Go Fashion’s IPO starts today: What hats do brokers wear?

New Delhi: Go Fashion (India) IPO worth Rs 1,014-crore starts today. The company, one of the biggest women’s undergarments players in the country, sold its stake in the Rs 655-690 range during a three-day bidding process. This edition is available for subscription until Monday, November 22.

Brokers have mostly said they have a positive view of Go Fashion over the long term, even though the company has reported negative earnings in 2020-21. However, the Covid-19 pandemic has had a significant impact on the company’s business and operations.

Marwadi Shares and Finance said considering TTM on June 2021 sales of Rs 271.4 crore on a post-issuance basis, the company will register a market cap/sales of 13.73 with a market cap of Rs 3,726.6 crore. Its partners, Page Industries and Trent, are trading at market cap/sales of 13.21 and 11.89, respectively. “This company is a well-known women’s undergarment in India with a well-diversified portfolio, multi-channel pan-Indian distribution network and reasonable ratings compared to its peers,” the broker added, giving it a subscription rating.

The day before the IPO, Go Fashion (India) distributed 66,10,492 equity shares to 33 anchor investors at a price of Rs 690 each to raise Rs 456.12 crore. The list of anchor investors includes the Government of Singapore, Abu Dhabi Investment Authority, Fidelity Finds, Nomura and various domestic mutual funds such as SBI, ICICI, Aditya Birla, Kotak and Axis. “Go Fashion India has a better track record of revenue growth, higher operating margins & high return on equity compared to TCNS Clothing. Considering all positive factors, we believe this assessment is at a reasonable level,” said Angel One, rating it subscribe.

The IPO is a mix of issuance of new equity shares worth Rs 125 crore and share dismantling by promoters and shareholders of 12,878,389 equity shares valued at Rs 888.6 via the offer for sale (OFS) route.

The company’s performance up to FY20 was strong but suffered losses in FY21 due to Covid-19 and higher costs. It has a strong balance sheet and decent cash flow, Religare Broking said in its IPO notes. “Going forward, its finances are expected to improve with innovation, expansion, strong brand memory and operating efficiency,” he said, adding that there was a positive outlook on the company for the long term.

Go Fashions (India) is one of the largest undergarment ranges in womenswear, with an 8 percent market share in this field. It offers products in all categories under one brand called Go Colors. The company has taken advantage of the first mover advantage to create a direct-to-consumer brand. It intends to expand into loungewear and athleisure.

The IPO is worth 14.6x FY21 EV-to-sales, which looks on par with Trent, but at a significant premium to Aditya Birla Fashion & Retail, Reliance Securities said. However, the share of organized retail in women’s clothing has increased. “Women’s undergarments are the fastest growing category in the womenswear segment, and are expected to grow to Rs 243 billion in FY25E, from Rs 135 billion in FY20. This offers healthy growth visibility to the GFL over the long term,” he added. .

The Company is exposed to all risks associated with leasing real estate, and any adverse developments could materially affect its business and finances. “Go Colors has strong brand value but fluctuated revenue and the company suffered losses in FY21,” said Investmart’s Swastika, adding that this edition had an attractive price tag.

As the number of working women increases, as fashion trends develop, it is expected that the company has a strong growth momentum, coupled with subscription ratings for listings and long-term profits. The company serves its customers primarily through an extensive network of 459 exclusive brand outlets, including 12 kiosks and 11 franchise stores, spread across 23 states and Union territories, as of September 30, 2021.

“Given GFIL’s potential target market and market share in the niche category, coupled with the largest EBO network, we feel we have the potential to expand the business and also almost completely recover the profitability lost due to the pandemic,” said Broker Choice, providing a long-term subscription rating issue.