Dates: 17th November, 2021 to 22nd November, 2021
Price Band: Rs.655 to Rs.690 per share
Minimum Lot: 21 shares
Minimum Application Amount: Rs. 13,755- Rs. 14,490
Total Issue Size: Rs.969 cr- Rs.1.014 cr (Combination of Fresh Issue worth Rs.125 cr and OFS of 1.2 cr shares worth Rs.844 cr- Rs.889 cr)
Objects of the offer
Women’s bottom-wear focused company Go Fashions Ltd aims to raise Rs.125 cr via fresh issue for the purpose of rolling out 120 new Exclusive Brand Outlets (EBOs) and to fund general working capital requirements. The remaining part of the issue is purely offer for sale in which promoters and some of the investors are selling stake. Sequoia Capital one of the marquee investors holds 28% stake in the company and is now selling 50% of its stake in the company via offer for sale.
Corporate Profile & Business overview
Go Fashion (India) Limited is engaged in the development, design, sourcing, marketing and retailing a range of women’s bottom-wear products under the brand, ‘Go Colors!’. It has a market share of approximately 8% in the branded women’s bottom-wear market in FY20 in India. It was the first company to launch a brand exclusively dedicated to women’s bottom-wear category and offers one of the widest portfolios among women’s apparel retailers in India in terms of colours and styles, as of July 2021. Go Fashion has leveraged its first mover advantage to create a direct-to-consumer brand with a diversified and differentiated product portfolio of premium quality products at competitive prices. The company sells their products via EBOs (69% of total revenues), Large Format Stores (LFS) (22%), Multi-Brand Outlets (MBOs) (4.7%) and Online channels (4.3%).
Go Fashion sells bottom-wear products, which include churidars, leggings, dhotis, harem pants, patiala, palazzos, culottes, pants, trousers and jeggings, which are sold across multiple categories such as ethnic wear, western wear, fusion wear, athleisure, denims, plus sizes and girls wear making their portfolio ‘universal’ and for every occasion. It aims to continue its razor sharp focus on bottom-wear category only which gives them a tag of a niche company present in a very niche segment. As of September 30, 2021, the company sold bottom-wear in over 50 styles in more than 120 colours. The company endeavour to provide its customers with premium quality products, and at a price range that caters across all income segments and the price range of their products ranges from Rs.225 to Rs.1,599.
The company served its customers primarily through their extensive network of 459 exclusive brand outlets (“EBOs”) (including 12 kiosks operated on a “company owned and company operated” (“COCO”) model and 11 franchise stores) that are spread across 23 states and union territories in India, as of September 30, 2021. Moreover, Go Fashions strategy of sourcing and not manufacturing on their own saves them significant amount of Capex. They undertake manufacturing activities through 73 suppliers and 42 job-workers spread across 11 states and union territories as of September 30, 2021.
Financials & Key Performance Indicators
Go Fashions India Ltd reported good performance till FY20 (pre-covid). It has witnessed over 37% CAGR growth in revenues between FY19 and FY20 (pre-covid). Even though due to COVID-19 its revenues and PAT declined drastically, the revenues are now witnessing sequential improvement as stores are opening up. The company has reported healthy growth in key store operating metrics like SSSG and sales per sq.ft as well as clocked healthy ROE and ROCE between 14 to 18% pre-COVID. The company is expecting to bounce back to pre-COVID levels in terms of margins and profits in the upcoming quarters. Go Fashion has superior margins and return ratios as compared to its major peers like TCNS, ABFRL but they are not comparable on a like to like basis as it is present in a very niche category of women’s bottom wear only.
Present in Niche Category
Go Fashions India Ltd has identified a very niche category of segment called women’s bottom-wear where it is razor sharp focused and plans to grow their market share of 8% as of FY20 to 15% by 2025 which will be led by a shift to unorganized to organized market. The share of organized retailing within women’s apparel has increased from 19% in Fiscal 2015 to 27% in Fiscal 2020 and is expected to reach 42% by Fiscal 2025.
Multi-Channel Pan-India distribution network
Go Fashion primarily follows the ‘Company owned and Company Operated (COCO)’ model to ensure efficiency and offer customers a standardized experience and service. They have grown their EBO store network at a CAGR of 16% between Fiscals 2019 and 2021 and apart from the EBOs they are also focused on increasing their direct to consumer reach through digital advertising which constitutes large portion of the advertisement expenses. Online sales contributed ~5% of their sales in FY21 as compared to just 1.5% in FY19 which is expected to reach 9% by 2025.
Follows efficient procurement strategy
Go Fashion offers customers premium quality products at affordable prices and in Fiscal 2021, more than 88.32% of their products were retailed at a price lower than Rs.1,049. They have been able to achieve their value proposition to customers through low procurement and operating costs. They outsource the manufacturing of their products and thereby do not incur manufacturing costs.
The current and continuing impact of the ongoing COVID-19 pandemic on the company’s business and operations has been significant. The impact of the pandemic on their operations in the future, including its effect on the ability or desire of customers to visit its stores, is uncertain and may be significant. The impact can continue to have an adverse effect on their business prospects, strategies, business, operations, their future financial performance, and the price of Equity Shares.
The company has incurred losses in Fiscal 2021. In the event they incur net loss in the future, their business and financial condition may be adversely affected.
Go Fashion is dependent on sales through large format stores, multi-brand outlets, its franchisees, and online retailers for a significant portion of their revenues. The company’s business, results of operations and financial condition could suffer if they fail to maintain relationships with such third parties.
The company is dependent on third-party transportation providers for the supply of raw materials and delivery of their products. As of FY21 Go Fashion procured 67% of its fabric materials from its top five suppliers.
As of FY21 the company’s promoters VKS Family Trust and PKS Family Trust had pledged their shares aggregating to 16.6% of the paid-up Equity Capital against a facility availed from Tata Capital amounting to Rs.40 cr.
Peer Comparison & Conclusion
The branded women’s wear segment in India is dominated by certain large national and regional players like TCNS with brands such as W, Aurelia, Elleven, and Wishful, BIBA etc. which offers varied category of women’s wear as well as menswear products. Go Fashions, on the other hand, is highly skewed towards only women’s bottom wear market and will continue to focus on the same which may restrict its future growth prospects in the newer categories. As of FY21 price to sales of 14.2x, Go Fashions looks steeply priced as compared to its peers like TCNS (7.9x) and ABFRL (5.4x) which can be attributed to its superior financials. However, considering the company’s focus on only one category i.e., women’s bottom wear, the premium valuations may not be justified. Considering the traction and euphoria surrounding the primary markets and that the company does have better financial track record and margin profile as compared to its peers, we recommend investors to ‘SUBSCRIBE’ to this IPO FOR LISTING GAINS only.