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Go Fashion (India) Ltd (GFIL) 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. GFIL is engaged in the development, design, sourcing, marketing and retailing of women’s bottom-wear products under the brand, ‘Go Colors’. Incorporated in 2010, GFIL is the first company to launch a brand exclusively dedicated to the women’s bottom-wear category. They have a pan India network of 459 Exclusive Brand Outlets (EBO) in the country, with significant number of stores in Southern and Western India.

* The women’s bottom-wear market in India accounted for 8.3% of the women’s apparel market and stood at ₹13,547cr in FY20 and is expected to grow at a CAGR of 12.3% to reach ₹24,315cr by FY25.

* GFIL sells the products through exclusive brand outlets (EBO) including franchise stores, large format stores (LFS), multi-brand outlets (MBO), and online channels such as online retailers and their websites.

* Sales of products through EBOs LFSs, franchisees, MBOs and online retailers, represented 69%, 22%, 1.3%, 2.8% and 4.7% respectively, of the total revenue from operations in FY21.

* The company plans to roll out 120 more EBOs with the funding proceeds from the IPO and to launch about 2000 exclusive brand outlets in the next six-seven years.

* GFIL follows a cluster-based expansion model for store expansion and will be opening new stores in the vicinity of existing stores to get better brand recall and visibility.

* Going forward, the company aims to adopt an omnichannel approach, given the online push due to the pandemic and will be enabling all its stores for online deliveries to neighbourhood areas.

* GFIL’s advertisement spends as a percentage of revenues was the lowest (~2%) among key women’s apparel companies in India. 

* For FY21, the revenue of GFIL stood at ₹250.7cr against ₹392cr a year ago. Net loss for FY21 stood at ₹3.5cr versus a profit of ₹52.6cr in FY20, primarily on account of the impact of COVID-19 on the operations and on account of the adoption of Ind AS 116.

* The company was able to maintain attractive gross margins of 59% for FY19-21 period. Avg. EBITDA margin is at ~26% due to tight operational control.

* A Growing number of working women, rise in disposable income, consumer shift towards buying from safe & hygienic facilities triggered by COVID-19 augurs well for GFIL.

* At the upper price band of Rs.690, GFIL is available at Mcap/sales of 14.9x (FY21) which appears fully priced. However, considering GFIL’s investment in digital channels, omnichannel 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.

Purpose of IPO

The Offer comprises of the fresh issue by the company and an offer for sale by the selling shareholders. They propose to utilize the net proceeds towards funding for the roll-out of 120 new EBOs (₹33.7cr), funding working capital requirements (₹61.4cr) and general corporate purposes.

Key Risks

* The current and continuing impact of the ongoing COVID-19 pandemic on the business and operations

* GFIL generated majority of the sales from the exclusive brand outlets located in Southern and Western India (69% of the total network of stores & ~75% of revenue).

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