Ethos IPO subscribed 24% on Day 1 so far; here’s what brokerages have to say

Initial public offering (IPO) by Ethos Limited got subscribed 24 per cent on the first day of offer till 3.40 pm. The public offer has received bids for 9,57,712 shares so far against 39,79,957 shares offered by the company, data available with BSE showed.

The portion reserved for retail investors and non-institutional investors got subscribed nearly 50 per cent and 2 per cent, respectively, so far. The company aims to raise Rs 472 crore from investors through the public offer. Ethos has fixed a price band of Rs 836-Rs 878 per share for the public offer, which will close on May 20.

The IPO includes a Rs 375 crore fresh issue and an offer for sale (OFS) of 11.08 lakh shares. Following the listing, the market capitalisation of Ethos at the cap price would be around Rs 2,050 crore. Shares of the company are proposed to be listed on leading stock exchanges BSE and NSE both.

Ethos is the leading vertical specialist of luxury watches and accessories in India. The company is a subsidiary of KDDL (dials and watch hands making company for global brands) and has an omnichannel presence. At present, the company has 50 stores. Ethos represents over 60 premium and luxury watch brands in India with over 5,000 products. The company has partnered with prominent brands like Rolex, Breitling, Seiko, Omega, Tag Heuer, Frederique Constant, Oris, Victorinox, Baume & Mercier and Raymond Weil among others.

Brokerages hold mixed views on the IPO. For instance, ICICI Securities has given an ‘Avoid’ rating to the issue. It said that over the last five years, revenues have grown at a moderate pace of around 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 and lower margins have translated into company reporting single-digit RoE (around 7-8%). At the upper end of the price band, Ethos is valued at 95 times P/E on an annualised FY22E basis. Sustained enhancement in profitable growth and improvement in return ratios would be key monitorables, going ahead,” ICICI Securities said.

On the other hand, Hem Securities has given a ‘Subscribe with long term’ rating to the IPO. “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 issue,” Hem Securities said adding the company is bringing the issue at a price-to-earnings of 95 times on post issue 9 months annualised FY22 EPS basis,” Hem Securities said.

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