Luxury watch retailer Ethos Ltd has attracted another marquee institutional investor, with Quant Mutual Fund acquiring a 2.6% stake worth around ₹175 crore at ₹2,500 per share. The investment comes at a time when the company continues to strengthen its position as India’s leading luxury watch retailer, even as short-term profitability remains under pressure due to currency fluctuations.
With a market capitalisation of around ₹6,629 crore, Ethos has increasingly emerged as a proxy for India’s rapidly expanding affluent and high-net-worth individual (HNI) consumption story. The company retails some of the world’s most prestigious watch brands, including Rolex, Omega, TAG Heuer, Tissot, Longines, Rado, Breitling and Tudor, making it one of the biggest beneficiaries of rising luxury spending in India.
Quant Mutual Fund’s investment also places it alongside other well-known institutional investors. Veteran fund manager Hiren Ved’s Alchemy Capital currently owns about 2.1% of the company, reflecting continued institutional confidence in Ethos’ long-term growth prospects.
Revenue Growth Continues to Surprise
According to a recent research report by Emkay Global Financial Services, Ethos delivered another quarter of strong revenue growth despite facing headwinds on profitability.
The brokerage noted that the company’s Q4 revenue grew 33% year-on-year, exceeding its estimates by around 4%. This indicates that demand for luxury watches in India remains exceptionally robust despite concerns over discretionary spending.
Emkay believes Ethos continues to deliver one of the strongest growth profiles in the retail sector, forecasting revenue growth of nearly 29%, supported by approximately 14.2% same-store sales growth (SSSG) in FY26.
The sustained expansion is being driven by increasing wealth creation, premiumisation of consumer spending and rising demand for global luxury brands among India’s affluent consumers.
Margins Hit by Swiss Franc Volatility
While sales remained impressive, profitability disappointed during the quarter.
The brokerage highlighted that continued depreciation of the Indian rupee against the Swiss Franc, coupled with negative operating leverage arising from rapid store expansion, resulted in an EBITDA miss of nearly 4%.
Consequently, EBITDA margins contracted by roughly 300 basis points during the quarter.
Currency movements remain one of the biggest risks for Ethos because a significant portion of luxury watches sold in India are imported from Switzerland. A stronger Swiss Franc increases procurement costs, squeezing retailer margins until price hikes can be passed on to customers.
However, Emkay expects these pressures to gradually ease as currency volatility normalises and lower customs duties under the proposed European Free Trade Association (EFTA) agreement begin benefiting importers over time.
Strong Balance Sheet Provides Comfort
One of Ethos’ biggest strengths continues to be its exceptionally healthy balance sheet.
The company ended FY26 with approximately ₹7.6 billion (₹760 crore) of net cash, representing nearly 85% of its current invested capital.
This sizeable cash reserve provides ample flexibility for store expansion, inventory management and investments in new growth opportunities without putting pressure on leverage.
Encouragingly, despite aggressive expansion, operating cash flows turned positive during FY26 after the company improved working capital efficiency by nearly 25 days.
This demonstrates improving execution and inventory management—critical factors in the luxury retail business.
New Growth Engines Emerging
Beyond its core luxury watch business, Ethos is steadily building additional growth avenues.
Its Certified Pre-Owned (CPO) luxury watch business grew around 23% during FY26, benefiting from increasing consumer acceptance of authenticated pre-owned luxury watches.
The company’s lifestyle subsidiary, which distributes premium global brands such as Messika and Rimowa, expanded its footprint by opening two additional stores during FY26 and reported profitability at the PAT level for the first time.
Meanwhile, investments in associate businesses, including Favre Leuba and Pasadena, continue to remain in the investment phase, with combined losses of around ₹4.6 crore during FY26. Management expects these businesses to mature over the coming years.
Emkay Retains ‘Buy’ Rating
Although Emkay has marginally reduced its target price by around 5%, lowering it from ₹2,950 to ₹2,800, the brokerage has retained its ‘Buy’ recommendation.
The target price revision primarily reflects temporary pressure on margins arising from adverse currency movements rather than any deterioration in the company’s long-term fundamentals.
According to the brokerage, Ethos continues to stand out because of its industry-leading revenue growth, strong same-store sales performance, healthy balance sheet, positive operating cash generation and multiple emerging growth drivers.
Outlook
Quant Mutual Fund’s ₹175 crore investment reinforces institutional confidence in Ethos’ long-term growth story. While near-term earnings may remain sensitive to fluctuations in the Swiss Franc and currency-led margin pressures, the structural drivers remain intact.
India’s expanding base of affluent consumers, rising discretionary spending, growing appetite for luxury brands and Ethos’ dominant market position continue to make it one of the strongest listed plays on premium consumption. If currency headwinds moderate and margins recover as expected, the company could be well-positioned to deliver sustained earnings growth over the next few years.
