Go Fashion (India) Limited is one the India’s largest women’s bottom wear brands in India. Company is engaged in the development, design, sourcing, marketing and retailing of a range of women’s bottom-wear products under the brand ‘Go Colors’.
Company offers one of the widest portfolios of bottom-wear products among women’s apparel retailers in terms of colors and styles. As of 32-May-21, the company sold bottom-wear in over 50 styles in more than 120 colors.
The company has 450 exclusive brand outlets (EBOs) across 23 states and union territories in India. The company’s distribution channels include large format stores (LFSs) including Reliance Retail Limited, Central, Unlimited, Globus Stores Private Limited, and Spencer’s Retail among others.
| IPO Opening Date | 17-Nov-21 |
| IPO Closing Date | 22-Nov-21 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 10 per equity share |
| IPO Price band | Rs 655 to Rs 690 per equity share |
| Lot Size | 21 Shares |
| Min Order Quantity | 21 Shares |
| Listing at | BSE and NSE |
| Issue Size | Total Size Rs 1,013.61 Crores Fresh issue – Rs 125 Crores OFS: Rs 888.61 Crores |
| Book Running Lead Managers | ICICI Securities, JM Financial Consultants and DAM Capital Advisors |
1) It is one of the largest women’s bottom-wear brands in India.
2) It has wide, well-diversified, product portfolio and first-mover advantage
3) Company has multi-channel retail presence across India
4) Company with strong unit economics with an efficient operating model
5) It has an extensive procurement base and automated procurement & supply chain
Go Colors (Go Fashion) IPO Size is Rs 1,013.61 Crores, out of which
1) Offer for Sale (OFS) for Rs 888.6 Crores – Under OFS, selling shareholders would sell their shares and company would not get any money from this IPO proceeds.
2) Fresh issue for Rs 125 Crores – These proceeds would be used for the following:
Funding rolls out of 120 new EBOs (Exclusive Brand Outlets);
Funding working capital requirements; and
General corporate purposes
| Financial Year ending / Period ending (Amt in Mns) | ||||
| Particulars | FY19 | FY20 | FY21 | Qtr Ending 30-Jun-21 |
|---|---|---|---|---|
| Total Assets | 4,041.3 | 5,191.9 | 5,483.7 | 5,306.5 |
| Revenues | 2,909.8 | 3,968.4 | 2,822.5 | 402.9 |
| Profit After Tax | 309.4 | 526.3 | -35.4 | -190.0 |
| Profit % | 10.63% | 13.26% | -1.25% | -47.15% |
1) The company is one of the largest women’s bottom-wear brand in India under the brand name ‘Go Colors’. Company has widespread and well diversified product portfolio.
2) Company has good revenue growth from FY19 to FY20 (Rs 290.9 Crores to 396.8 Crores). However, its FY21 revenues have fallen to Rs 282.2 Crores. One can make assumption that such drop in revenue is due to covid-19 pandemic.
1) While the company was earning profits in FY19 and FY20, it turned to loss making for FY21 and for Qtr ending Jun, 2021. Investors should always invest in profit making companies.
2) Company IPO has Offer for Sale (OFS) for Rs 888 Crores. Such OFS would go to selling shareholders and company would not get any money.
3) Covid-19 pandemic has impacted the company and it might continue to impact future too.
4) Company products are sold under single brand i.e. ‘Go Colors’. If they are unable to maintain this brand, it can affect its business.
5) Company carries operations from a single warehouse located in Southern India. Any disruption in the operation of the warehouse can impact business.
6) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
| Offer Open | 17-Nov-21 |
| Offer close | 22-Nov-21 |
| Finalization of Allotment | 25-Nov-21 |
| Initiation of Refunds | 26-Nov-21 |
| Credit to Demat Account | 29-Nov-21 |
| IPO Shares Listing Date | 30-Nov-21 |
1) If we take last 3 years weighted average EPS of Rs 4.01 and the upper price band of Rs 690, the P/E ratio works out to 172x.
2) FY21 EPS and Q1 FY22 is negative, hence we cannot compute P/E ratios.
3) Company is asking IPO price for P/E of 172x. There are listed peers doing similar business like Page Industries which is trading P/E of 130x and other companies have negative EPS, hence P/E cannot be computed. However, IPO price with P/E of 172x is aggressively priced.
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market.
Currently Go Colors (Go Fashion) IPO GMP is not available as there is no trading’s happening as of the day of writing the article.
Go Colors is one of the leading women’s bottom-wear brands in India.
Company generated strong revenue growth during FY19 and FY20, however, revenues declined in FY21. One can majorly attribute such decline is due to covid-19. The hidden fact is that Q1 FY22 revenues are low at Rs 40.2 Crores. If we annualize it, the revenues for FY22 could be just over 160 Crores (I know it is not an appropriate way of doing it) compared to Rs 282.2 Crores for FY21.
The company has incurred losses for FY21 for Rs 3.5 Crores. Another hidden fact is that it incurred a loss of Rs 19 Crores for Q1 of FY22. If it continues in similar trend, just imagine the huge loss it might book for FY22.
The issue price is highly priced.
One can understand what happened to Nykaa IPO (which has negative / low margins, but has good brand value) which was subscribed multiple x times and bumper listing. This indicates clearly that investors are not worried about financials, but just betting all IPOs.
While the company has good brand value, considering fluctuating revenues (and declining revenues for Q1), company moving into losses, abnormal IPO pricing and other risk factors indicated above, investors can stay away from such IPO as of now. Once company turns into profits, investors can check valuations and then go for investment.