The issue opened for subscription on Wednesday. The company is aiming to raise Rs 472.29 crore by selling its shares in the range of Rs 836-878 during the book building process.
As per data available on Friday, the issue saw applications for 41,38,650 shares or 1.04 per cent till 5 pm, against the offer size of 39,79,957 shares.
The quota for retailers was subscribed 84 per cent, whereas the allocation for HNI investors fetched 1.48 times bids. Institutional buyer’s portion was subscribed 1.06 times.
Ahead of the IPO, the company garnered Rs 141.69 crore from 9 anchor investors. The company informed the exchanges that it has allocated 16,13,725 shares at Rs 878 per share on Tuesday to anchor investors.
However, analysts are mixed on the issue. Some believe it is a long-term investment while others believe you should avoid subscribing to the IPO given the rich valuations demanded by the company. Low growth track record of the company also works against it.
Over the last five years, revenues have grown at a moderate pace of 11% CAGR in FY17-22 (annualising 9MFY22 sales). The company has clocked in average PAT margins of 2-2.5% (except for 9MFY22 wherein the company reported higher PAT margins of 3.8%), noted analysts.
“Despite Ethos following an asset light business model, higher capital blockage in inventory (Inventory days: 170+) and lower margins have translated into companies reporting single digit RoE (7-8%). At the upper end of the price band, Ethos is valued at 95x P/E on an annualised FY22 basis,” said Bharat Chhoda of
.
He has assigned ‘AVOID’ rating and awaits consistency in improvement in profit metrics that the company has exhibited in recent quarters. Sustained enhancement in profitable growth and improvement in return ratios would be key monitorables, going ahead, he added.
Though not everyone has such bearish expectations from the firm. Some believe there is a story here that requires attention. Runjhun Jain of Nirmal Bang said going forward, the company is expanding its stores (13 new stores over 50 existing in next three years) and with new categories it can grow strongly.
