IPO Note - Ethos Ltd By Nirmal Bang
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Company Overview
Ethos is the India’s one of the largest luxury and premium watch retail player having 13% share of the total retail sales in premium and luxury segment and a share of 20% when seen in exclusively luxury segment in the FY20 delivering a content-led luxury retail experience to the customers through online and physical presence
Ethos’s promoter, KDDL Limited, is listed on the BSE and the NSE. Subsequently, the retail business of KDDL was hived off into a Company under the name and style of Kamla Retail Limited in 2008 and it was renamed as Ethos Limited in 2012, in order to consolidate the business of luxury watch retail under one umbrella for better management and focused approach.
Objects of the Issue
The issue of Rs 469 cr includes Rs 94 cr offer for sale and balance Rs 375 cr fresh issue which would be used for (a) pre-payment of certain borrowings (b) funding working capital requirements (c) establishing new stores and renovation of certain existing stores
Investment Rationale
* Long-Standing Relationships with Luxury Watch brands
* Access to large luxury customer base
* Leveraging the leadership position of luxury watch market for other luxury segments
* Early mover advantage in certified pre-owned business
* Improving profitability
Valuation and Recommendation
Going forward, the company is expanding its stores (13 new stores over 50 existing in next three years) and with new categories we believe it can grow strongly. We understand that the company is very small as compared to other listed retail players and focused on one category (currently), we believe that there is scope for growth in future. On current valuations, it looks attractive on EV/EBITDA and EV/Sales basis and therefore, we recommend “Subscribe for Long Term”.
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