Lull For New Listings Continue After Ethos Makes Weak Stock Market Debut

Ethos Ltd, the country's largest luxury and premium watch retailer, made a weak stock market debut on stock exchanges on Monday. The stock opened for trading at Rs 830 on the BSE, marking a decline of 5.46 per cent. On the National Stock Exchange, the stock opened for trading at Rs 825 marking a decline of 6 per cent. The stock fell as much as 12 per cent or Rs 104 from IPO price.

Ethos raised Rs 472.29 crore from the share sale via initial pubic offering (IPO) which ended on May 20. Ethos' IPO comprised of fresh issue of Rs 375 crore and an offer for sale worth Rs 97.29 crore. The company sold shares in the price band of Rs 836-878 per share and the issue was subscribed 1.04 times.

The company had stated that it would use proceeds from the fresh issue for repayment of debt, funding working capital requirements, opening new stores and general corporate purposes.

Ethos has the largest portfolio of premium and luxury watches in India and retails 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.

Lull In New Listings

There has been subdued action in the IPO space for quite some time now. The past issues like Life Insurance Corporation of India, Delhivery, Prudent Corporate Advisory Services, Rainbow Children's Medicare, Evoq Remedies, Global Longlife Hospital and Research, Bhatia Colour Chem and Fone4 Communications all made weak start on the stock markets.

Analysts say that unlike last year, the market conditions have changed drastically as rising interest rates amid surging inflation has tightened liquidity in the markets and investors have become cautious of rich valuations that the companies are demanding in the IPO markets.

The current lull in IPO markets can be attributed to increasing cost of funds as investors are unwilling to pay a significant premium unless companies demonstrate growth and show signs of profitability, explained Tanushree Banerjee, co-head of research at Equitymaster.

"After the blockbuster listing of even mildly profitable and unprofitable businesses in 2021, the subdued IPO listing in 2022 suggest caution in the markets. Investors are unwilling to pay a significant premium unless companies demonstrate growth and show signs of profitability. With cost of capital moving up, IPOs may find takers only if the company fundamentals are sound and they are fairly valued," Banerjee told Outlook Business.

Low subscription levels for the IPOs since start of this year compared to last year makes it evident how tight liquidity scenario has made it tough for new entrants to raise funds through IPOs, analysts added.

Ethos IPO got subscribed 1.04 times by the last day of the issue. This compared with IPO subscription levels of other tech companies like MTAR Technologies, PB Fintech, Nazara Technologies, Zomato and Nykaa was much lower.

MTAR Technologies was subscribed a whopping 133 times, PB Fintech was subscribed 6.48 times, Zomato was subscribed 20.92 times, Nazara Technologies was booked 75 times and promoter of Nykaa - FSN Ecommerce Ventures was subscribed 35.91 times, data from the National Stock Exchange showed.

Meanwhile, the fund raising via IPOs have slowed across the world. An EY report says that IPO activity in the Americas region declined by 72 per cent in the first quarter of 2022, whereas in the Asia-Pacific region, the decline was to the tune of 16 per cent, with 188 IPOs raising $42.7b in proceeds. A large number of companies across markets have either put their listing plans on hold or have settled with a smaller round of fund raising through listing.