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Friday, 13 May 2022


Luxury watch retailer

Potential to expand into adjacent luxury offerings such as eyewear, jewelry, and cosmetics

Ethos 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% when seen in exclusively luxury segment in the financial year 2020.

Company has sizeable portfolio of premium and luxury watches in India enabling it to retail 50 premium and luxury watch brands like 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.

Company has chain of 50 physical retail stores in 17 cities in India in a multi store format. Stores are categorized into 14 Ethos Summit Stores and one Airport store that houses bridge to luxury, luxury, and high luxury brands, 14 multi-brand outlets and 10 Ethos Boutiques both housing bridge to luxury and premium brands, 10 luxury segment mono-brand boutiques offering a single luxury watch brand and 1 CPO (certified pre-owned) luxury watch lounge for pre-owned watches.

In addition to premium and luxury watch retail, company also undertake retail of certified pre-owned luxury watches under ‘Certified Pre-Owned’ (CPO) luxury watch lounge located at National Capital Territory of New Delhi. Company started preowned luxury watch retail business in Fiscal 2019. CPO is a destination for selling and buying preowned luxury watches under technical expert supervision providing a 360- degree physical inspection and verification of watches and certified with a two-year warranty.

Management also intends to expand into other luxury verticals in a short to medium term. There is a potential to expand into adjacent luxury offerings like hard luxury in various product categories such as eyewear, jewelry, luggage, cosmetics, writing instruments.

Company also offers an Omnichannel experience to customers through its website (India’s largest website for premium and luxury watches in terms in number of brands and watches offered) and social media platforms. Through its website, company caters to customers located in cities where it does not have any physical presence. Omnichannel model helps adding more customers, expanding reach, and providing better watch buying experience to customers.

As of March 31, 2022, company had about 25 lakh website users, over 2,83,300 active email subscriptions, 1,68,000 Instagram followers, 1,57,000 Facebook followers, and 12,300 You Tube subscriptions. Its digital platform has created a niche in the online luxury watch market through various unique value-added services including a highly specialized team of luxury watch consultants, targeted content, watch insurance, easy installments and dedicated after sales service to customers.

Company has a loyalty program called ‘Club Echo’, which operates as a dynamic incentive scheme providing benefits to repeat customers based on their cumulative purchasing over time. As of March 31, 2022, company had over 2,83,300 registered members to Club Echo. Club echo sales for 9M FY2022 was Rs 407.65 crore, out of which repeat transactions represented 36.49% of value share.

Company’s business is supported by state-of-the-art service centre, which is equipped with latest machinery imported from Switzerland. Its service centre has received authorizations from several leading global watch brands.

Company expects the luxury watch market to continue to grow in India as well as neighboring countries like of Bangladesh (Dhaka), Sri Lanka (Colombo), Nepal (Kathmandu) and Maldives (Male). Company intends to expand its physical store network and increase market share.

For the nine months period ended December 31, 2021, FY2021, 2020 and 2019, capital expenditure on opening new stores and refurbishing old ones was Rs 607.88 lakh, Rs 1,088.36 lakh, Rs 1,379.13 lakh and Rs 1,394.46 lakh, respectively.

Offer and its objects

The IPO comprises fresh issue of equity shares worth up to Rs 375 crore and an offer for sale of Rs 97.28 crore on the upper price band by existing shareholders.

Price band for the IPO is Rs 836 to Rs 878 per equity share of face value Rs10 each.

Objectives for the fresh issue include Rs 29.28 crore for repayment or prepayment of outstanding borrowings, Rs 234.96 crore for funding working capital requirements, Rs 33.27 crore for financing the establishment of new stores and renovation of the certain existing stores, Rs 1.98 crore for financing the upgradation of ERP and remaining amount will be used for general corporate purposes.

Promoters of the companyare KDDL, Mahen Distribution and YashovardhanSaboo.Promoters and promoter group holds an aggregate of 1,54,56,412 equity shares, aggregating to 81.02% of the pre-Offer issued and paid-up Equity Share capital.The post IPO shareholding for the same is expected to be around 61.65%.

The issue, through the book-building process, will open on 18 May 2022 and will close on 20May 2022.


Company is market leader in Luxury watch segment in India, it also leads the Luxury Omnichannel market in India. In FY 2020, 36% of Ethos’s revenue came from digitally enabled sales.

Company’s online channels offer customers the ability to (i) purchase online with home delivery, (ii) book a viewing in-store or at home or office, and (iii) services to collect the product in-store. This is supplemented by personalized online assistance.

The overall luxury preowned market in India was valued at approximately Rs 40-50 crore in Fiscal 2020, which is largely dominated by the unorganized sector contributing almost 80% of the market. The organized sector offering certification on preowned luxury watches is at a nascent stage in India and was valued at approximately Rs 10-15 crore in FY2020. This market presents an opportunity to grow significantly from the current base, in line with the global trends.

Promoter’s experience in the watch industry has assisted the company in establishing strong relationships with the global watch brands and further strengthening its business. Company also benefits from an experienced management team with deep industry know-how and knowledge.

Owners of major luxury watch brands invest heavily in marketing. As a luxury watch retailer, company benefits from the increased awareness generated by traditional marketing activities as well as promotional activities, such as watch fairs, exhibitions, and flagship store openings.

As of March 31, 2022,the company had access to a HNI customer base of over 2,83,300. Demand for its products is directly proportional to the number of HNI customers. Expected increase in the number of HNI’s in fast emerging economies, such as China and India will drive purchases of luxury watches.

Company’s average selling prices per watch in retail business have increased on a yearly basis. The average selling price of watches moved up from Rs 73,261 in FY 2019 to Rs 84,240 in FY 2020, to Rs 1,09,864 in FY 2021 and to Rs 1,42,795 for the nine months period ended December 31, 2021.

Company’s flagship stores are high-street stores allowing lower mall dependency, which proved to be a massive structural advantage, especially during the pandemic year, when all the shopping malls were directed to be closed.

Company has Strong and long-standing relationships with luxury watch brands. Some of these business partnerships with brands like Omega, Rado, Tissot, Longines, Baume Mercier, IWC Schaffhausen, Jaeger LeCoultre, Carl F Bucherer and Balmain have been ongoing for more than a decade.

Company benefits from operating in markets in which retailers generally do not engage in seasonal or other calendar-based promotions to sell luxury watches (since the preservation of the exclusivity and rarity value is part of the appeal of luxury watches to customers).

Luxury and above watch segments demand better margins which allows to have better profitability. The retailer margins on premium watches ranges from 20% - 25%, while retailer margins on bridge to luxury segment ranges from 25% - 28%, and luxury & above segments have a retailer margin of 20% - 35%.


Most of suppliers, company works with is on a nonexclusive basis, in absence of exclusivity with suppliers, the company may be subject to competition from the entities which may have more resources. For FY2019, FY20, FY2021 and 9M FY2022 top 5 suppliers contributed 73.25%, 72.19%, 69.71% and 66.87% of total supplies respectively.

Company’s business partly depends on the continued success and reputation of its third-party brands globally, and any negative impact on these brands may adversely affect business. Company is also dependent on watch brands for the manufacturing.

Company faces competition from various domestic as well as international players that may have some effect on its competitive position and profitability.

As of December 31, 2021, March 31, 2021, and March 31, 2020, contingent liabilities stood at Rs 37.08 crore, Rs 36.54 crore and Rs 3.33 crore, respectively. If these liabilities materialize, it may adversely affect financial condition.

There are outstanding legal proceedings involving company, its Directors and Promoter. These proceedings are pending at different levels of adjudication before various judicial authorities, from which further liability may arise. any adverse decision in such proceedings may affect the company.

Company’s sales are concentrated in certain Tier I cities in India in a relatively small number of stores. Its top three stores are in the National Capital Territory of Delhi and Bengaluru, Karnataka which contributed 31.91% of total sales in FY2019, 26.64% in FY2020, 29.11% in FY2021 and 32.58% in 9M FY2022.

company’ products are discretionary, which are highly dependent on trends in consumer spending and, consequently, are sensitive to factors that influence consumer spending. Any adverse change in these factors could affect demand.

As a part of growth strategy, company plans to further expand its store network in India. Expansion into new geographic regions, including different states in India, subjects the company to various challenges, including those relating to lack of familiarity with the culture, legal regulations and economic conditions of these new regions, language barriers, and the lack of brand recognition and reputation in such regions. Company has closed and/or relocated 13 stores due to commercial considerations in the last three fiscals.

Company holds 99.999% partnership interest in wholly owned subsidiary, Cognition Digital LLP which may incur losses in the future. In case Cognition Digital LLP incurs losses in the future, the company will have to bear such losses in proportion to its partnership interest which may have an adverse impact on the financials of the Company.

Company’s credit rating has been downgraded in the past. Any future down grading in the credit rating can make it difficult to raise finance.

Company faces foreign exchange risks that could adversely affect its results and cash flows. Company has foreign currency payables for supply of the products, and are therefore, exposed to foreign exchange risk between the Indian Rupee and CHF (Swiss Franc) and other foreign currencies. Any appreciation of foreign currencies against the Indian Rupee may result in reduction of margins and consequently have an adverse effect on business and result of operations.

Statutory Auditor has included certain emphasis of matters in audited financials of the company for the nine months period ended December 31, 2021, FY 2021 and FY2020. No modification has been made in respect of the same in Restated Consolidated Summary Statements, however there is no assurance that it may not occur in future.

Any increase in regulatory duties payments including the customs/import duties may affect business. Effective rate of import duties including GST on luxury watches is around 41%, any further increase in the duties may affect profitability.

As of April 11, 2022, the company secured loans amounting to Rs 1,729.84 lakh (primarily cash credit facilities) and may in the future continue to avail secured borrowings, which may be recalled at any time, with or without the existence of an event of default, on short or no notice. Such recalls on borrowed amounts may be contingent upon happening of an event beyond company’s control and there can be no assurance that company will be able to persuade lender to give extensions or to refrain from exercising such recalls, which may adversely affect results of operations and cash flows.


For FY 2021, consolidated sales were down by 15.57% to Rs 386.57 crore compared to FY 2020. OPM fell by 100 bps to 10.27% which led to 22.99% decrease in operating profit to Rs 39.27 crore. Other income increased 424.42% to Rs 16.57 crore, while interest cost fell 13.48% to Rs 16.98 crore and depreciation decreased 4.36% to Rs 31.36 crore.

 Share of profit from Associates/JVin FY21 was Rs 0.14 crore compared to loss of Rs 0.33 crore in FY2020. PBT increased 306.69%% to Rs 8.09 crore. Tax expenses for FY2021 was of Rs 2.31 crore compared to tax expense of Rs 3.32 crore in FY2020. In FY2021, net profit stood at Rs5.78 crore compared to loss of Rs 1.33 crore in FY2020.

Nine months ending December 2021 annualized EPS on post-issue equity works out to Rs 9.12. At the upper price band of Rs 878, P/E works out to 96.23. There are no listed companies in India that engage in a similar business.

At the higher price band of Rs 878, the offer is made at Post-issue EV/ nine months ending Dec 2021 annualized Sales of 3.64 times, on a post-issue equity share capital of Rs 23.34 crore of face value of Rs 10 each. For FY2021, Ethos OPM and ROE stood at 10.27% and 3.71%, respectively


Ethos: Issue highlights

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Ethos: Restated Consolidated Financials


1903 (12)

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2103 (12)

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* EPS is annualized on post issue equity capital of Rs 23.34  crore of face value of Rs 10 each


EPS for nine months ending Dec 2021 is annualised


EO: Extraordinary items. EPS is calculated after excluding EO and relevant tax


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Source: Capitaline Corporate Database