgaon, Guwahati, Ludhiana, Nagpur, Noida, Pune and Thane) in a multi store format and offer an omni channel experience to its customers through its website and social media platforms. It has a sizeable portfolio of premium and luxury watches in India enabling them to retail 50 premiums 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.
Ethos IPO dates, issue details, Size and Price Band
|IPO Opening Date||18-May-22|
|IPO Closing Date||20-May-22|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 836 to Rs 878 per equity share|
|Lot Size||17 Shares|
|Listing at||BSE and NSE|
|Total Issue Size||Rs. 472.29 Crores|
|Fresh issue||Rs. 375 Crores|
|OFS||Rs. 97.29 Crores|
What are the competitive strengths of Ethos Limited?
1) Company has access to the large luxury customer base
2) Company is the leading luxury watch Omnichannel retail player of India
3) It is strategically located and well invested store network with attractive in-store experience
4) Company has strong and long-standing relationships with luxury watch brands
5) Company enjoys leadership position in an attractive luxury watch market
6) It is the early mover advantage in certified pre-owned business
7) Founder-led company supported by a professional management team
What are the Objects of the IPO Offer?
Ethos IPO Size is Rs 472.29 Crores which has both OFS and fresh issue.
1) Offer for Sale (OFS) for Rs 97.29 Crores: Under OFS, selling shareholders would get entire money and the company would not get any funds.
2) Fresh issue of Rs 375 Crores: Fresh issue would be used for the following:
- Repayment or pre-payment, in full or in part, of all or certain borrowings availed by the company.
- Funding working capital requirements of the company.
- Financing the capital expenditure for establishing new stores.
- Financing the renovation of certain existing stores and upgradation of enterprise resource planning software.
- General corporate purpose.
Who are the promoters of Ethos Limited?
Yashovardhan Saboo, KDDL Limited and Mahen Distribution Limited are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years and 9 months.
|Financial Year ending / Period ending (Amt in Mns)|
|Profit After Tax||988.9||-133.4||578.5||1,598.8|
Positive Factors in Ethos IPO
Here are the key reasons to invest in this IPO.
1) Company is India’s largest luxury and premium watch retailer.
2) Company has a large base of luxury customers with a deep understanding of digital and omnichannel commerce.
3) Company has generated stable revenues in the last 3 years and 9 months.
Risk Factors of investing in Ethos IPO
1) Company margins are volatile. It incurred loss in FY20. Its margins dipped in FY21 compared to FY19. It generated 2.2% margins in FY19 (Rs 98.8 Crores), however, shown surprise increase in margins for the 9 months ended Dec-21 to 3.72% (Rs 159.8 Crores). Majority of the increase in margins for this period came through “inventory re-valuations” which we cannot expect every year.
2) Covid pandemic has affected company business. Such uncertain pandemics can affect in future too.
3) Company does not have definite agreements for the supply of products with the majority of its suppliers. Failure to successfully leverage its supplier relationships and network could adversely affect them.
4) Company has certain contingent liabilities for the past financial years. If materialize, may adversely affect its financial condition.
5) Investors should read complete risk factors indicated in the RHP before investing in this IPO.
Ethos IPO valuation
Ethos IPO price band is Rs 836 to 878 per share.
1) If we consider last 3 years weighted average EPS of Rs 2.2 and the upper price band of Rs 878, P/E works out to 400x.
3) Similarly, if we consider FY2021 EPS of Rs 3.15 and the upper price band of Rs 878, P/E works out to be 278x.
4) If we take 9 months ended Dec-21 EPS and annualize it, the P/E works out to be 75x.
5) Means company is asking the upper price band of IPO price of Rs 878 in the P/E ratio of 75x to 400x.
As per the RHP, there are no listed peers to compare the P/E Ratio. However, share price at a P/E ratio of up to 400x in general is considered as overpriced.
Ethos IPO Dates – Subscription, Allotment and Listing Dates
|Finalization of Allotment||25-May-22|
|Initiation of Refunds||26-May-22|
|Credit to Demat Account||27-May-22|
|IPO Shares Listing Date||30-May-22|
How to buy Ethos IPO online through Zerodha?
You can login to your demat account, visit the IPO section and apply for this IPO during the subscription dates.
You can also apply this IPO on Zerodha. If you do not have Zerodha account, sign-up here and proceed to the next step.
Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.
Follow below steps to apply this IPO in Zerodha platform:
1) Visit the Zerodha portal and login to Console.
2) Go to Portfolio and click the IPOs link.
3) Visit ‘Ethos Limited IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty and the Price which you want to bid.
5) Click on ‘Submit’ IPO application form.
6) Visit the UPI App (net banking or BHIM) to approve the mandate.
Ethos IPO – Should you Invest or not?
Ethos Limited is India’s largest luxury and premium watch retailer. It has access to base of luxury customers. It has 50 premium brands in watch portfolio.
Company revenues are stable in the last 3 years and 9 months.
Company margins are fluctuating. Sudden improvement in margins for the 9 months ended Dec-21 is majorly attributable to revaluation of inventory which would not come every year.
Its issue price is overpriced.
Considering all these positive factors and negative factors indicated above, investors can stay away from this IPO at this point of time.
Source: Ethos IPO Prospectus (RHP)
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