Go Fashion IPO - Information Note

5paisa Research Team 5paisa Research Team 13th December 2022 - 10:36 pm

Go Fashion India, is little over 10 years old. It is the largest organized retailer specializing in women’s bottom-wear market and has 8% market share of branded women’s bottom-wear.

Go Fashion straddles the entire value chain extending from development, design, sourcing, market and retailing of fashion wear with focus on women’s bottom-wear.

Go Fashion offers a wide choice of women’s bottom-wear with over 50 styles and 120 different colour shades.

It has an omni-channel marketing approach, selling products through its 459 exclusive brand outlets (EBOs) as well as through the major large format stores (LFS) like Reliance Retail, Unlimited, Central, Globus, Unlimited etc.

Its back-end is supported by over 73 suppliers and 42 full-time job workers in 11 Indian states.

Key terms of the IPO issue of Go Fashion India

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	17-Nov-2021
Face value of share	Rs.10 per share	Issue Closes on	22-Nov-2021
IPO Price Band	Rs.655 - Rs.690	Basis of Allotment date	25-Nov-2021
Market Lot	21 shares	Refund Initiation date	26-Nov-2021
Retail Investment limit	13 Lots (273 shares)	Credit to Demat	29-Nov-2021
Retail limit - Value	Rs.188,370	IPO Listing date	30-Nov-2021
Fresh Issue Size	Rs.125 crore	Pre issue promoter stake	57.47%
Offer for Sale Size	Rs.889 crore	Post issue promoters	52.78%
Total IPO Size	Rs.1,014 crore	Indicative valuation	Rs.3,727 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	75%	Retail Quota	10%

_{Data Source: IPO Filings}

Here are some of the key merits of the Go Fashion business model

1) The company has strong and established linked with the sourcing and work order points at the back end and the LFS stores in the front-end.

2) The women’s bottom-wear segment is a fast-moving and dynamic segment and its ability to adapt to changing tastes, fashions and customizing offers is a big edge.

3) Out of its total sales in Jun-21 quarter, EBOs account for 78.2%, LFS for 13.4% and online for 6.5% with the EBOs being the fastest growing touchpoint.

4) Go Fashion EBOs enjoy best in class same store growth (SSG) of 183% in Jun-21 quarter and sales per SFT at over Rs.1,440.

5) Go Fashion manages its entire inventory and logistics out of its 99,100 SFT warehouse in Tirupur, which gives them greater control over process flow

How is the Go Fashion IPO structured?

The Go Fashion IPO is structured as an offer for sale (OFS) cum fresh issue. Here is a gist of the IPO offer.

A) The OFS component will comprise the issue of 1,28,78,389 shares and at the peak price band of Rs.690, the OFS value works out to Rs.889 crore.

B) Out of the OFS of 128.78 lakh shares, promoters will sell under 15 lakh shares. Among early investors; Sequoia Capital will offer 74.99 lakh shares; India Advantage Fund 33.11 lakh shares and Dynamic India Fund 5.77 lakh shares.

C) Post the offer for sale and the fresh issue, the stake of the promoters will come down from 57.47% to 52.78%. Public shareholding post the IPO will stand enhanced to 47.21%.

D) The fresh issue component will entail the issue of 18,11,594 equity shares which at the upper end of the price band of Rs.690 works out to a total fresh issue size of Rs.125 crore.

Key Financial parameters of Go Fashion India

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Sales Revenues	Rs.250.67 cr	Rs.392.01 cr	Rs.285.25 cr
EBITDA	Rs.46.35 cr	Rs.126.51 cr	Rs.79.99 cr
Net Profit / (Loss)	Rs.(3.54) cr	Rs.52.63 cr	Rs.30.94 cr
Net Worth	Rs.282.94 cr	Rs.286.30 cr	Rs.228.33 cr
EBITDA Margins	18.49%	32.27%	28.04%
ROCE	3.47%	18.14%	14.36%

_{Data Source: Company RHP}

The financial year 2020-21 was an exceptional year where most retail outlets had to be closed and footfalls fell drastically. That led to a sharp fall in sales as a result of which the fixed costs could not be fully absorbed.

However, if you remove the COVID effect, the numbers have been fairly strong. But for the exceptional COVID situation, Go Fashion has been a consistently profit making company.

EBITDA margins around 30% and ROCE in the range of 14% to 18% can be construed as solid numbers. As Go Fashion further increases the share of EBOs, it would be able to see higher retention margins while a focus on online selling would make the business more scalable at minimum incremental investments.

Check - Go Fashion (India) IPO - 7 Things to Know

Investment Perspective for Go Fashion India

Here is what investors must consider before investing in the Go Fashion IPO

a) The latest year losses and the Jun-21 quarter losses are an outcome of an exceptional situation created by COVID. Otherwise, financials have been robust.

b) The company is likely to benefit going ahead as it enhances the share of sales from EBOs and focuses more on online as a scalable growth model.

c) The company will be using the funds to open 120 new EBOs and that is likely to be value accretive for the stock in terms of fund usage.

d) Offers one of the widest ranges of women’s bottom-wear with a very wide price range to suit all types of customers.

The stock would be about 45-50 times normalized earnings for FY21, so it would be cheaper in forward terms. A good participation in the fast growing retail segment.

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