Brokerages have mostly said they have a positive view on Go Fashion in the long run, despite the company having reported a negative bottom line in 2020-21. However, the Covid-19 pandemic has had a significant impact on the company’s business and operations.
Marwadi Shares and Finance says considering a TTM as of June 2021 sales of Rs 271.4 crore on a post-issue basis, the company is going to list at a market cap/sales of 13.73 with a market cap of Rs 3,726.6 crore. Its peers Page Industries and Trent are trading at market cap/sales of 13.21 and 11.89, respectively. “The company is a renowned women’s bottom wear in India with a well-diversified portfolio, multi-channel pan-India distribution network and reasonable valuations compared to its peers,” the brokerage adds, giving it a subscribe rating.
A day before the IPO, Go Fashion (India) allotted 66,10,492 equity shares to 33 anchor investors at Rs 690 apiece to raise Rs 456.12 crore. The list of anchor investors includes Government of Singapore, Abu Dhabi Investment Authority, Fidelity Finds, Nomura and various domestic mutual funds such as SBI, ICICI, Aditya Birla, Kotak and Axis. “Go Fashion India has a better track record of revenue growth, higher operating margin & high return on equity compared to TCNS Clothing. Considering all the positive factors, we believe this valuation is at reasonable levels,” says Angel One, giving a subscribe rating.
The IPO is a mix of issuance of fresh equity shares worth Rs 125 crore and offloading of stakes by promoters and shareholders of 12,878,389 equity shares worth Rs 888.6 via the offer for sale (OFS) route.
The company’s performance till FY20 was strong but it incurred losses in FY21 due to Covid-19 and higher expenses. It has a strong balance sheet and decent cash flow, says Religare Broking in its IPO note. “Going ahead, its financials are expected to improve with innovation, expansion, strong brand recall and operating efficiency,” it says, adding that there is a positive view on the company for the long term.
Go Fashions (India) is one of the largest bottom-wear ranges in women’s apparel, with an 8 per cent market share in this space. It offers products in all categories under a single brand named Go Colors. The company has leveraged its first-mover advantage to create a direct-to-consumer brand. It intends to expand into loungewear and athleisure.
The IPO is valued at 14.6x FY21 EV-to-sales, which looks to be on a par with that of Trent, but at a significant premium to Aditya Birla Fashion & Retail, says Reliance Securities. However, the share of organised retailing in women’s wear has increased. “Women’s bottom wear is the fastest-growing category in the women’s apparel segment, and is expected to grow to Rs 243 billion in FY25E, from Rs 135 billion in FY20. This offers healthy growth visibility to GFL in the long run,” it adds.
The company is exposed to all of the risks associated with leasing real estate, and any adverse developments could materially affect its business and finances. “Go Colors has a strong brand value but has fluctuating revenues and the company moved into losses in FY21,” says Swastika Investmart, adding that the issue is attractively priced.
As the number of working women is increasing, along with the fashion trend evolving, it is expected that the company has strong growth momentum, coupled with a subscribe rating for listing and long-term gains. The company serves its customers primarily through an extensive network of 459 exclusive brand outlets, including 12 kiosks and 11 franchise stores, spread across 23 states and Union territories, as on September 30, 2021.
“Considering the target market potential and the market share of GFIL in the niche category, coupled with the largest network of EBOs, we feel that it has the potential to expand the business and also almost fully recover the lost profitability due to the pandemic,” says Choice broking, giving the issue a rating of subscribe for long term.
