Go Fashion IPO: All You Need To Know
The company will launch its IPO on Nov. 17. It's going on sale for six days instead of three—as Nov. 19 is a market holiday.
Go Fashion (India) Ltd., which owns the women’s bottom wear brand Go Colors, will sell shares at Rs 655-690 apiece in its initial public offering that starts on Nov. 17 in what has been a record year for companies turning public. The initial share sale will close on Nov. 22 because of the extended weekend.
The Chennai-based company plans to raise Rs 1,013.6 crore through the issue at the upper end of the price band. The IPO comprises fresh issue of equity shares worth Rs 125 crore and an offer for sale worth Rs 888.6 crore, in which promoters—PKS Family Trust and VKS Family Trust—will offload 7.45 lakh equity shares each. Bidding for anchor investors opened on Nov. 16.
Other entities selling their shares include investors Sequoia Capital India (74.98 lakh shares), India Advantage Fund S4 I (33.11 lakh shares), and Dynamic India Fund S4 U.S. I (5.76 lakh shares).
Following the issue, its promoter stake would fall from 57.47% to 52.78%. Go Fashion is seeking a market value of Rs 3,727 crore at the upper end of the price band.
Issue Details
Duration: Nov. 17-22.
Issue size: Rs 969-1,014 crore.
Price band: Rs 655-690 apiece.
Face value: Rs 10 per share.
Lot size: 21 shares and in multiple thereof.
Maximum lot: 13 (273 shares or Rs 1,88,370).
Issue break-up: 75% for qualified institutional buyers, 15% for non-institutional buyers and 10% for retail investors.
Listing: NSE and BSE.
Lead managers: JM Financial, DAM Capital Advisors (Formerly IDFC Securities) and ICICI Securities.
Registrar: KFin Technologies Pvt.
Where Will The Money Go?
The company plans to use Rs 33.73 crore of the IPO's proceeds to fund the roll-out of 120 brand outlets, while Rs 61.4 crore would be utilised for working capital requirements. The remainder will be used for general corporate purposes.
Business
The company develops, designs, sources, markets and retails a range of women’s bottom-wear products.
Go Fashion, citing Technopak Analysis data in its red herring prospectus, said it's one of the largest players in the Rs 4,473-crore branded market for such products with a market share of nearly 8%.
It operates a network of 459 exclusive brand outlets across India, including 12 kiosks operated on a company-owned and company-operated model and 11 franchisees. About 268 of such outlets are across eight Indian cities. The company operates 297 such outlets in high street locations like airports and 162 stores in malls. Its distribution channels includes large format stores like Reliance Retail Ltd., Central, Unlimited, Globus Stores and Spencer’s Retail, among others. As of September, Go Fashion operates 1,270 large format stores.
The company plans to invest more in digital channels as part of its strategy to build an omni-channel engagement experience. Revenue from online channels has grown at an annualised rate of 82.2%, it said.
The company plans to launch about 2,000 exclusive brand outlets in India in six-seven years, Go Fashion Founder and Chief Executive Officer Gautam Saraogi recently told the media.
After growing in double-digits in FY19 and FY20, same-store sales growth for such outlets fell 37% year-on-year in pandemic-hit FY21. But Saraogi said it has been improving sequentially as demand normalises and bottom wear like leggings and palazzo become essential to every woman’s wardrobe.
The share of organised retailing within women’s apparel rose from 19% in FY15 to 27% in FY20, and is expected to reach 42% by FY25 as the number of working women and customer spending power increases. Bottom wear is the fastest-growing category in the women’s apparel market and is projected to grow to Rs 24,300 crore in FY25 from Rs 13,500 crore in FY20.
Financials
The company's revenues and profit dipped in FY21 owing to Covid-led restrictions on operations across the country.
Peers
The branded women's wear segment in India is dominated by large national and regional companies like TCNS (W, Aurelia, Elleven, and Wishful), Biba, Global Desi, Go Colors, AND, H&M, Zara, M&S, Fabindia and Soch. It also faces competition from private in-house label brands launched by large format stores.
Go Fashion has the highest return on capital employed among peers. Its Ebitda margin was 32% in FY20—also among the highest.
Key Strengths
Round-the-year relevance of Go Colors product portfolio allows the company to retail the products in all seasons with limited discounts.
Multi-channel pan-India distribution network with a focus on exclusive brand outlets, enhancing brand visibility.
Go Fashion primarily follows the company owned company operated model of retailing to ensure efficiency. Retailing through its exclusive outlets enhances brand equity. The company allows them to undertake line extensions, as shelf space on each exclusive store is controlled by them.
They have a scalable development model for their EBOs based on their know-how and experience. Their ability to identify and determine the optimum location and size of a store as well as manage rental costs and the marketing leverage of their EBOs are critical to ensuring visibility among target customers and sustainability of store profitability, resulting in the company having one of the highest sales per square feet among key women’s apparel companies and in particular among EBOs in India in FY21.
They have in-house expertise in developing and designing products. Go Fashion offers customers premium products at affordable prices. In FY21, 88% of the products were retailed at a price lower than Rs 1,049.
Leverage online channel to boost sales.
Risks
The Covid-19 pandemic has impacted the company’s business and operations significantly. This can affect its operations in the future, including the ability or desire of customers to visit stores. As a result, company's business prospects, strategies, operations, their future financial performance, and price of equity shares, can face adverse prospects.
Increase in competition as companies transition from unorganised to organised or branded segment.
The company is exposed to all of the risks associated with leasing real estate, and any adverse development could materially affect their business, results of operations and financial condition.
The company incurred losses in FY21. Their business and financial condition may be affected if they incur net losses in the future.
Go Fashion retails through large-format stores, multi-brand outlets, its franchisees, and online retailers for a significant portion of their revenue. The company’s business, results of operations and financial condition could suffer if they fail to maintain relationships with such third parties.
There could also be disruption of services from third-parties, including vendors and logistics service providers.
The company has certain contingent liabilities that haven't been provided for in the company’s financial statements, which if they materialise, may adversely affect its financial condition.
The company won't receive any proceeds from the offer for sale portion.
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