Stocks

Everything you need to know about the Go Fashion Limited IPO & Recommendation on should you invest?


Key IPO Details

  • Price band: ₹655-690
  • Face value: ₹10 Per Equity Share
  • Fresh equity issue: ₹125 crores
  • Offer for sale: ₹889 Crores
  • Minimum bid size: ₹14,490  (21 shares)
  • Listing: NSE and BSE.

About the company

Owner of women’s wear brand Go Colors, Go Fashion (India) Limited was incorporated in 2010 and is one of the largest women’s bottom-wear brands in India. The company sells leggings and churidars, pants, jeggings, palazzos, and loungewear and had a market share of about 8 percent in the branded women’s bottom-wear market in FY20. As of May 31, 2021, the company has 450 exclusive brand outlets (EBOs) that are spread across 23 states and union territories in India. The company is backed by Sequoia and ICICI Venture.


Strengths

  • Women’s bottom-wear brand with a well-diversified product portfolio.
  • Strong unit economics with an efficient operating model.
  • In-house expertise in developing and designing products.

Risks

  • The company is dependent on a single brand and category.
  • Inability to effectively manage or expand its retail networks.
  • It may be unable to adequately protect the trademarks.
  • Womenswear is a highly competitive market and the competition is intensifying every day.
  • If the Coronavirus cases rise, it directly impacts the business operations and retail industry.

Go Fashion IPO Lead Managers

  • DAM Capital Advisors Ltd (Formerly IDFC Securities Ltd)
  • ICICI Securities Limited
  • JM Financial Consultants Private Limited

IPO Objectives

  • To fund the rollout of 120 new Exclusive Brand Outlets
  • To fund working capital requirements
  • General corporate purposes

Recommendation

We believe the company has the ability to grow to continue across geographies depending upon the strength of the brand, product offering, and store economics.

The company’s ability to effectively execute the expansion strategy further depends on its ability to open new stores successfully. As of September 30, 2021, the company operated 459 EBOs across 118 cities in 23 states and union territories across India. The company has a demonstrated track record of strong financial performance during the FY20, although their performance in FY21 was impacted because of the Covid 19.

Considering the trailing twelve months (TTM), June 2021, sales of ₹271.4 crores on a post-issue basis, the company is going to list at market capitalization/sales of 13.73, commanding a market cap of ₹3,726.6 crores. If you compare it with competition, its peers like Page Industries and Trent are trading at market cap/sales of 13.21x and 11.89x, respectively. The company is commanding a slightly expensive valuation but it’s a good long-term play considering its growth and market leadership position in the category it operates.

Given the frenzy in the IPO market, investors may be tempted to invest with the intention of making a quick buck from listing gains. While we don’t recommend listing gains as the reason to invest in a company, but if someone is tempted to, we only recommend this strategy to investors with a high-risk appetite.

If you choose to invest in IPOs, make sure to allocate no more than a small percentage of your portfolio. This rule applies to investing in any individual stock. Experts recommend that you avoid putting large percentages of your cash in any one company, no matter whether it’s a hot IPO name or has been listed on the NSE for over two decades.


Arihant Team
The Arihant Team believes everyone deserves access to sophisticated financial advice. From day one, our mission has been to help make investing easier and accessible to every Indian. Our team of experts are curating informative and research-based article on this blog, to help make investing and managing your money easier for you!

If you would like us to discuss a specific topic on our blog, please write to us at research@arihantcapital.com.
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