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Ethos Limited

Rating - Avoid

Ethos Limited ("Ethos") was incorporated on November 5, 2007, with KDDL Limited as one of the company's promoters. In the financial year 2020, Ethos is India's leading luxury and premium watch retailer, with a 13 percent share of overall retail sales in the premium and luxury category and a 20 percent stake in the strictly luxury market.

* With a Pan India presence, Ethos has made its presence across cities and regions through a network of stores and boutiques. Its 50 stores are spread across 17 cities. Ethos Summit exclusively houses bridge to luxury, Luxury & High Luxury Brands, while Ethos Stores house the premium & fashion range as well.

* They have the sizeable portfolio of premium and luxury watches in India enabling them 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.

* Ethos also actively retails through its website. Online purchase is digitally enabled for fashion and below range, while it is voice enabled for premium & luxury range. On their website visitors can research about the latest watch launches, reviews and choose from over 7,000 premium, bridge to luxury, luxury and high luxury watches across 50 brands and as of the calendar year ending December 31, 2021, their website had 21,844,216 number of visitor sessions.

* As of March 31, 2022, they had about 2.5 million website users, over 2,83,300 active email subscriptions, 1,68,000 Instagram followers, 1,57,000 Facebook followers, and 12,300 YouTube subscriptions.

Outlook & Valuation: India will witness substantial growth in wealth and a sprouting up in the number of Affluent, HNI and UHNI individuals. Luxury watch brand sales are directly linked to the rise in high net worth individuals, thus the company is poised to grow well in the medium to long term. Ethos has a loyal base of customers and is focused on customer experience through consultation with watch experts, prompt customer service, loyalty points, guides & research on various watches and brands, and service & repair through Ethos Watch Care. The company has an Omni-channel distribution network which includes both physical stores and its online website. Relationships with owners of luxury watch brands typically take many years to develop and are difficult to replicate. Ethos has immensely benefitted from its Promoter’s long-standing relationships with luxury watch brands, developed over the years. Further, through its strong and long-standing relationships with the world’s leading luxury watchmakers, Ethos is able to offer its customers the most respected luxury watches brands in the world. However, there are some concerns with the company like the lack of exclusive agreements with the watch companies, which can lead to an increase in competition. Further, if there is an economic slowdown, demand for premium products may take a hit. The company has priced the issue at a valuation of 3.7 times annualized FY22 sales and 100 times annualized earnings. The company doesn’t have a listed peer, but the valuation demanded is too rich despite the prospects being good and the current volatile market is not conducive for primary issues with such rich valuations. Thus we recommend avoiding the issue.

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