KDDL Ltd
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Ladies and gentlemen, good day, and welcome to Ethos Limited Q4 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Yashovardhan Saboo, Managing Director, Ethos, for his opening remarks. Over to you, sir.
Thank you very much. Good evening, and a warm welcome to everyone for the maiden post-listing earnings conference call for Ethos Limited. I'm sure you have seen a listing that started at 10:00 today on both the stock exchanges, BSE and NSE. It's a momentous occasion for our company to travel a long way. And I want to thank all our investors and analysts for their confidence, support and engagement in Ethos. For this call, I'm joined by Mr. Pranav Saboo, CEO; and Mr. Ritesh Agrawal, CFO; and we also have SGA, our Investor Relations advisers on the call.
As I said, this is a landmark moment for all of us, including the shareholders of KDDL Limited, the parent company of Ethos. We believe the idea of Ethos was the most logical way of unlocking value and give justice to the business we have put our hearts to over the past many years.
Let us move to the business of Ethos. The business of Ethos, its history, what it does and how it makes money. These have been elaborately detailed in the RHP relating to the IPO. The watch market in India and globally has been succinctly captured in the independent report by Technopak, which is also included in the RHP. So with your permission, I will not repeat those facts.
Further, the investor presentation has also been uploaded on our website and on the stock exchanges some hours ago, and I'm sure you've had the opportunity of having gone through that too. I will, therefore, proceed to share with you with much pleasure details of the financial performance of what has been a record year FY '22. I remind everyone that this was the year in which the deadly Delta wave of COVID was sweeping across India in the first quarter, that is April to June 2021, which deeply impacted every business, especially retail businesses with malls remaining closed for practically 80% of that period.
Notwithstanding the impact Q1, we have recorded the highest ever yearly revenue, EBITDA and PAT in FY '22. Let me give you the figures. As Ind AS 116 has a significant impact on our EBITDA and PBT, I'm sharing the key highlights of the financials without Ind AS 116 impact to give a simpler view of the accounts. Billings increased by 30% Y-o-Y to INR 185 crores in Q4 of FY '22. This despite a lockdown of up to 2 weeks in many cities due to the third wave of COVID in January and February. For the year as a whole, billings increased by 50% Y-o-Y to INR 670 crores in FY '22. Of these, billings for exclusive brand for watches contributed INR 52 crores in quarter 4, that is 28% of the total billings for the quarter, while for the year as a whole, it contributed INR 178 crores in billing, that is 27% of the total billings of the year.
Consolidated revenue from operations increased by 29% Y-o-Y to INR 159 crores in quarter 4. And for the year, it increased by 49% to INR 577 crores in FY '22. Consolidated gross profit increased by 35% Y-o-Y to about INR 48 crores in quarter 4 '22 while it increased by 58% Y-o-Y to INR 166 crores in FY '22. Consolidated gross profit margins expanded significantly too by 130 basis points Y-o-Y to 30.2% in quarter 4 FY '22, while it expanded by 165 basis points Y-o-Y to 28.8% for the whole year. Consolidated EBITDA increased by 46% Y-o-Y to INR 15.4 crores in quarter 4 while it increased by 85% Y-o-Y to INR 48.3 crores in the whole year. Consolidated EBITDA margin expanded by 110 basis points Y-o-Y to 9.6% in quarter 4 FY '22, while it expanded by 160 basis points to 8.3% for the year as a whole. Consolidated PBT...
Ladies and gentlemen, the line for Mr. Saboo is disconnected. Request you all to please be connected while I connect him back to the conference.
Ladies and gentlemen, thank you for patiently waiting. Over to you, sir.
The stock carrying months on sales reduced from 6.2 months in FY '21 to 5.3 months in FY '22 and better inventory planning and sales and consolidated debt stood at about INR 60 crores post the repayment from IPO, which is the best debt level significantly reduced almost to half. Ladies and gentlemen, while we are pleased with the record numbers. We are even more excited about the prospects for the current year and the years ahead. We continue to see strong demand for our products and the consolidation of our leadership team.
The line for Mr. Saboo has been disconnected. Please give us a moment, we'll call him again. Other members of management, would you like to continue because I'll connect Mr. Saboo back to the call.
Ladies and gentlemen, this is Pranav Saboo, and I'll continue the speech. Ladies and gentlemen, while we are pleased with these record numbers, we are even more excited about the prospects for the current year and years ahead. We continue to see strong demand for our product and the consolidation of our leadership position in the market. Already in the first 2 months of the current year, that is April and May, we estimate revenue in the vicinity of INR 120 crores. This indicates that we have a strong revenue growth in quarter 1. Profitability will also be strong on the back of improved margins and greater leverage on fixed costs.
Further, as is known, quarter 2 and quarter 4 are generally stronger than quarter 1. And quarter 3 significantly the strongest of all quarters. Therefore, we are very hopeful of strong growth of 30% to 35% in revenue for FY '23 over FY '22, a strong like-for-like store growth and great increase in the profitabilities. Besides these exciting summarized financial numbers, there is a wealth of qualitative factors that provide immense fundamental strength and an impregnable moat to our business. This includes a portfolio of over 30 brands available exclusively at Ethos, a list that will further grow.
Let me -- I would like to share some more information. Let me start by sharing very exciting news that we have just received a few days ago. I'm extremely pleased to announce that Geneva-based, GPHG, is the premier global award for excellence in watchmaking widely acknowledged as the Oscars of the watch business has chosen Ethos as the partner for the unique pre-award exhibition in 2022. Only 2 cities in the world are chosen every year for this event. This year, the event will be held in New Delhi in October with Ethos as the sole watch retail partner. I would like to add that our Chairman is a member of the global GPHG Academy since 2021. This is a matter of great pride for every one of us at Ethos.
Now let me go on to the industry. As per Technopak, the watch market in India was valued at INR 13,500 crores in 2020 and is expected to grow at a CAGR of 10.6% to reach INR 20,300 crores by 2025. On the other hand, premium segments are growing at a CAGR of 12%. The luxury segments are growing faster than other segments at a CAGR of 13%. These fast-growing segment is where Ethos is focusing and growing its market share continuity. The preowned business will further increase the overall industry size. Our growth is galvanized by our portfolio of 33 brands, which are exclusively available at Ethos. The investor presentation lists most of these. We are in discussion with more brands -- with some more globally recognized brand and hope to share information of additions to our brand portfolio during the year as and when new arrangements are finalized.
Relationships with luxury brands and their owners typically take many years to develop and are difficult to replicate. Our promoters and management team has worked hard to nurture these relationships and these too provide a wide moat for our business. Our partnership with key brands, including Omega, Bvlgari, IWC, Hublot, Panerai, Rado, Tissot, Longines, Breitling, Jaeger-LeCoultre and many more brands. These have been ongoing for more than a decade, and for most, we are the brands' largest Indian partner. Certified preowned watches is a great growth pillar for the watch industry. The preowned watch sector does not cannibalize the new watch business. On the contrary, it adds to the overall industry size by promoting multiple ownership of watches and adding a whole sector of first-time luxury enthusiasts. It is already 33% of the new watch business globally. And according to industry experts, it will become half the size of the global watch -- new watch industry globally by 2025.
At Ethos, we grew from roughly INR 11 crores of certified preowned business in FY '21 to INR 32 crores of business in FY '22. We hope to exceed over INR 75 crores of business by the end of the year through one lounge in Delhi and the website for preowned watches. Over the next 2 years, we will expand the footprint along with the website to 4 to 5 major cities in India to continue driving strong growth in the preowned business. In India, we will dominate this fast-growing sector because we are the only ones with a pan-India network to source watches. Our state-of-the-art service center, which we recently opened, [ restore each watch ] and provides a 2-year warranty on the watches. Our new website secondmovement.com, has already received 100,000 visitors on board every month. We have painstakingly trained 17 watchmakers over the last 12 months. We are well placed to grow this business rapidly, it will have a huge impact on the new watch business as well.
Within the luxury segment, the higher-priced watches are growing at a faster pace than lower-priced watches. Ethos being predominantly luxury and premium-focused players will continue to benefit from this phenomena. Luxury and high luxury watch segments also earned better margins, allowing us to have better profitability. We derive significant benefits from the tendency of consumers in the luxury watch market to become repeat customers.
Our physical presence is leveraged by our strong digital platform with a frequently visited website, effective social media communication, a large database of HNI customers, and an active program of home and office delivery of luxury products. Our digital platform has created a niche in the online luxury watch market through various unique value-added services, including a highly specialized team of luxury watch consultant, targeted content, watch insurance, easy installments and dedicated aftersales service to our customers.
Our loyalty program called Club ECHO is a customer relationship management initiative, which provides benefits to repeat customers based on their cumulative purchasing over time. The database generated via Club ECHO gives us access to important buying trends, which further enables us to design appropriate communication strategies, leading to greater satisfaction and commitment. As of March 31, 2022, we had over 283,300 registered members in our Club ECHO.
We have also leveraged our rich experience to expand into other luxury verticals such as luggage and jewelry recently. We have recently entered into an exclusive -- into an agreement with RIMOWA for retailing their range of luxury luggage and Messika for retailing their range of luxury jewelry in India. This will open new growth verticals for the company in the future.
I will summarize our key and high priority strategy: expanding our physical store network. We will continue to execute our pipeline of new store projects as well as identify attractive locations for opening new company-branded stores or monobrand boutiques. We have planned to add 13 boutiques across India and renovate 6 stores, including a certified preowned lounge in Mumbai, which we plan to open very soon.
Certified preowned watches. As I've mentioned, we plan to scale up the certified preowned watches vertical swiftly through the expanding the footprint along with the website to 3 to 4 major cities in India to fuel further growth. Increased market share and profitabilities. Our focus will continue to grow business from existing and new stores using our strong omnichannel platform and digital reach to capture higher market share and improve margins in our existing stores through the increased sale of business and cost-optimization initiatives.
Increased our watch brand portfolio. As a part of our continuous effort to offer the widest assortment of brands to our customer base, we will continue to invest in entering into new brand relationships including some exciting new exclusive relationships while continuing to nurture our existing brand partnerships. I want to underline the fact that today 33 brands work exclusively in India with us. We will continue to invest in strengthening our brand through online marketing, electronic media, print media, outdoor events and sponsorships. We believe that investment in brand is critical to increasing our brand recognition and market share and also help us capitalize on the growing consumer preference for branded products.
Lastly, aftersales service. Our service center is already one of the best in the country with extensive brand authorization. We will build excellence in our aftersales service as one of the key drivers for our business and our credibility in our customer base.
With these words, I would -- I thank you again for your confidence and I now hand over the call back to our Chairman.
Thanks, Pranav. I hope for all the listeners, he's been able to summarize and present useful information about our business. My apologies for the disconnections in between but I hope you've enjoyed this call. And I now welcome your questions and participation.
[Operator Instructions]
We take the first question from the line of Akshay K. from Envision Capital.
First of all, congratulations on the listing. Sir, I wanted to know what sort of revenues are we expecting from RIMOWA and Messika?
Akshay, thanks for the kind words. May I suggest if you have more questions, if you can ask all of them so then we can go on? Or is this your only question?
Yes, I'll just ask them. Sir, also one thing to understand you have given a slide where in a loyalty program started by other brands. So I think there is only one of the other competitors who have started this. So wanted to understand, so this is a new business to me, how difficult is it to start the loyalty program? And what sort of loyalty benefits -- what is the differentiating factor are we giving? And I don't think there is -- what we can say very much difficult to start a loyalty program. And I believe that Helios also has a loyalty program by the name of Encircle. And my third question would be what sort of ASP, average selling price, currently, we are at INR 1.5 L. So what sort of ASPs can we expect going forward? These are the 3 questions from my side.
So let me answer the last one first, ASP. You've seen in the last 4 years, our ASP has grown from around INR 73,000 to about INR 145,000 now, around that number. This is a result of a couple of things. Most importantly, our shift of focus away from low-price segment as in watches below INR 30,000, INR 40,000 towards more watches in the price range of INR 1 lakhs to INR 3 lakhs to INR 5 lakhs and INR 10 lakhs. This trend towards a higher percentage of our business coming from the luxury and high luxury segment is going to continue and we believe that there will be a steady growth in the ASP as it has grown in the past couple of years. It's difficult to really estimate completely exactly how it will grow. But I think the trend of the last couple of years is going to continue.
Second, loyalty program. Listen, the loyalty program works if you have a certain minimum threshold of loyalty customers, you have a large offering of brands...
Mr. Saboo is disconnected. Maybe you can continue. I'll call him back.
So just to continue. So the loyalty program requires a large setup that we believe that the current competition does not have. It requires the capturing of data. It requires to be able to work on the data, you have to have a large number of brands. We have to bring the brands on board to be able to work with these -- to work with the loyalty program. We offer many benefits to our customers as well.
First of all, we offer points on every purchase, which they can redeem in the future for a greater offer on any of our watches, they get priority service at our aftersales service center, they get invitations to our events, they get access to limited edition watches. So there's a host of other benefits that we have that we offer to customers, which is why we see people enrolling for the loyalty program.
I believe the next question was on the lines of RIMOWA and Messika. We believe that every RIMOWA boutique that we open will give us INR 12 crores to INR 15 crores of business. We have already finalized the first location for RIMOWA in Mumbai, and we are looking for more locations in luxury malls. And as and when they come up, we will be signing that on. At the moment, for Messika, we are opening only as a trial -- the first 6 months will be a trial phase that we are doing inside a few of our stores. And once that is successful, we will be taking it to boutiques, and we expect every boutique as well to do about INR 80 lakhs to INR 1 crore of business going forward. That's a monthly figure.
Just one follow-up. Sir, you did mention that loyalty program needs to tie up with brands. So the benefits which we are passing to the customer in terms of discounts and all these events. So I think events still we would be doing, but any discounts or rebates on future purchases are they passed through to the brand or we are getting that from the brand as well?
We -- in many of the cases, we take care of the cost. In many of the cases, it is shared with the brand. So it depends brand to brand, but brands do want to participate with us in the communication cost, in bearing some of the costs, including offers to our customer base.
We take the next question from the line of [ Anjana Shah ] from [ Shah Investors ].
So I have 3 questions. First, can you give any qualitative aspects on how the business focus will change for Ethos post-IPO? Second, how will the fresh issue be utilized to create value for the company in the long term? And third, what can be the sustainable EBITDA margins for our business?
So our fresh issue to be utilized for working capital but for a long-term business growth as well as the -- we will be utilizing fresh issue for opening our stores that has been proposed as well as the upgradation of our IT infrastructure, and the balance will be from a general corporate purpose. So these are from our fresh issue utilization. And definitely, all these fresh issues are primarily for the business growth of the organization going forward.
I do want to say that the idea with the raise of the fund is to use the money to create structural advantages for the business going forward. For example, signing on more exclusive brands. For example, creating new boutiques and creating -- tying up with new brands and creating new experiences for our customers to be able to power us forward.
[Operator Instructions] We take the next question from the line of [ Akshay Jain ] from [ Jain Capital ].
So I have a couple of questions. Firstly, what are your views on certified preowned business? So how do you plan to scale it? And lastly, what is the expected ROCE of the business once it's stabilized?
Pranav, will you take the question on the certified preowned business?
I think you should go ahead and take that. Just go ahead with the -- yes.
Okay. Okay. So Akshay, sorry, again, I'm getting disconnected, but I hope you won't get. The certified preowned business is actually, as Pranav mentioned, a very fast-growing business globally. And in India as well, it is growing fast. We can see it. We can feel it. As you know, in the second year, we nearly tripled the business and we are once again looking at a high double-digit growth in this year as well.
How it works is actually -- there are 2 things it accomplishes, right? There are people who own multiple watches in the premium and luxury segment and many of the watches they don't use and they can actually then sell the watch and upgrade to another watch which they like more. On the other hand, it allows first-line users who want entry into a premium or luxury watch segment, but at a lower price than a new watch would cost, it allows them to buy into a watch or even to buy into multiple watches. That's the reason why this model is successful globally, and that's the reason why it's succeeding in India.
How it works for us is we're -- actually through our website and through our launch. We are in touch with customers who want to sell their watches, we assess those watches. We make sure that they are genuine watches, then those watches are fully refurbished in our service center and then they are offered for sale and then they're customers who are interested in the watches and they come and buy them. There are cases where a seller may expect a different price than what we feel is there. In that case, we tell the seller, look, we will put -- we will service your watch, and we will put it on our website at the price you want and if a customer is there, he will buy it. When the customer buys it, we will deduct the agreed margin. And after that, we'll make the payment for you -- to you.
So we have both a bought and sold model as well as the [ consignment and sale ] model, and both are working pretty strongly for us. As far as the ROCE is concerned, it is our long-term goal to actually go for -- to attain a figure higher than 25% ROCE.
We take the next question from the line of [ Sachin Shah ] from [ S. S. Securities.]
I have a couple of questions. First would be, what is your same-store sales growth in FY '22? And how is the trend over the last 3, 4 years.
Okay. What are the other questions, please?
And my second question would be on the digital side. I mean, how -- what are the initiatives you are taking to grow on the digital aspect and how quickly it can be scaled up in a span of 2, 3 years?
Right. Ritesh, would you answer the question on same-store sales growth and trend on the digital, please?
So same-store sales growth for FY '21 is 47%. And if we talk about the Q1, it's 21% -- sorry, Q4 21%.
Mr. Shah, I may just say you also asked for what has been the long-term trend. If we exclude the COVID period in the longer -- in the past, our same-store growth used to be in the region of 10% to 12%. We are seeing an acceleration now as we move to higher price points because actually, for the same store, with higher price points, we get a much higher growth rate. And therefore, we believe our same-store growth will be substantially higher than the long term or the previous trend of 10% to 12% and what you're seeing, for example, in the last quarter of 21% same-store growth, we are hoping that we will continue to achieve something in that vicinity in the near future as well.
So around 18% to 20% is the target?
It depends on a little bit on what is the product mix and so on. But as I said, significantly higher than the 10% to 12%, which was the trend pre-COVID. Pranav, would you like to answer the question on digital initiatives and growing that side of the business?
So the digital part of the business is growing quite quickly. We are adding -- we are taking several initiatives there to be able to further grow the business. We have, for example, on now on many of our -- on our watches on the website, you can see it is in -- they are available in 3D. They're available in augmented reality. We have our own studio that is coming up to create content that is further shoppable. Our own channels that are going to come up for creating video content because we believe the future is that of video content. Later in the year, we have our app coming out as well, which I believe will be quite a game changer in terms of the way the industry looks at watches digitally.
So we're taking all of these steps. In fact, if you look at our website, secondmovement.com, everything, all the watches there are watches that we shoot ourselves. The content is created by us. And we have a much higher stock turn on the certified preowned business that we have over here as well. So I believe that with all of these initiatives, we'll be able to grow quite quickly as we have in the past.
Would be in high D the target would be?
What you mean by -- in terms of...
Growth target.
So what I can say is that digital will probably be around 35% to 40% of the overall business that we are doing.
[Operator Instructions] We take the next question from the line of [ Puja Shah ] from [ PCG ].
Sir, I would like to ask a question on exclusive agreements with the brands. Are we going forward to have an exclusive agreements with the brands? And if so, with which brands?
Puja is this your only question? Or you have other questions? Why don't you list them all?
No, sorry, this is the only question.
Okay. So let me answer that. As Pranav mentioned, out of our portfolio of a little more than 50 brands, 33 brands are available exclusively at Ethos. So essentially, what we're saying is nearly 2/3 of our brand portfolio consists of brands that are exclusively at Ethos. We do want -- we do plan to add to this brand list because an exclusive brand actually allows us to offer a very differentiated product portfolio to customers and it builds a very strong moat around us.
There are reasons why brands also want an exclusive arrangement because it allows them to reduce their cost of operating in India while getting the advantage of the extensive digital and physical network of Ethos. So to answer your question, yes, we have exclusive arrangements, and we will be growing the list of brands we have exclusive at Ethos.
So we have exclusive agreements or arrangements, sir?
These are -- so in many cases, there were agreements. In many cases, there are arrangements. As I mentioned in the speech, a lot of -- most of the luxury brands, they have -- the relationships are extremely important and these relationships are nurtured. We may often start a relationship with an agreement but it continues even if there is no agreement in place. So while there are agreements, not all of them have agreements, but what I can say is that the exclusive arrangements that we have had with so many brands have all continued from the time they have started without any break.
I just do want to add that most of the brands that we have in our exclusive portfolio also have contracts, exclusive contracts.
We take the next question from the line of [ Priyanka Shah ].
I wanted to understand what can be the sustainable EBITDA margins for the business?
Our EBITDA margin -- is this your only question?
Yes. I have 2 more questions.
Please go ahead.
Also, do you have any plan to optimize your high inventory days going forward? And how many stores do you plan to open in the next 1 year?
Okay. Coming to EBITDA margins, I don't know if you participated in the earnings calls of KDDL where we used to report Ethos in past years. 3 or 4 years ago, we used to look and it is a matter of record that we said our goal is to hit INR 1,000 crores of billing and a 10% EBITDA. And we said that is something that we'll be very happy to achieve. Despite the 2 years of disruption of COVID, I am happy to say that we are almost reaching that level. And we hope that very soon, we will be able to touch the EBITDA level which I'm talking now without Ind AS, right?
However, is 10% the EBITDA ceiling? I don't think so. Because what is happening now is that we are seeing a constant improvement in our margins and a constant improvement in our operating leverage. And therefore, I believe that the EBITDA margins will exceed 10%. I don't want to give a cap number because cap numbers sort of weigh us down. But I believe we will get an EBITDA margin, which would be superior to most of the businesses in the retail space and definitely in excess of 10%.
As far as the inventory question you've have raised. In terms of sales, our inventories 3 years ago was about 190 days. The last report, it's come down to about 155 days, 157 days of sales. So there has been a steady decrease in the inventory in terms of days of sales that we've had. We believe that this improvement will continue a bit as we go ahead and upscaling tools. However, I do want to add a word of balance here. Because remember that this is a luxury business. This is not a business where people just come and put a watch in a basket on the Internet and we deliver a INR 1 lakh watch just like that. It doesn't work like that.
In the luxury business, people need to see exactly what they are buying and for that, a physical inventory is important. For example, if someone is buying a INR 5 lakh watch. And we have a watch, which has a black dial but the lady who's buying it she said, "No, no, I want to see what a gold dial looks like." I cannot say that, "Look, here is the picture of the gold dial, please go ahead and buy it." In a T-shirt, you may say, "Okay, I want a white color T-shirt. If the size is fine, if the fabric is fine, I will take it, I don't have to see it." But in a watch, the customer will say, "I need to see that watch." So there is a certain minimum requirement of inventory that the luxury business requires.
So we have to reach a balance between the stock required what is natural for the success of the luxury business and what is efficient from a working capital point of view, I think our working capital efficiency in terms of inventory has increased. Over the last couple of years, working capital has gone down in a number of days of sales. It will continue to improve, but we will need to carry a certain minimum inventory because of the nature of our business. As far as the new stores are concerned, we have planned. We have specifically 13 stores, new stores that we are going that we are expanding into. These stores are identified. However, the exact timing of these will depend on when the malls become ready because most of them are actually in malls. We do expect a large number of them to be ready in this financial year, but towards the end of the financial year.
We take the next question from the line of Adit Shah from Vibrant Securities.
Hello, good evening, sir. Lalaram here.
Congratulations to you.
I think I should congratulate you guys, sir, for all the hard work over the last 4 years and great to see this outcome. And so obviously, very happy for myself and also clients and also for the company. Sir, I have a couple of questions. One is based on the first 2 months of this financial year, what does the outlook look like given we have seen some weakness in global financial markets and that does have an impact on the wealth effect and the propensity to consume? That is my first question.
My second question is basically, for the next 2 to 3 years, we see that we are also expanding into new categories. But is it fair to assume that our overall growth and sort of margin expansion will be driven by the watch category or the other categories have a fairly significant role in the near term, in the next 2 to 3 years?
Okay. So Lalaram, a very interesting first question. In the first 2 months, I can go out and say on the last day of the first 2 months and we see absolutely no impact of what I feel as the global sort of trends. In fact, one question that I was often asked was that the growth that you saw in the last quarter 3 and quarter 4, was it because people are not traveling or for any reason like that, and now that people are traveling, sales they're going to come down.
Well, travel has been opened since April, since March, it has been completely open. Airports are full, flights are full, you can't find tickets or places in hotels anywhere outside India. Indians are traveling everywhere, but we have seen 0 impact on our sales. The first 2 months, I can tell you the first 2 months we are seeing -- we are estimating sales of about INR 120 crores, right? Which is going to be a record quarter. And you know that kind of a revenue, if you prorated it, what it does. And obviously, quarter 1 is -- quarter 2 and 3 -- 2 and 4 are better than quarter 1. Quarter 3 is obviously the best quarter in the retail business in our business especially.
So there is a very strong and continuing undercurrent of growth of demand. I've been saying this since to look at the trends, filter away the COVID quarters, and you see the strong growth in demand. This is not only an India phenomena. It's a global phenomena. But today, the Indian high-end shoppers are no different from anyone else in the world. And we believe this is going to continue. Absolutely.
On your second question, over 2 to 3 years, yes, while we are looking at other segments such as jewelry and luggage and you can understand that jewelry is a very strong complementary segment to watches because it attracts lady customers, right? So therefore, there's a strong rationale to enter into that segment. But you're also right that over the next 2, 3 years, the mainstay of the business will still be the luxury and premium watch business. There are huge opportunities in that business. There are many brands, global, very famous brands who are not even present in India yet. We are working to bring those brands to India. We will be the partner of choice.
So there is a large potential of growth in the watch business. It will remain the mainstay of our business. But with the new segment, jewelry, luggage, perhaps some others, we will build a growth vector which will continue to power the company to growth even in future years, let's say, 3, 4, 5 years from now when the growth in the watch segment starts to slow down a bit. We don't see any evidence of that but we're just building another engine of growth in our business, in the luxury business because we see huge complementarity in these segments.
Understood. Great to hear the momentum is still very strong and all the best for this financial year.
Getting stronger, Lala.
I would be happy to be wrong here. Stronger. And all the best, hope it maintains that way.
We take the next question from the line of Rahul Agarwal from InCred Capital.
Sir, 3 questions. Firstly, on the industry. It seems like vertical specialists generally get most of the market share for luxury watches in terms of retailing in the country. How do you see this moving ahead? Are you seeing some consolidation here, some parameters that brands monitor and choose their partners in India? What is Ethos doing better than the other? That is the first question.
Secondly, about the new brands you talked about signing up more exclusive brands. Just wanted to understand what's the scope like further from here because we already have a lot of brands with us in our portfolio in terms of adding new ones going into next 3 to 5 years? And will these be only entering India for the first time or you would also be taking market share from other existing retailers?
And lastly, on the margin, you said, obviously, there is even scope further here even from 8.5% we reported this year. This I'm talking about without Ind AS. But what would be the levers to improve margins? Obviously, the presentation talks about exclusive brands, the higher revenue share from them helps on the EBITDA margin side. But if you could list down 2, 3 reasons for how we should track EBITDA margin going forward, that will be helpful. That's all from my side.
Okay. First about the vertical specialists and why -- what Ethos does better than anybody else. You're right. Selling luxury watches is a highly skilled and technically oriented retail. People believe that watches are expensive INR 5 lakh and INR 10 lakh watches that's why only because of the brand. That's not true. There is a huge amount of engineering. There is a big amount of know-how and specialization that goes into the watches, and collectors who buy that kind of watch want to know what is special about this watch. Why is it INR 5 lakhs? Why is it INR 10 lakhs? Why is it INR 2 lakhs? While you get a quartz watch for -- a good quartz watch for INR 10,000. Why do some mechanical watches from collector brands cost INR 25 lakhs, INR 30 lakhs?
And for this, you need a very specialized and highly trained manpower. So this is the first point, right? Ethos invest in training its manpower multiple times more than any other retailer and the brands recognize this. Brands have training sessions where sometimes more than one retailer representatives are there. And time after time, the representative of Ethos are rated as the highest price by the brands. So this is the first point.
Second point, our digital network, our digital reach due to the network that we have is an all-India reach. And this contribution to the reach of the brand without having too many points of sales. You are aware that today, brands are saying, I don't want 20 points of sale or 30 points of sales or 50 points of sales. They don't want too many points of sales, but they want qualitative points of sales. If with a limited number of points of sale, brand can reach the all-India market. Stores become efficient, brands become successful.
So this is the other unique strength that Ethos is bringing on the table. These are the 2 strongest strengths. I'm sure there are more which I would love to discuss and reveal. For example, the quality of the service that we order, the dependability that we offer, the transparency that we offer. These are all things that are highly valued by brands. The professionalism of our purchasing, of our dependability of our payments. These are all very, very strong factors that go into nurturing our brand relationships.
As far as the new brands are concerned, we have 33 brands. We believe we will sign on more, especially in the high-priced segment. We need a portfolio that is equal to the best in the world. Why did -- in the past, why did Indians shop outside India when they were looking for expensive or luxury watches? They said that in India, we don't have enough choice. We don't have enough choice of brands. And within the brand, we don't have enough choice of merchandise. Ethos has changed that forever.
Today, you go into an Ethos store, the experience, the portfolio of brands, the brand which -- the product within its portfolio is equal to similar global stores anywhere there. And that's the reason why we are seeing more and more Indian customers buying in India. Of course, the other reason is that prices in India are competitive with anywhere in the world. So that's the reason why we believe there will be new brands that we'll be signing on. It will be -- and it will help us to present the most exciting portfolio of brands to our customers.
It's difficult to put a number to it, but wait for good news, you would see it coming. You asked whether it's going to be completely new brands or some who are present, already present in India. I can't really say that, but I can tell you that brands in the past, which were working through distributors or agents have chosen to work with us exclusively because of the benefits it offers them. So we hope to add more new brands, whether first time or already existed in India.
Your last question was on margin growth. The 2 most important reasons you already said, which is exclusive brands and the operating leverage. However, I may add that as our marketing, and our storytelling, and our communication becomes important, and as our service becomes important and valuable. Our after-sale service and the credibility of the brand Ethos goes. The other factor that we see happening is that the consumer discounts that we have to offer, those are gradually going down.
You may recall that in past years, there were often offers and consumer sales. We don't have to do that very often now. Consumers are happy to buy at even a lower discount from Ethos or no discount from Ethos very often because they value the service, the product, the reliability of what we offer at Ethos, and this is also helping us to improve our margins.
Got it, sir. Sir, just one follow-up. On the certified preowned business, how does the sourcing really work? As in you said, you are the largest sourcing retailer in the country for certified preowned in India today. But how does it really work in terms of getting the right product, getting it at the right time. And then as Pranav mentioned, the turns are very high. So how quickly do you liquidate? Could you just throw some light here, sir?
So the purchasing process is a very key process in the certified preowned business. Why? Because, A, you need to connect with interested sellers. With a pan-India network, it gives us a huge strength because when a customer comes to buy a watch, they're very often surprised when a person in the store also asked, "Sir, would you have or ma'am, would you have a watch that you're not using, which you would like to sell an upgrade to another watch or maybe just sell it?" And they're very surprised, "You're doing that, too?" Yes.
So the pan-India network of stores that nobody else has, gives us that leverage. How does it work? So obviously, when we buy a watch -- before we buy the watch, the customer wants to know what is the approximate price that they can get. But for that, we need to judge whether the watch is genuine, whether -- what is the condition of the watch. So there is a provisional documentation that is done, then the watch is shipped to our central service center, experts then check the watch for its genuineness, for what will be the refurbishment cost that is communicated, agreed with the customer.
When it is agreed, when the final documentation is done, the refurbishment is done, and it is offered for sale. The refurbishment process and all of this takes about a month. But after that, within a month the watch sells out. On an average, we have less than a month of stock of preowned watches. Our bottleneck has actually been -- up to now, has been the refurbishing capacity but this, as Pranav mentioned, we have trained 17 watchmakers. We have a state-of-the-art service center. So this capacity is steadily going up. And with this, we will be buying more and selling more.
As there are no further questions, I would now like to hand over the conference to the management for closing comments.
Thank you very much. I would like to take this opportunity to thank all the listeners and everyone who joined in this maiden earnings call of Ethos. Thank you for your confidence, and we look forward to remaining connected. Thank you, Pranav. And thank you, Ritesh. And thank you, [ Sanjeev ], for being on the call as well. Thanks very much. Goodbye. Have a nice day.
Thank you, sir. Thanks all the participants.
Thank you. On behalf of Ethos Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.