KDDL (Ethos Watches) - Scalable business model at an inflection point?

KDDL - Buy.pdf (1.3 MB)

Pls find my research on KDDL attached. I think it has got great potential over the long run. Very interested to learn what the crowd wisdom thinks.


Hi Arun, great work. Just a few thoughts/queries from my side. Will also spend some more time looking into this.


Business model

  • What is the extent of price differential between luxury watches bought domestically vs purchased abroad/at airport duty free shops?
  • Does Ethos service watches in house or do the watch makers depute or train personnel?
  • Do watchmakers conduct advertising campaigns/ incur other promotional costs?
  • How long have they been showcasing the various brands in their portfolio? Is there any history of exclusive brands going it alone in India?
  • Do they invest in inventory or are watches ordered once the customer orders or is the watchmaker reimbursed by Ethos only when the watches are sold?
  • Are there any plans to introduce other adjacent products? E.g. luxury perfumes, eye wear, pens, etc?
  • What is the share of sales from online? What is the risk of people visiting their stores to try watches and then buying from other vendors online?


  • Apart from the promoter are there any professional managers?
  • Sixth Sense stakeholding - I reckon we can find that through exchange filings or else RoC filings

Is this company listed on the markets?

Thanks a lot Arun. You have complied everything together very well. The story has a great potential and can unfold well. India doesn’t have a luxury retailer(pan India) as as I know and this place can be taken by Ethos. They have already selling other items like mobiles, pens, belts etc…

@rohansh Please listen to the conference calls at researchbytes, some of your questions will be answered.

Disc: I am invested from lower levels.

Hi Any comment on below statement.
“The domestic watch industry continued to operate at suboptimal levels and the inflow of watch dials orders from domestic market further declined during the year. In order to optimise our production facilities through consolidation, the management closed two units for manufacturing and assembly of watch dials at Parwanoo and Barwala”

Thanks Arun for a very good report and thread. This looks very interesting, I looked at screener, what is the difference bet standalone and consolidated numbers, it s a big gap ?
Also the undervaluation has gone it seems, what is the PE ? to me it looks 40,which is not cheap.Since your report, the price has also gone to 360 from 300.
But the space is very interesting and can surely be a long term story.
Do we have any other luxury retail chain listed in India ? apart from jwellery players, Titan PCJ etc.
Also What is the RoE and RoCE and FCF ? Thanks

It’s due to KDDL retail subsidiary Ethos Watches.

I am new here, excuse for any mistakes.

One Question on the business model, I feel that in the next decade smart watches will dominate and regular watches will fade out… i am may be wrong since newspaper is still going strong after TV news came in…

Just wanted to know your thoughts on this.


Ethos do sell luxury watches which is hard to fade. Also, luxury retailing can be extended to other product categories once you have the client base.

Btw…please read the report by Arun(in the first post), it will help understand the business model better. Also visit researchbytes and listen to the conference calls. The business seems to be in good hand.

PS: I called the company today and the annual result is on 28th May.

Hi @mikaarun,

First of all a big thumbs up to the detailed post you have done. You have beautifully captured and explained the business model, competitive landscape and opportunity ahead. I really liked the data about the growth of luxury cars in India over last few years :smiley:

I got interested in KDDL few months back and after initial research was really excited about the company and the opportunity. Their online platform is really remarkable and the no of visitors they are getting is phenomenal. They are doing a superb job in engaging such customers and educating them and increasing business without having to open new stores. Here was a good article - http://retail.economictimes.indiatimes.com/news/apparel-fashion/luxury/we-plan-to-become-single-largest-place-for-buying-luxury-watches-ceo-ethoswatches-com/27969438 which highlighted how they are able to showcase and service the highest range of watches because of their online platform.

On the negatives:

  1. Over last few months we read more on the digital watches and my brother @pratyushmittal who is a tech freak showed several articles and features. I strongly feel that the watch industry will completely change over next 3-5 years. This may be a big concern for long term investors in KDDL (We may thinking too forward and the co might be able to adapt or find other avenues by then)
  2. As per the recent finance bill - PAN is compulsory for purchases above 1 lac. As luxury watches are mostly sold in cash, this may be a short term negative.

We did ask some of these queries on concall and one may like to hear management’s response.

Overall, yes the company is doing several interesting things.


1 Like

@ayushmit great to see your interest in KDDL. On the negatives part I have some observations:

Point 1: Digital/Smart watch onslaught may not be that big as it is perceived as Swiss watches are considered more as a jewellery for men. Swiss watches have survived quartz boom and they should survive this phase as well. The smart watch arrival might expand the market itself. Some interesting articles are below:


Also KDDL is a retailer and not manufacturer hence they can change course if needed.

Point 2: PAN requirement can be short term dampener but in long term it should be fine. I was talking to one of my friends who used to run an auto dealership and he told me how they used to managed the cash payments which is not very uncommon.

Overall I feel this is a good story which might hit a temporary headwind but over a period should do well.


Dear Arun and Ayush,

What are your opinions on the competition from owner managed and single store retailers such as Johnsons, Rose, Time Avenue, etc.
I know some people who buy luxury watches and they tell me that the prices offered by these stores are basically unbeatable. Brands like JLC, Breguet and IWC go for discounts as high as 40%. Johnson for example, has the highest per square foot sale for Breguet in the entire world! Sometimes this is even because some retailers might not be entirely paying the duty on watches by hand carrying them to India.
If a person is spending a few lakhs of rupees on a watch, they might not look at just 1 location before making a purchase.

Does the fake or imitation watches make a risk for something like Ethos. Know dealers in my city who give exact replicas of Tag heuer and Hublot for as low as 5000 bucks.

@AnkGupta The customers of KDDL are ultra rich and they won’t buy imitation ever as these watches are associated with pride.

Hi Abhishek,

Yes, there is a tough competition at the same time there is a lot of fake market also. This is where KDDL stands out - if you read their interviews - they have been committed towards 100% genuine watches only even if they get lesser business. They do carry a high reputation if one takes feedback from industry people.

Disadvantage with family businesses is that they can’t be scaled up quickly. This is where KDDL has an advantage. Do spend sometime on their website - I think they are doing a good job.


KDDL looks quite interesting. I believe KDDL was first mentioned in the forum around 2 to 3 months ago. One thing that is very interesting is - how come a company of such size is able win the trust of buyers who are very discerning? Will it be able to sustain it? Need to dig a little deep.

I believe digital watches are more about utility and luxury watches are about status, so should be treated differently.I think a typical well to do person in society who owns expensive digital watch and a Rolex, would still prefer to go wth Rolex to a function. When the first electronic watches were sold in huge numbers, I used to think regular watches would disappear, but it never happened.

Thank you Arun for the write up. Will spend more time on the weekend.

Pls find some of the clarifications below –

Not sure of the after-sale service part. Probably the market has not been big enough for an established network. But, after-sale contracts are usually awarded at a national level by the brand owners and typically the largest retailers bag them.

Ethos’ advertising spends are focused towards Ethos and not the brands. But, KDDL has been very active in bringing the international watch exhibitions to India. In 2014, Ethos for the first time brought in the so-called Oscars of the watch making industry as the organizing partner. (http://www.pocketnewsalert.com/2014/09/ethos-and-grand-prix-dhorlogerie-de.html)

Product category expansion sounds very interesting but may turn unwise at this point of time. Look at the kind of customer base that you have built and the leads that you have acquired. Jewelry, Perfume, Accessories are all potential targets but I don’t think the management would/should get into adjacent categories right now.

Smart watches – Somehow I fail to understand how/why smart watch could replace the Swiss watches. I fail to see a need to even compare a $200 or a $400 plastic watch with $10,000 hand-made item. Smart watches will definitely make an impact but at the fashion segment or the entry-level premium segment.

Johnson / Kapoor… - They are definitely a competition in their respective geographies. No doubt. They even go to the extent of taking their collection to the customer’s house, have them try it and they have built relations over generations. But I believe that these are the guys who go behind Old Money and Ethos targets New Money.

Thanks for your views. Would appreciate any incremental “on the ground” info on store-level profitability and its potential. Had talked to two PE players who had evaluated Ethos for investment. Both of them had questions on how the store-level profitability will shape up. To me, the data is already suggesting improving profitability and the next 4 quarters’ data will be very critical. Both of the players had extremely high regards for the management.:slight_smile:


Another good read on the promoter


Results out:
Standalone Q4 PAT down from 1.42 cr to 1.24 cr YoY.
Consolidated Fy15 PAT at 8.68 cr. v/s 8.53 cr.
Consolidated EPS Rs. 9.58

Sales grew to 403 crore from 328 crore. The tax expense was to 5.08Cr from 1.97 Cr last year due to deferred tax.