Last updated: 16 Nov, 2021 | 02:45 pm
Go Fashion (India) Limited (Go Fashion) IPO opens for subscription on 17th November. The company is looking to raise up to Rs 1,023 crore through the public issue. Here are the details:
About the IPO
Go Fashion Limited IPO Date: 17 November - 22 November 2021
Go Fashion Limited IPO Price band: Rs 655 - Rs 690
Issue Size: Rs 1013.61 crore (Fresh Issue of Equity shares aggregating up to Rs 125 crore and Offer for sale of 12,878,389 Equity shares)
Post Issue Market Cap: Rs 3,544 crore – Rs 3,727 core
Reservation: QIB 75%, Retail - 15%, NII 15%
Bid lot: 21 shares, and in multiples of 21 shares
Objectives of the issue
The net proceeds from the IPO will be utilized for the following purposes :
About Go Fashion
Below are different categories in which Go Fashion creates products:
The Indian women's apparel industry is highly fragmented with several regional brands and retailers present in local markets across the country. Go Fashion's products compete with non-branded products, local retailers, and products of other established brands. Some of the brands that the company competes with are BIBA, Global Desi, AND, H&M, Zara, M&S, Fabindia, Soch, and Twin Birds. They also face competition from private in-house label brands launched by large-format stores.
The listed peers include Page Industries, Trent Limited, Bata India Limited, Aditya Birla Fashion & Retail Ltd, TCNS Clothing Co Ltd.
Well-diversified product portfolio - Go Fashion has 50 bottom wear styles in a range of over 120 colors under the brand Go colors. They are among the first companies to launch a bottom wear brand in the organized market. Given that bottom-wear is a ‘core essential’, demand for their products is consistent across regions where their products are sold.
Multi-channel pan-India distribution - They have a multi-channel retail presence in India. They retail their products directly to consumers primarily through their network of EBOs. They also retailed their products through 1,270 LFSs and also sell their products through online marketplaces and their website.
Strong unit economies - Go Fashion has a standardized and scalable development model for their EBOs based on their know-how and experience. They can identify and determine the optimum location and size of a store as well as manage rental costs.
Technology-driven supply chain management - They have automated their entire procurement and supply chain operation through their ERP system. It allows them to maintain flexibility and enables them to meet their requirements efficiently without relying on any vendor, supplier, or factory. They manage their inventory and logistics and their entire supply chain for all their channels from their warehouse in Tirupur.
Additional product launches and same-store sales growth - Company’s existing portfolio coupled with its ability to launch new products that address the requirements of women’s bottom-wear ensures that they are better equipped to offset any adverse impact.
Expand retail network - They intend to follow the COCO model that will ensure better operational control over their stores. As part of their growth strategy, they plan to expand their EBO network in other regions across India. By having their products be reasonably priced and essential, they hope to increase their footprint and scale of operations across India.
Focus on an online channel - With increased internet penetration, increased usage of smartphones, the convenience provided by e-retailing in terms of payment and return policies as well as discounts offered, coupled with a low base effect is enabling e-retailing’s sharp growth in recent years. The company proposes to make investments in digital channels to build an omnichannel engagement experience for their customers and have a dedicated team for their e-commerce operations.
Failure to maintain brand awareness - Brand awareness is essential to the continued growth and financial success of the company. Its operations are influenced by brand marketing and advertising initiatives. If the company is unable to effectively market its products and brand, or there is deterioration in public perception of its brand, it could affect customer footfall and consequently impact its financial condition and cash flows.
The risk associated with leasing real estate - Go Fashion sells products through exclusive brand outlets (EBO). EBOs operate on leased properties, and hence the company is exposed to the market conditions of the retail rental market. If they are unable to renew leases for stores on acceptable terms, they will have to close or relocate the relevant stores. It would eliminate the sales that those stores would have contributed to its revenues during the period of closure, and could be subject to renovation and other costs and risks.
Unable to expand retail network - The company's ability to expand and grow sales significantly depends on the reach and effective management of the retail network. If they are not able to obtain the locations at favorable lease rentals or lease periods or at the time and place that they desire, it may hurt their financials.
Go Fashion IPO Review: INDmoney Analysis
Go Fashion is among the largest women’s bottom-wear brands in India, with a market share of approximately 8% in the branded women’s bottom-wear market in Fiscal 2020. Although Go Fashion was on a good growth trajectory pre covid, it was hit hard by the pandemic with store closures and the company is still seeing prolonged effects with buyers preferring online stores to brick & mortar. Hence the company reported Rs 19 cr loss in April-June 2021 period. However, the company is trying to adapt to the situation with promoting sales through online channels.
Since the company reported a loss in FY21, we cannot value Go Fashion on a price to earnings basis. Considering EV/EBITDA which is 79 for FY21, the company seems potentially overvalued, also considering the fact that it is loss making. However, only Page Industries among the listed peers reported a profit in the recent fiscal.
Given negative profitability, potentially high valuation, and poorer return ratios as compared to its peers, we remain ‘Neutral’ on the long-term prospects of the issue. Given a fancy for IPOs in the ongoing season, the company may still see strong subscription numbers. Hence, investors looking for listing gains can subscribe to the issue.