Ethos Chairman explains what the India-Europe trade agreement means for the luxury watch retailer

The trade and economic partnership agreement signed by India with the European Free Trade Association (EFTA) on March 10, will considerably strengthen the business of luxury watches in India, says Yashovardhan Saboo, Founder and CMD of luxury watch retailer Ethos.

The agreement will reduce the current trade duty rate of 23% between India and Europe--including Iceland, Liechtenstein, Norway, and Switzerland--to zero, through seven annual reductions.

The agreement is poised to bring substantial economic benefits, including a projected $100 billion in investment over the next 15 years and the creation of one million jobs in India.

"At 23%, the duty was among the highest in the world. What this (the agreement) is going to do is it will bring prices margins in India pretty much in line with international norms, which also means that the brands and retail together will have the ability to invest to grow the market, service levels, and the retail experience. This, in turn, will lead to growth in the market. We believe the growth in India should accelerate as a result of a fantastic change like this," Saboo said.

However, Saboo does not see any immediate implications on business from this new development as Ethos already has contracts in place with leading brands.

The benefit will be felt over the long term once the duty impact comes in and domestic margins start getting aligned with international norms, he stated.

The company is targeting 20-25% compounded annual growth rate (CAGR) over the next 5-10 years. Saboo believes the market will expand at about 12-13% per year in value terms.

Ethos has a sizeable portfolio of premium and luxury watches in India, enabling it to retail 50 premium and luxury watch brands like Rolex, Omega, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Bvlgari, Rado, Longines, and Tissot.

According to a brokerage firm, Emkay, the India-EFTA deal could improve margins for Ethos by up to 200 basis points (bps).

“There will be an improvement. Over 3-4 years, we should start to see the needle move on margins,” Saboo said.

Ethos recently acquired a Swiss brand, Favre Leuba. “We believe that the team should be ready with the new collection and relaunch the brand by the end of August or September,” Saboo said.

Speaking about Rimova, Saboo said, the company is planning to open more boutiques in India in the coming years.

For its jewellery business, Messika, Ethos is looking to finalise a place for a boutique.

The current market capitalisation of Ethos is ₹6,489.89 crore.