Go Fashion (India) IPO opens: Should you subscribe?

The initial public offering (IPO) of Go Fashion (India), owner of women wear brand ‘Go Colors’, opened for subscription on November 17. The company has fixed a price band of Rs 655-Rs 690 for the ongoing public offer. The IPO will close on November 22.

Go Fashions claims it is the first company to launch a brand exclusively dedicated to the women’s bottom-wear category. Market watchers believe that it signifies a shift from the unorganised to modern retail.   Brokerages are bullish on the issue. Geojit Financial Services said, “At the upper price band of Rs 690, Go Fashion (GFIL) is available at Mcap/sales of 14.9 times (FY21) which appears fully priced. However, considering GFIL’s 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, we assign a ‘Subscribe’ rating for the issue on a long-term basis.”   The offer comprises of the fresh issue by the company and an offer for sale by the selling shareholders. They propose to utilise the net proceeds towards funding for the roll-out of 120 new exclusive brand outlets (Rs 33.7cr), funding working capital requirements (Rs 61.4 crore) and general corporate purposes.   For FY21, the revenue of the company stood at Rs 250.7 crore against Rs 392 crore a year ago. Net loss for the year came at Rs 3.5 crore versus a profit of Rs 52.6 crore in FY20, primarily on account of the impact of COVID-19 on the operations and on account of the adoption of Ind AS 116.   “A growing number of working women, rise in disposable income, consumer shift towards buying from safe and hygienic facilities triggered by COVID-19 augurs well for GFIL,” Geojit Financial Services said.   Angel One also gave ‘Subscribe’ rating on the issue. “Go Fashion India has a better track record of revenue growth, higher operating margin and high return on equity compared to TCNS Clothing. Considering all the positive factors, we believe this valuation is at reasonable levels.”   The ongoing IPO got subscribed 78 per cent so far on the first day of offering. The public offer received bids for 62,77,971 shares till 11.15 am (IST) against 80,79,491 shares offered by the company.