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                 Ethos Limited is the largest luxury and premium watch retailer in India. The company delivers premium luxury watches through websites, social media platforms and physical stores. Ethos Limited operates on an omnichannel model and allows customers to order products either offline or online and have the flexibility of buying products at one store and returning at another or browsing product catalogues and placing orders online with doorstep delivery. The company's watch portfolio has 50 premium brands including 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.The company has 50 physical retail stores in 17 cities in India including New Delhi Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Chandigarh, Ahmedabad, Jaipur, Lucknow, Gurgaon, Guwahati, Ludhiana, Nagpur, Noida, Pune and Thane. Ethos Limited has 7,000 different premium watches and 30,000 watches in stock at any given time.

As of December 31, 2021, the company's website had 21,844,216 visitor sessions.

The company propose to utilise the Net Proceeds towards funding the following objects:

• Repayment or pre-payment, in full or in part, of all or certain borrowings availed by the Company.

• Funding working capital requirements of  Company.

• Financing the capital expenditure for establishing new stores.

• Financing the renovation of certain existing stores and up gradation of enterprise resource planning software.

• General corporate purpose.

• Access to large luxury customer base.

• Leading luxury watch Omnichannel retail player of India.

• Strategically located and well invested store network with attractive in-store experience.

• Strong and long-standing relationships with luxury watch brand.

• Leadership position in an attractive luxury watch market.

• Early mover advantage in certified pre-owned business.

• Founder-led company supported by a professional management team.

Watch market in India was valued at ~ ₹13,500 Cr in FY2020 and is expected to grow at a CAGR of 10.6% to reach ~ ₹ 22,300 cr by FY 2025, on back of factors like increased discretionary spend on watches category,  opening of more organized channels of purchase like MBOs and online market place & vertical specialist, increased penetration of smart watches in mid to premium category, omnichannel market organization etc.

The Indian watch market is further segmented basis Product type and Price. On the basis of Product type, they are differentiated as ‘Traditional watches’  and smart watches. While traditional watches occupy almost 76% share of the overall watch market, smartwatches hold 24% share, with the latter expected to grow a faster rate, owing to consumer demand, fitness & health consciousness, technological advancements linking the watch to other smart devices, and most importantly, the entry of multiple brands in the mass to mid segment smartwatch space which has given consumers the option to try out smartwatches without pushing into the premium segment.

• Company’s business partly depends on the continued success and reputation of third-party brands globally, and any negative impact on these brands, or a failure by ethos or owners of these brands to protect them, as well as other intellectual property rights and proprietary information, may adversely affect the business, results of operations, financial condition and cash flows.

• Company’s inability to identify customer demand accurately and maintain an optimal level of inventory in the  stores may impact  operations adversely.

• Company’s business and its sales are significantly concentrated among certain stores and hence there is high dependency on these stores.

• The growth of online retailers may create pricing pressures, increase competition, and adversely affect its business, results of operations and financial condition.

• Its business is susceptible to shortage of the products due to pilferage, damages and theft.

• Company also faces foreign exchange risks that could adversely affect results of operations and cash flows.

• Company’s business is manpower intensive and subjected to high attrition . Its business may be adversely affected by work stoppages, increased salary demands by its employees or increase in minimum wages across various states across various states.

• Company’s business is subjected to seasonality. Lower revenues in the certain period of any Fiscal may adversely affect the business, financial condition, results of operations and prospects.

On financial performance front, if we take average EPS of last 3 years of 2.21 and upper price band of ₹878 , P/E ratio comes out to 397x and if take EPS of Dec 21 of 8.74 and upper price band of ₹878, P/E ratio comes out to 100x and hence its price band seems very expensive. Even in terms of financials the company has posted inconsistency and the strong earnings for 9M-FY22 creates concern over sustainability going forward. On the basis of expensive valuation and no comparison in terms of listed peers there is no harm in skipping this pricy IPO and Hence we recommend our clients to “AVOID” this offer.

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