Ethos Ltd, one of the largest watch retailers in the Indian premium and luxury watch industry, will make its debut on stock exchanges on Monday (May 30).
The company had launched its initial public offering on May 18 and the last day to subscribe to the IPO was May 20.
According to a report from Technopak Advisors, Ethos has 13 percent of the Rs 6,615 crore premium and luxury watch market as per data available for FY20. It had 20 percent of the exclusively luxury segment in the period. The company has a portfolio of 50 luxury brands and a pan-India retail presence supported by omnichannel and digital team capabilities.
Its network includes 50 physical retail stores in 17 cities in India and the firm has 7,000 premium watches and 30,000 watches in stock at any given point in time.
In the IPO garnered Rs 472 crore at Rs 878 per share through fresh issue of shares aggregating up to Rs 375 crore and an offer for sale of 1,108,037 shares by shareholders and promoters aggregating up to Rs 97.29 crore.
The subscription failed to catch investor fancy and barely managed to scrape through. It was subscribed 1.04 times on the final day. Retail investors bid for only 0.84 percent of their portion. The quota for qualified institutional investors (QIB) was subscribed 1.06 times and that for non-institutional investors (NII) 1.48 times.
As per IPO Watch, which tracks the grey market, the stock did not command any significant premium during the period of subscription and has been trading flat/at a discount over the past few days.
As per current grey market price, investors are not likely to make any listing gains on May 30.
“Ethos was commanding a premium in the last few sessions in the grey market and now slipped to a discount today in the range of Rs 5-10 per share,” said Vinit Bolinjkar, head of research, Ventura Securities. “This along with market volatility can have the stock listing at a discount in the range of Rs 868-873 per share.”
Earlier the brokerages were optimistic about the issue and had assigned a “subscribe for long term” or “subscribe with caution” rating to the issue. They were concerned about the reduction in discretionary spending by the consumer and the fact that most suppliers are non-exclusive apart and the threat of a future pandemic looms.
“We have assigned an 'avoid' rating to the issue as it is not encouraging to note the company performance for FY19-21 and sales volume and profitability are declining in recent years,” said Piyush Chajed, research associate, Choice Broking.
“At the higher price band of Rs 878, the company demanded a FY21 enterprise value/sales multiple of 4.5x which left investors with no margin of safety,” he added while not expecting the stock to list at any premium.
Echoing the views of both the experts above, Aditya Shah, smallcase manager and chief investment officer at JST Investment, said, “The listing will be very tepid and given the volatile market conditions there will not be any significant listing gains.”
The company intends to utilise net proceeds from the fresh issue to pre-pay or repay in part or full existing loans to the extent of Rs 29.89 crore. A sum of Rs 234.96 crore is intended to be used for funding working capital requirements; Rs 33.27 crore for opening new stores and renovating certain stores while Rs 1.98 crore for upgrading the enterprise resource planning system. The remaining funds will be used for general corporate purposes.
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