30 Nov , 2021 By : Kanchan Joshi
MUMBAI: Go Fashion (India) Ltd, the owner of women's bottom-wear brand Go Colors, made a stellar stock markets debut on Tuesday. Shares of the company listed at Rs1,310 apiece on the exchanges, an 89.85% premium over the issue price of Rs690.
The Rs1,014 crore issue was subscribed 135.46 times in the price band of Rs655 to Rs690.
Ahead of the issue, Amarjeet Maurya, analyst, Angel One Ltd, had said that in terms of valuations, the post-issue FY20 EV/EBITDA works out to 30.2 times which is almost in similar range compared to its peers TCNS Clothing Co. “Further, Go Fashion India has a better track record of revenue growth, higher operating margin & high Return on equity compared to TCNS Clothing Co," he said.
Go Colors will not receive any proceeds from the offer for sale (OFS) and the proceeds received from OFS will not form part of the net proceeds. Net proceeds will be used to fund the rollout of 120 new exclusive brand outlets (EBOs), working capital requirements and general corporate purposes.
"At the upper price band of Rs690, the stock is available at market capitalisation/sales of 14.9 times (FY21) which appears fully priced," said Geojit Financial Services Ltd. It added that a Growing number of working women, rise in disposable income, consumer shift towards buying from safe and hygienic facilities triggered by covid augurs well for GFIL.
The brokerage firm likes the company on a long-term basis considering, its investment in digital channels, omni-channel engagement, focus on e-retail, distributive growth strategy to tap customers from tier 1 to tier 3 cities and expansions plans for existing and newer geographies.
"Go Fashion is the first company to launch a brand exclusively dedicated to the women’s bottom-wear category. It is a play on the unorganised to the modern retail shift. At the upper end of the price band, it is valued at 9.4 times, 14.6 times EV/sales for FY20, FY21, respectively," said analysts at ICICIdirect. However, they noted that dependence on single brand and category, high store network concentration in southern and western India and dependence on single warehouse for pan-India distribution are key risks and concerns for the company.
Go Fashion is a women’s bottom-wear brand in India, with a market share of 8% in the branded women’s bottom-wear market in FY20. It is engaged in development, design, sourcing, marketing and retailing of women’s bottom-wear products under the brand, ‘Go Colors’.
The company has a pan India network of 459 EBOs, with significant number of stores in southern and western India.
For FY21, its revenue stood at Rs250.7 crore against Rs392 crore a year ago. Net loss was at Rs3.5 crore versus a profit of Rs52.6 crore in FY20, primarily on account of the impact of covid-19 on operations and due to adoption of new accounting standards - Ind AS 116. The company was able to maintain attractive gross margins of 59% for FY19-21 period.