Ethos IPO: Should you subscribe? Here is what Anil Singhvi, brokerage suggest

Ethos IPO: The three-day initial public offer (IPO) of Ethos IPO opened for subscription on Wednesday, May 18, 2022, and will close on May 20 (Friday). The issue of Luxury and premium watch retail player Ethos, which aims to raise Rs 472.3 crore at the upper end of the price band, consists of a fresh issue of equity shares aggregating to Rs 375 crore and an Offer-For-Sale (OFS) of up to 1,108,037 equity shares. The public issue has set a price band of Rs 836-878 a share for this issue. At the upper end of the price band, the public issue is expected to garner Rs 472.3 crore. Investors can bid for a minimum of 17 equity shares and in multiples of 17 thereafter. 

Meanwhile, as the issue opens today, what should investors do with Ethos IPO?  

Zee Business Managing Editor in his preview has said that the company is backed by strong promoters and is a profit-making company with good financial track record. "It also has an asset light model and is a low debt company, which boasts of high-profile investors. However, it comes at expensive valuations," said the market guru.  

Singhvi said that the company has low margin trading business and revenue growth does not infuse much confidence either. " Risk-taking investors are only suggested to apply," Zee Business Managing Editor added.  

Meanwhile, echoing Singhvi's recommendations, Marwadi Financial Services too recommended for subscribe with caution rating.  

Considering the FY21/FY22 (Annualised) EPS of Rs.2.48/Rs.9.13 on a post issue basis, the company is going to list at a P/E of 354.36x/96.17x with a market cap of Rs.20,501 mn, it said. There are no listed companies in India that engage in a business similar to that of the company. We assign “Subscribe (With Caution)” rating to the IPO as the company is a leading luxury watch omnichannel retail player in India, said Marwadi Financial Services in its IPO note. 

"However, the IPO is richly priced and the company will have to continue growing its business at a high growth rate in order to justify its valuation, which keeps us cautious from a long-term perspective," it added. 
 
Earlier, Ethos Limited on Tuesday said it has raised around Rs 142 crore from anchor investors ahead of its initial share sale.  

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— Zee Business (@ZeeBusiness) May 18, 2022

As per BSE, the company has decided to allocate 16,13,725 equity shares to anchor investors at Rs 878 apiece, aggregating the transaction size to Rs 141.68 crore. 

ICICI Prudential Mutual Fund, Jupiter India Fund, Saint Capital Fund, Nomura Singapore and UPS Group Trust are among the anchor investors  

As a part of the OFS, Yashovardhan Saboo, KDDL, Mahen Distribution, Saboo Ventures LLP, Anuradha Saboo, Jai Vardhan Saboo, VBL Innovations, Anil Khanna, Nagarajan Subramanian, C Raja Sekhar, Karan Singh Bhandari, Harsh Vardhan Bhuwalka, Anand Vardhan Bhuwalka, Shalini Bhuwalka and Manju Bhuwalka will sell equity shares. 

Objective of the IPO  

Proceeds from the fresh issuance will be utilised for repayment of debt, funding working capital requirements, opening new stores and general corporate purposes. 

Half of the issue size has been reserved for qualified institutional investors, 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors. 

About the company 

Ethos has the largest portfolio of premium and luxury watches in India and retails 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.  Under the brand name Ethos, it opened its first luxury retail watch store in January 2003 in Chandigarh.