Ethos IPO GMP, Subscription Status, Review: Should you Invest in the IPO on Day 2?

Ethos IPO Day 2 Subscription: The Initial Public Offering (IPO) of Ethos Ltd, one of the largest retailers in the premium and luxury watch industry, is open for  subscription now. The public offer of the luxury watch retailer opened on May 17 and will remain open for subscription till May 20. Ethos IPO aims to raise Rs 472.29 crore from its public offer where Rs 375 crore would come through fresh issues while Rs 97.29 crore would be raised via offer for sale (OFS). The public issue has been offered at a price band of Rs 836 to Rs 878 per equity share. Ethos, which houses luxury watch brands such as Rolex, Rado, Longines, Omega, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Fossil, and Casio, among others, has raised Rs 142 crore from anchor investors ahead of its IPO.

Ethos IPO: Subscription Status

After day 1 of bidding, Ethos IPO has been subscribed 0.27 times whereas its retail portion has been subscribed 0.53 times.

Ethos IPO: Objective

The watch retailer has proposed to utilize the net proceeds of its public issue for debt repayment, funding its working capital, financing its capital expenditure, etc.

Ethos IPO: Financials

Ethos Ltd reported total revenue at around Rs 445 crore in FY19 whereas in FY20 and FY21, its total revenue stood at Rs 461 crore and Rs 403 crore respectively. In the first 9 months of FY22, Ethos Ltd has reported total revenue at around Rs 429 crore. Its Profit After Tax (PAT) in April to December 2021 period stands at around Rs 16 crore, which was around 5.78 crore in FY21.

Ethos IPO: GMP Today

Meanwhile, Ethos shares have made debut in the grey market after day one of bidding. According to market observers, shares of Ethos are available at a premium of Rs 10 in the grey market today. As per the market observers, Ethos IPO GMP today is Rs 10 which means the grey market is expecting that Ethos IPO listing would be around Rs 888 ( Rs 878 + Rs 10) per equity share.

Ethos IPO: Should You Invest?

Giving long-term subscribe tag to Ethos IPO, Astha Jain, Senior Research Analyst at Hem Securities said, “Company is bringing the issue at a price band of Rs 836-878 per share at p/e multiple of 95x on post issue 9 Months annualized FY22 eps basis. The company being the leading luxury watch Omnichannel retail player in India has access to a large base of luxury Customers. The company enjoys a leadership position in an attractive luxury watch market with an early mover advantage in certified pre-owned business. Also, Ethos being a Founder-led company is supported by a professional management team. With strong growth prospects, we believe the company to be a candidate for long-term investment purposes. Hence, we recommend “Long Term Subscribe” on the issue.”

ICICI Securities in their IPO note said, “Over the last five years, revenues have grown at a moderate pace of ~11 per cent CAGR in FY17-22 (annualising 9MFY22 sales). The company has clocked in average PAT margins of 2-2.5 per cent (except for 9MFY22 wherein the company reported higher PAT margins of 3.8 per cent). Despite Ethos following an asset light business model, higher capital blockage in inventory (Inventory days: 170+) and lower margins have translated into company reporting single digit RoE (~7-8 per cent). At the upper end of the price band, Ethos is valued at ~95x P/E on annualised FY22E basis. Sustained enhancement in profitable growth and improvement in return ratios would be key monitorables, going ahead. We assign ‘AVOID’ rating and await consistency in improvement in profit metrics that the company has exhibited in recent quarters.”

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