ethos limited Archives

Here are some of the major updates that could move the markets on Monday:

Vehicle registrations grow in strong double-digits in November

Vehicle registrations grew in strong double-digits in November, even after the close of the festive season. Consumers bought vehicles betting on improvement in the general economic situation, employment, and household income. Overall registrations rose 25.71% year-on-year (YoY) to 23,80,465 units. Sales were marginally higher by 1.52% compared to the pre-covid month of Oct 2019.

Read more here.

Marico to acquire Vietnam-based Beauty X Corporation for ₹172 crore

Marico Ltd has entered into a definitive agreement to acquire Vietnam-based personal care firm Beauty X Corporation for ₹172 crore. Beauty X owns female personal care brands Purité de Prôvence and Ôliv, which offer a range of products such as shower gels, shampoos, conditioners, face wash, and lotions. The transaction is expected to be completed by March 31, 2023.

Read more here.

V-Guard Industries to acquire Sunflame Enterprises for ₹660 crore

V-Guard Industries Ltd will acquire a 100% stake in kitchen appliance company Sunflame Enterprises for ₹660 crore. The deal will be funded through a mix of internal accruals and debt. The acquisition is in line with V-Guard’s strategy to become a significant player in the domestic kitchen appliances segment. The deal will be closed by mid-January 2023.

Read more here.

Lupin launches generic joint pain drug in US market

Lupin Ltd has launched a generic version of Pennsaid, used to treat pain in the knees caused by osteoarthritis, in the US market. The product (Diclofenac Sodium Topical Solution 2%) is the generic version of Horizon Pharma Therapeutics’ Pennsaid. As per IQVIA MAT October 2022 data, Diclofenac Sodium Topical Solution had estimated annual sales of $509 million in the US.

Read more here.

TVS Motor subsidiary to acquire EV-related assets in Germany

TVS Motor Company’s Singapore-based subsidiary has signed an agreement to acquire electric vehicle (EV)-related technology and assets in Germany. The assets will help strengthen TVS Motor’s expansion in the EV two-wheeler market globally. TVS Singapore will acquire the assets through its subsidiary BBT Vermogensverwaltungs GmbH (or Celerity Motor GmbH).

Read more here.

Greenko Group emerges lowest bidder for NTPC’s 300 MWh energy storage tender

Greenko Group has emerged as the lowest bidder in the world’s first and largest technology-based 3,000-megawatt hours (MWh) storage tender from NTPC Renewable Energy Ltd (NTPC REL). Hyderabad-based Greenko is backed by GIC Holdings Pte Ltd, Abu Dhabi Investment Authority, and Japan’s ORIX Corp. The company also partnered with state-run ONGC to develop green ammonia production and storage facilities for export purposes.

Read more here.

Equity mutual fund inflows fall 76% to lowest in 21 months in November: AMFI

Inflows into equity mutual funds fell to the lowest level in 21 months in November 2022. Net investment into equity and equity-linked schemes declined nearly 76% over the previous month to ₹2,258.35 crore. The number of Systematic Investment Plan (SIP) accounts reached 6.04 crore in Nov, compared to 5.93 crore in October. The mutual fund industry (across debt and equity) recorded a total net inflow of ₹13,263.6 crore in November, compared to an inflow of ₹14,047 crore in October.

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Ethos enters into exclusive retail partnership with German-brand Tutima

Luxury watch retailer Ethos Ltd has signed an exclusive retail partnership with Tutima to introduce the Germany-based brand in India. Through this partnership, Ethos will exclusively retail its sporty and performance-driven timepieces across India. Tutima is known among collectors and enthusiasts as pilot’s watches, which they first started making in the 1980s.

Read more here.

Bajaj Consumer Care announces buyback at ₹240 per share

Bajaj Consumer Care Ltd announced an ₹80.89 crore share buyback at ₹240 per share through the open market route. The maximum number of equity shares proposed to be bought back at the maximum buyback size and price would be 33.7 lakh equity shares. The FMCG company will utilize at least 50% of the maximum buyback size (₹40.44 crore) and purchase a minimum of 16.85 shares.

Read more here.

Luxury watch retailer Ethos Limited launched its three-day initial public offering (IPO) on May 18. The company sells some of the best-in-class premium watches in the world today. In this article, we analyse the company and its IPO.

Company Profile – Ethos Limited

Ethos Limited is one of the largest luxury and premium watch retailers in India. It had a 13% market share of the total retail sales in the premium & luxury watch segment as of FY20. Moreover, the company had a 20% market share exclusively in the luxury watch segment during the same period. Ethos sells 50 watch brands, including Omega, TAG Heuer, Rado, Longines, Tissot, Oris SA, and Rolex. These brands use expensive materials and delicate craftsmanship to create unique timepieces.

The company currently operates 50 physical stores across 17 cities in India. The stores are categorised into: 14 Ethos Summit stores and one airport store, 14 multi-brand outlets and 10 Ethos boutiques, 10 luxury segment mono-brand boutiques offering a single luxury watch brand, and one Certified Pre-Owned (CPO) luxury watch lounge. Its top three stores are located in the National Capital Territory of Delhi and Bengaluru (Tier-1 cities), accounting for one-third of its revenue.

Ethos also provides an omnichannel experience to customers through its website and social media platforms. Their online sales accounted for 37.64% of the total sales in FY21. The company’s loyalty program, called Club Echo, is a key source of repeat sales. They had access to a high net-worth Individual (HNI) base of over 2,83,300 at the end of March 31, 2022.

The company is a subsidiary of KDDL Limited, a leading manufacturer of watch components and high-quality precision stamped components.

About the IPO

Ethos Ltd’s public issue opens on May 18 and closes on May 20. The company has fixed Rs 836-878 per share as the price band for the IPO.

The fresh issue of shares (of the face value of Rs 10 each) aggregates to Rs 375 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to Rs 97.29 crore. Individual investors can bid for a minimum of 17 equity shares (1 lot) and in multiples of 17 shares thereafter. You will need a minimum of Rs 14,926 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 221 equity shares (13 lots).

Ethos will utilise the net proceeds from the IPO for the following purposes:

Repayment/prepayment of borrowings – Rs 29.89 crore
Funding working capital requirements – Rs 234.96 crore
Establishing new stores – Rs 33.27 crore
Renovating existing stores and upgrading enterprise resource planning (ERP) software – Rs 1.98 crore
General corporate purposes.

The total promoter holding in the company will decline from 81.01% to 61.65%.

Financial Performance

Ethos’ revenue figures are inconsistent. It posted a 15.5% YoY decline in revenue to Rs 386.6 crore for the financial year 2020-21 (FY21). Net profit stood at Rs 5.79 crore in FY21, compared to a loss of Rs 1.33 crore in FY20. EBITDA fell 23% YoY to Rs 39.7 crore in FY21. The luxury and high luxury watch segment sales constituted ~58% of the total sales in FY21. Going forward, the growth of online retailers could create pricing pressures.

Interestingly, the company reported a revenue of Rs 418.59 crore during the first nine months of FY22 and the net profit jumped to Rs 15.99 crore.

Risk Factors

Ethos does not have definitive agreements for the supply of products or fixed terms of trade with a majority of its suppliers. The failure to successfully leverage supplier relationships and networks could adversely affect the company.
The company’s business partly depends on the continued success and reputation of third-party brands across the globe. Any negative impact on these brands or the failure to protect intellectual property rights may severely affect Ethos’ operations.
Most of the company’s suppliers work with them on a non-exclusive basis. In the absence of exclusivity with suppliers, Ethos may be subject to stiff competition from entities that have more resources.
Ethos is dependent on watch brands for the manufacturing of all the products it sells. Any disruptions in third-party manufacturing facilities or the failure to adhere to relevant quality standards could harm the company’s reputation.
The inability to identify customer demand accurately or maintain an optimal level of inventory in stores may adversely impact its operations.

IPO Details in a Nutshell

The book-running lead managers to the public issue are Emkay Global Financial Services and InCred Capital Wealth Portfolio Managers. Ethos Ltd filed the Red Herring Prospectus (RHP) for its IPO on May 6. You can read it here. Out of the total offer, 50% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 35% for retail investors.

Ahead of the IPO, Ethos raised Rs 141.68 crore from nine anchor investors.

Conclusion

According to ICICI Securities, the premium and luxury watch market is expected to grow at a ~12% CAGR from Rs 6,600 crore in FY20 to Rs 11,900 crore in FY25. The high luxury watch market is expected to grow at a CAGR of 14% to Rs 1,040 crore over the next five years. Ethos plans to increase its store count by 13 over the next few years. Its business model requires access to high working capital to stock up inventory. A significant portion of the IPO proceeds will be used for this purpose. They also aim to improve the assortment of existing brands and bring new brands to India through exclusive partnerships.

Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Do consider the risks associated with the company and come to your own conclusion.

What are your views on Ethos Ltd’s IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.