Ethos Ltd - IPO Note

Watches & Accessories

Ethos Ltd - IPO Note

Watches & Accessories

Price range
Rs. 836-878
Issue Period:
May 18, 2022
May 20, 2022
May 20, 2022

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 472 cr.
Public Issue
0.6 cr. shares
Market cap post IPO
2050 cr.
Equity Pre - IPO
18.78 cr.
Equity Post - IPO
23.34 cr.
Issue type
Fresh Issue & OFS

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths

Leadership position in the luxury watches market:
Ethos is the largest retailer for luxury watches in India commanding 20% market share of the organized market for luxury watch retail in India. They have the sizeable portfolio of premium and luxury watches in India enabling them to retail 50 premium and luxury watch brands. Ethos benefits from strong levels of domestic demand for luxury watches.  Brands command significant pricing power, which has enabled them to raise the list prices of their products almost every year. The retailer margins on premium watches ranges from 20% - 25%, on bridge to luxury segment ranges from 25% - 28%, and on luxury & above segments ranges between 20% - 35%.  The fact that luxury and above watch segments demand better margins allows the company to have better profitability in sale of high value luxury and above category. The company derives significant benefits from the tendency of consumers in the luxury watch markets to become repeat customers and span age and income groups.

Strategically located and well invested store network:
With 50 retail stores, over 7,000 varied premium & luxury watches and about 30,000 watches in stock at any given time, company’s retail stores are located strategically in shopping malls, airport terminals and other premium areas. Their network of retail stores allows them to cater to a large section of consumers and ensure effective penetration of the luxury watch brands that they retail.

Long-Standing Relationships with Luxury Watch brands
The retailing of luxury watches requires formal approval from the owner of the luxury watch brand to carry a particular product on a store-by-store basis, rather than being allowed to distribute products across an entire network. Brand owners control distribution through strict, selective distribution arrangements, which are limited by geography, are typically granted on a store-by-store basis and contain a wide range of requirements on how their products are to be displayed, how they can be sold. Relationships with owners of luxury watch brands typically take many years to develop and are difficult to replicate. Through its strong and long-standing relationships with the world’s leading luxury watch makers, Ethos is able to make a strong footing in the segment.

Leveraging the luxury watch retail business to expand into other luxury verticals
Ethos has a thorough understanding of the luxury customer and the related environment in India and has a ready database of HNIs in India. All of their retail platforms are well maintained and appeal to customers interested in purchasing luxury products. They intend to leverage their strength of understanding of the luxury market, customers and products, reputation for authentic, high-end luxury products. They have ventured into sale of pre-owned luxury watches and intend to expand into other luxury category goods.

Increasing the watch brands portfolio
Ethos endeavors to improve sales and hence create value for their brand relationships through improved merchandising, refined marketing and new data driven brand specific experiences. They want to ensure that their platform maintains its position as a go-to premium and luxury watch retail destination for its diverse brand relationships. Many of the world’s leading watch brands are not yet present in India and Ethos intends to partner with them and bring these brands to India. In addition to increasing their brand portfolio, they also intend to enter into and increase their exclusive arrangements for sale and marketing of premium and luxury watch brands in India.


No exclusive partnership with brands:
The Company has not entered into any exclusive arrangement with most of its suppliers. In the absence of exclusive arrangements, their competitors may offer better deals & discounts to the customers and hence, intensifying competition.

Higher competition from online retailers:
E-tailers that exclusively have only an online presence and no physical presence, may be able to price their products lower by leveraging on their asset light model, while introducing newer products and maintaining quality control.

Seasonality and discretionary nature of the business:
The Company’s sales are impacted by seasonality, which may cause the revenues to vary significantly between different quarters in a Fiscal. In addition, due to high end, the business of the company is highly discretionary in nature and overall macro-economic situation affects the company like it happened during Covid. 

Company Description

Incorporated on November 5, 2007 and promoted by KDDL Limited (one of the promoters), 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 FY20. The company delivers premium luxury watches through websites, social media platforms and physical stores. Ethos Limited operates on an omnichannel model and allows customers to order products either offline or online. The company's watch portfolio has 50 premium brands including 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.

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.


Ethos is the leading luxury watch Omni-channel retail player of India with access to a large base of luxury Customers. Company enjoys leadership position in an attractive luxury watch market along with early mover advantage in certified pre-owned watch business. Going forward, the company is expanding its stores from 50 to 63 stores in next three years and also plans to enter new product categories to boost growth. However, at the upper price band of Rs 878, the IPO is valued at ~95x FY22 annualized earnings (consensus), which does not leave much upside potential. Also, the company has hardly made any profits in the last three years with margins on the lower side as compared to high margins enjoyed by other players. Hence, we recommend investors to ‘AVOID’ subscribing to the IPO.

Key Information

Use of Proceeds:
The offer comprises of a fresh issue and an offer for sale. The total issue size is of Rs 472 cr. Out of the fresh Issue of Rs 375 crores, Rs 30 crores is proposed to be utilized for debt repayment/prepayment, Rs 35 crores for financing the establishment of new stores & renovation of the certain existing stores and up-gradation of ERP, Rs 235 crores is to be used for funding working capital requirements, and the balance for general corporate purposes. The balance ~Rs 97 crores of the issue would be through offer for sale by the shareholders and proceeds would go to such selling shareholders.

Book running lead managers:
Emkay Global Financial, Incred Capital

Ethos is led by an experienced management team with deep industry know-how and knowledge. The management team is led by Managing Director Yashovardhan Saboo who is also the promoter of the company. Pranav Saboo, CEO of Ethos has been instrumental in devising the strategy of making the online presence of the company while Manoj Subramanian, its Chief Operating Officer, has been intrinsically linked with the watch industry for several years.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY19 FY20 FY21
Net Sales 444.00 458.00 387.00
Material Cost 315.00 329.00 282.00
Employee Cost 33.00 33.00 29.00
Other Expenses 38.00 44.00 36.00
EBITDA 58.00 52.00 40.00
EBITDA Margin 13.00% 11.00% 10.00%
Depreciation & Amortization 26.00 33.00 31.00
EBIT 32.00 19.00 9.00
Other Income 1.00 3.00 16.00
Interest & Finance Charges 16.00 20.00 17.00
Profit Before Tax - Before Exceptional 17.00 2.00 8.00
Tax Expense 7.00 3.00 2.00
Net profit for the year 10.00 (1) 6.00