The initial public offer (IPO) of luxury watch retailer Ethos generated a decent investor response in the first couple of hours of the bidding process on Wednesday. The IPO will remain open till Friday.

As per data available on Wednesday, the issue saw applications for 5,32,831 shares or 13 per cent till 11.25 am, against the offer size of 39,79,957 shares. Most of the applications came from retail investors, the quota for whom was subscribed 27 per cent so far.

Ahead of the IPO, the company garnered Rs 141.69 crore from nine anchor investors. The company informed the exchanges that it has allocated 16,13,725 shares at Rs 878 per share on Tuesday, May 17, 2022, to anchor investors.

FlexiCap Fund, Jupiter India fund, Saint Capital Fund, Cohesion MK Best Ideas Sub-Trust, Jupiter South Asia Investment Company Limited- South Asia Access Fund, Coeus Global Opportunities Fund, Alchemy Leaders of Tomorrow- Closed-ended fund Series 2, UPS Group Trust, Nomura Singapore Limited ODI are amongst the investors that participated in the anchor book.

However, analysts are mixed on the issue. Some believe it is a long-term investment while others believe you should avoid subscribing to the IPO given the rich valuation demanded by the company. The low growth track record of the company also works against it.

Over the last five years, revenues have grown at a moderate pace of 11% CAGR in FY17-22 (annualising 9MFY22 sales). The company has clocked in average PAT margins of 2-2.5% (except for 9MFY22 wherein the company reported higher PAT margins of 3.8%), noted analysts.

“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%). At the upper end of the price band, Ethos is valued at 95x P/E on annualised FY22 basis,” said Bharat Chhoda of


He has assigned ‘AVOID’ rating and awaits consistency in improvement in profit metrics that the company has exhibited in recent quarters. Sustained enhancement in profitable growth and improvement in return ratios would be key monitorables, going ahead, he added.

Though not everyone has such bearish expectations from the firm. Some believe there is a story here that requires attention. Runjhun Jain of Nirmal Bang said going forward, the company is expanding its stores (13 new stores over 50 existing in next three years) and with new categories it can grow strongly.

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