Please refer to important disclosures at the end of this
report
1
Incorporated in 2007, Ethos Limited is 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% in exclusively luxury
segment in FY2020. KDDL Ltd is the parent company of Ethos Ltd and i
s
already listed on exchanges. The company
offers sizeable portfolio of 50
premium and Luxury watch brands. Ethos Ltd
platforms and
50 physical retails stores in 17 cities in India in a Multi store
format.
Positives: (a) M
arket leader in Luxury watch segment in India, and it also leads
the Luxury Omnichannel market in India (b)
Strategically located and well
invested store network (c) Strong and long-
standing relationships with luxury
watch brands (d) Founder-
led company supported by a professional
management team.
Investment concerns: (a) Increase in competition (b) Slowdown in the
economy
could impact the overall revenue of the company.
Outlook & Valuation: In terms of valuations, the post-
issue TTM P/E works out
to 96.2x (at the upper end of the issue price band), which is high considering
Company’s historical top-line & bottom-
line negative CAGR of ~7% and ~24%
respectively over FY19-21. However, Ethos has
a healthy market share in total
retail sales in the premium and luxury segment. Further Ethos has strong brands
and a wide range of products but we believe that these positives are captured in
the valuations commanded by the company. Thus, we have a NEUTRA
L rating
on the issue.
Key Financials
Y/E March (` cr) FY2019
FY2020
FY2021 9MFY22
Net Sales
444
458
387
419
% chg
3.2
(15.6)
Net Profit
10
(1)
6
16
% chg
(113.5)
533.7 -
OPM (%)
7.0
4.1
2.2
5.4
EPS (`)
5.3
(0.7)
3.1
8.5
P/E (x)
166.7
NA
284.9
-
P/BV (x)
12.6
11.0
10.6
-
RoE (%)
7.6
(0.7)
3.6
-
RoCE (%)
11.1
5.8
2.8
-
EV/Sales (x)
4.0
4.0
4.6
-
EV/EBITDA (x)
31.6
35.1
44.5
-
Angel Research; Note: Valuation ratios based on post-issue shares and at `878 per share.
NEUTRAL
Issue Open: May 18, 2022
Issue Close: May 20, 2022
Offer for Sale: 0.11cr share
Fresh Issue: `375cr
QIBs 50%
Non-Institutional 15%
Retail 35%
Promoters 61.7%
Public 38.4%
Issue Details
Face Value: `10
Present Eq. Paid up Capital:
`19cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: `23cr
Issue size (amount): `472.3cr
Price Band: `836-878
Lot Size: 17 shares
Post-issue mkt.cap: `1,970*– 2,050cr**
Promoter holding Pre-Issue: 81.0%
Promoter holding Post-Issue: 61.7%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Amarjeet S Maurya
Amarjeet.maurya@angelbroking.com
+022 4000 3600, Extn: 6810
Ethos Limited IPO
IPO Note |
Retail
May 16
, 2022
Ethos Limited | IPO Note
May
1
6
,
2
022
2
Company background
Incorporated in 2007, Ethos Limited is 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% in exclusively luxury segment
in FY2020. 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 and have the flexibility of buying products at one store and returning at
another or browsing product catalogues and placing orders online with
doorstep delivery.
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.
The company 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. Ethos Limited has 7,000 different premium watches and
30,000 watches in stock at any given time. As of December 31, 2021, the
company's website had 21,844,216 visitor sessions.
Issue details
Ethos is raising ~₹97cr through OFS and ₹375cr through Fresh Issue
in the
price band of ₹836-₹878per share.
Exhibit 1: Pre and post IPO shareholding pattern
No of shares (Pre-issue) % (Post-issue) %
Promoter 1,54,56,412 81.0% 1,43,95,912 61.7%
Public 36,21,751 19.0% 89,53,322 38.3%
Total 1,90,78,163 100.00% 2,33,49,234 100.00%
Source: Source: RHP, Note: Calculated on upper price band
Objectives of the Offer
Repayment or pre-payment, in full or in part, of all or certain borrowings
availed by the Company (~₹30cr).
Funding working capital requirements (~₹235cr).
Financing the capital expenditure for establishing new stores and
renovation of certain existing stores (~₹33cr) as well as upgradation of
enterprise resource planning software (~₹2cr).
General corporate purpose
Ethos Limited | IPO Note
May
1
6
,
2
022
3
Exhibit 2: Consolidated Profit & Loss Statement
Y/E March (` cr) FY2019 FY2020 FY2021
Net Sales
444
458
387
% chg
3.2
(15.6)
Total Expenditure
387
406
347
Raw Material
315
329
282
Personnel
33
33
29
Other Expenses
38
44
36
EBITDA
57
52
40
% chg (9.0) (23.0)
(% of Net Sales)
12.8
11.3
10.3
Depreciation& Amortization
26
33
31
EBIT
31
19
8
% chg (39.4) (55.4)
(% of Net Sales)
7.0
4.1
2.2
Interest & other Charges
16
20
17
Other Income
2
3
17
(% of PBT)
9.5
136.1
208.1
Recurring PBT
16
2
8
% chg (85.9)
243.2
Tax
7
3
2
(% of PBT)
40.0
143.1
29.0
PAT before P/L of JV
10
(1)
6
% chg (110.1) (665.2)
Share in profit of Joint Venture - (0)
0
PAT
10
(1)
6
Basic EPS (Rs)
5.3
(0.7)
3.1
Fully Diluted EPS (Rs)
5.3
(0.7)
3.1
Source: Company, Angel Research
Ethos Limited | IPO Note
May
1
6
,
2
022
4
Consolidated Balance Sheet
Y/E March (` cr) FY2019 FY2020 FY2021
SOURCES OF FUNDS
Equity Share Capital
17
18
18
Reserves& Surplus
114
132
137
Shareholders’ Funds
130
150
156
Total Loans
149
174
140
Other Liabilities
2
2
2
Total Liabilities
281
326
298
APPLICATION OF FUNDS
Net Block
90
125
111
Capital Work-in-Progress
5
1
4
Investments -
1
1
Current Assets
252
276
257
Inventories
206
219
198
Sundry Debtors
9
9
12
Cash
9
11
21
Loans & Advances
0
0
0
Other Assets
28
37
26
Current liabilities
88
96
94
Net Current Assets
164
180
163
Deferred Tax Asset
8
8
9
Other Assets
14
12
12
Total Assets
281
326
298
Source: Company, Angel Research
Ethos Limited | IPO Note
May
1
6
,
2
022
5
Exhibit 3: Consolidated Cash Flow Statement
Y/E March (` cr) FY2019 FY2020
FY2021
Profit before tax 16 2
8
Depreciation 26 33
31
Change in Working Capital -51 -12
26
Interest / Dividend (Net) 15 18
16
Direct taxes paid -7 -6
-3
Others -1 1
-15
Cash Flow from Operations -1 37
63
(Inc.)/ Dec. in Fixed Assets -13 -13
-9
(Inc.)/ Dec. in Investments 1 -1
-1
Interest Received 0 0
0
Cash Flow from Investing -12 -15
-10
Issue of Equity 29 21
0
Inc./(Dec.) in loans 0 -22
-29
Dividend Paid (Incl. Tax) 0 0
0
Interest / Dividend (Net) -16 -19
-16
Cash Flow from Financing 13 -20
-45
Inc./(Dec.) in Cash 0 2
8
Opening Cash balances 7 8
10
Closing Cash balances 8 10
18
Source: Company, Angel Research
Ethos Limited | IPO Note
May
1
6
,
2
022
6
Key Ratios
Y/E March FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
166.7
NA
284.9
P/CEPS
46.4
52.4
44.4
P/BV
12.6
11.0
10.6
EV/Sales
4.0
4.0
4.6
EV/EBITDA
31.6
35.1
44.5
EV / Total Assets
6.4
5.5
5.9
Per Share Data (Rs)
EPS (Basic) 5.3 -0.
7
3.1
EPS (fully diluted)
5.3
(0.7)
3.1
Cash EPS
18.9
16.8
19.8
Book Value
69.5
79.8
82.9
Returns (%)
ROCE
11.1
5.8
2.8
Angel ROIC (Pre-tax)
11.5
6.0
3.1
ROE
7.6
(0.7)
3.6
Turnover ratios (x)
Asset Turnover (Net Block)
4.9
3.7
3.5
Inventory / Sales (days)
169
174
187
Receivables (days)
7
7
12
Payables (days)
56
58
68
Working capital cycle (ex-cash) (days)
121
124
130
Source: Company, Angel Research
Ethos Limited | IPO Note
May
1
6
,
2
022
7
Research Team Tel: 022 - 40003600 E-mail: research@angelbroking.com Website: www.angelone.in
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