Go Fashion (India) is engaged in the
development, design, sourcing, marketing, and retailing of a range of women’s
bottom wear products under the brand ‘Go Colours’. The company is among the few
apparel companies in India to have identified the market opportunity in women’s
bottom wear and has acted as a ‘category creator’ for bottom wear. The company
had a market share of 8% in the branded women’s bottom wear market in FY2020.
Go Fashion (India) offers apparel in over 50
styles in more than 120 colours.Go Fashion (India) products include churidars,
leggings, dhotis, harem pants, patiala, palazzos, culottes, pants, trousers,
and jeggings which are sold across multiple categories such as ethnic wear,
fusion wear, western wear, athleisure, denims and plus sizes.
The company provides its customers with
premium quality products and at a price range that caters across all income
segment and price range. Its products range from Rs 225 to Rs 1,599 while the
average selling price of its products at exclusive brand outlets in FY2021 was
Rs 584.02 and was Rs 619.05 in the 3 months ended Jun 30,2021.
The company has a network of 459 exclusive
brand outlets (including 12 kiosks operated and owned by the company and 11
franchise stores) that are spread across 23 states and union territories as of
Sep 30,2021. In addition, 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. Its large
format stores have grown from 925 large format stores, as of March 31, 2019, to
1,267 large format stores, as of March 31, 2021, while as of September 30, 2021,
the company operated in 1,270 such stores. In addition, the company sells its
products on its own website and online marketplaces and through multi-brand
outlets.
The company’s inhouse design and merchandise
team designs and develops bottom wear products across categories with their
deep understanding of consumer requirement, in depth market research and data
analysis helping in creating the fit and comfort of its products. The design
and merchandising team issupplemented by an extensive sourcing network and the
manufacturing network undertaken through 73 suppliers and 42 job workers spread
across 11 states and union territories as of September 30,2021.
The company is promoted by Mr Prakash Kumar Sarogi, Mr Rahul
Sarogi, VKS Family Trust and PKS Family Trust.
Object of the offer
The offer
comprises a fresh issue of 1811594 equity shares at upper price band of Rs 690
and 1908397 equity shares at lower price band of Rs 655 aggregating up to Rs
125 crore by the company and an offer for sale by selling shareholders PKS
Family Trust up to 7,45,676 equity shares aggregating Rs 48.84 crore at upper
price band of Rs 690 and Rs 51.45 crore at lower price band of Rs 655, VKS
Family Trust up to 7,45,676 equity shares aggregating Rs 48.84 crore at upper
price band of Rs 690 and Rs 51.45 crore at lower price band of Rs 655, Sequoia
Capital India Investments of up to 74,98,875 equity shares aggregating Rs
491.18 crore at the upper price band of Rs 690 and Rs 517.42 crore at lower
price band of Rs 655, India Advatage Fund S4 I of up to 33,11,478 equity
shares aggregating Rs 228.49 crore at the upper price band of Rs 690 and
Rs 216.9 crore at lower price band of Rs 655 and Dynamic India Fund S4 US I of
up to 5,76,684 equity shares aggregating Rs 39.79 crore at upper price band of
Rs 690 and Rs 37.77 crore at lower price band of Rs 655.
PKS Family
Trust pre-issue shareholding was 28.74%, which shall decrease to 26.39% at the
upper price band of Rs 690, VKS Family Trust pre-issue shareholding was 28.74%,
which shall decrease to 26.39% at the upper price band of Rs 690, Sequoia
Capital pre-issue shareholding was 28.73%, which shall decrease to 13.88% at
the upper price band of Rs 690, India Advantage Fund S4 I pre-issue
shareholding was 12.69%, which shall decrease to 6.13% at the upper price band
of Rs 690 and Dynamic India Fund pre-issue shareholding was 1.1%, which shall
become nil at the upper price band of Rs 690.
The company proposes to utilize the net proceeds of the fresh
issue towards roll out 120 new exclusive brand outlets, amounting to Rs 33.73crore,
funding working capital requirements amounting to Rs 61.398crore and the
balance in for general corporate purposes.
Strengths
The share of organized retailing within
women’s apparel has increased from 19% in FY 2015 to 27% in FY 2020 and is
expected to reach 42% by Fiscal 2025. Women’s bottom-wear is the fastest
growing category in the women’s apparel segment market and is expected to grow
at a CAGR of 12.35% by FY 2025. The organised share of women’s bottom-wear
market is expected to reach Rs 9240 crore with a share of 38% in FY 2025
growing at a CAGR of 24.3% until 2025.
The company is among the largest women’s
bottom-wear brands in India, with a market share of approximately 8% in the
branded women’s bottom-wear market in Fiscal 2020 (Source: Technopak Report).
As of May 31, 2021, the company retailed 50 bottom-wear styles in a range of
over 120 colours under the brand ‘Go Colors’. Its product portfolio includes
churidars, leggings, dhotis, harems, patiala, palazzo, culottes, pants,
trousers, and jeggings across multiple categories including ethnic wear, fusion
wear, western wear, lounge wear, athleisure, Go Plus and girl’s wear. The
company’s diverse product portfolio caters to women across all age groups and
girls and physiques covering the entire spectrum of women’s bottom wear
spectrum. The company offer customers premium quality products at a price range
that caters across all income segments, which allows it to tap customers in
tier II and tier III cities as well.
The company has a multi-channel retail
presence across India. Its extensive network of stores allows it to cater to
women across India and ensures effective penetration of the products it
retails.The company retails its products directly to consumers primarily
through its network of exclusive brand outlets and as of May 31, 2021, the
company operated 450 exclusive brand outlets across 115 cities in 23 states and
union territories across India. As of March 31, 2021, the company had the
largest network of exclusive brand outlets among key women’s apparel brands in
India (Source: Technopak Report). Further, as of Sep 30, 2021, the company also
retailed its products through 1,270 large format stores such as Reliance Retail
Limited, Central, Unlimited, Globus Stores Private Limited and Spencer's Retail
among others, across 499 cities spanning the entire country covering 31 states
and union territories. The company also sells its products through online
marketplaces and through its own website.
The company has strategically undertaken brand
building initiatives to gain visibility with prudent use of resources while
incurring limited branding and marketing expenses. The company retails its
products under a single brand for improved brand recall and better marketing of
the products. Its advertisement and sales promotion expenses represented 1.86%,
1.82%, 2.54% and 4.43% of its revenue from operations in FY 2019, 2020 and 2021
and in the three months ended June 30, 2021, respectively, and yielded among the
highest revenues per unit spend in Fiscal 2020 (Source: Technopak Report).
The company has standardised and scalable
development model for its exclusive brand outlets based on its know-how and
experience. The company opened 305 new stores in the exclusive brand outlet format
and more than 400 new stores in the large format stores format in the last
three Fiscals across 507 tier I/ II / III / IV cities in India. Its products
being core and essential to consumers has enabled it to operate on a business
model where it offers limited discounts and sale of its products is typically
at full price which in its experience results in greater profitability.
Revenues generated from sale of its products at full price were Rs 177.82 crore,
Rs 261.07 crore, Rs 143.20 crore and Rs 23.3 crore and accounted for 95.64%,
97.89%, 82.88% and 96.09% of its total revenue from operations in FYs 2019,
2020, 2021 and in the 3 months ended June 30,2021 respectively. The company
staffs its exclusive brand outlets with limited people per store which is one
among the factors that contribute to its store profitability while ensuring
adequate attention to customers. The company’s average selling price has
increased from Rs 559.14 in FY 2019 to Rs 584.02 in FY 2021 and was Rs 619.05 in
the 3 months ended Jun 30,2021, primarily on account of value-added products
including pants, trousers and plus size products that the company has
introduced as part of its portfolio. The company’s COCO model of operating its exclusive
brand outlets is supported by streamlined store network planning, a robust
supply chain network and an efficient staff recruitment and development
program.
The company’s store closures in the last three
Fiscals (including on account of the impact of COVID-19) are indicative of its
ability to identify the right location for its stores and deliver strong
operating profits which is reflected in its pre-COVID-19 impacted Same Store
Sales Growth. The company closed 15, 18, 41 and five exclusive brand outlets in
FYs 2019, 2020 and 2021 and in the three months ended June 30, 2021,
respectively, while its Same Store Sales Growth was 19.97% and 11.37% in FY
2019 and 2020, respectively.
The company offers customers premium quality
products at affordable prices and in FY 2021, more than 88.32% of its products
were retailed at a price lower than Rs 1,049. The company has been able to
achieve its value proposition to customers through low procurement and
operating costs. The company outsource the manufacture of its products and
thereby do not incur manufacturing costs. The company has been able to build
and manage an extensive sourcing network to support its product development
teams. As of September30, 2021, the company has a network comprising over 120
suppliers and job-workers across India many of whom we have longstanding
relationship with its suppliers and job-workers.
The company has automated the entire
procurement and supply chain operation through its enterprise resource planning
system, which allows it to maintain flexibility and enables it to meet its
requirements in an efficient manner without relying on any one vendor, supplier,
or factory.
The company’s innovation, research and data
driven design process ensures that the company introduce new and differentiated
products that address evolving market trends and customers’ preferences.
Weaknesses
The Indian women’s apparel industry, particularly for ethnic and
non-western apparel, is highly fragmented with several regional brands and
retailers present in local markets across the country. The company’s products
compete with local retailers, non-branded products, economy brands and products
of other established brands. According to the Technopak Report, the branded
womenswear segment in India is dominated by certain large national and regional
players like TCNS (with brands such as W, Aurelia, Elleven, and Wishful), BIBA,
Global Desi, AND, H&M, Zara, M&S, Fabindia, Soch and Twin Birds
(Source: Technopak Report). The company also face competition from private
in-house label brands launched by large format stores and online only fashion
brands.
The company’s scale of operations remained moderate with entire
revenues derived from a single brand and single clothing segment (women’s
bottom-wear segment).
The apparel retail business is working capital-intensive in nature
with high inventory holding requirements in all the stores across a wide
product range. The company’s working capital intensity averaged at 39% during the
past four years.
The impact of the ongoing COVID-19 pandemic on its business and
operations has been significant and any future waves can again affect it
adversely.
The company manages its inventory and
logistics as well as its entire supply chain for all its channels from its
warehouse in Tirupur, Tamil Nadu, making it over-dependent on that location.
Valuation
For the 3 months ended Jun 30,2021, sales
were up by 200.8% to Rs 31.0 crore. Operating loss declined by 61.1% to Rs 5.9
crore. Other income decreased by 10.9% to 9.3 crore while interest cost
increased 10.6% to Rs 5.7 crore and depreciation increased by 10.0% to Rs 16.0
crore. Loss before tax declined to Rs 18.4 crore as against loss of Rs 24.5 crore
in the corresponding period of previous period. Net loss stood at 19.0 crore as
against net loss of Rs 8.6 crore.
For FY 2021, sales were down by 36.1% to
Rs 250.7 crore primarily due to impact of Covid first wave. OPM declined by
1378 bps to 18.49% which led to 63.4% decline in operating profit to Rs 46.3
crore. Other income increased 554.6% to 31.6 crore while interest cost increased24.9%
to Rs 20.6 crore and depreciation increased by 29.9% to Rs 60.5 crore. Loss
before tax stood at 3.1 against profit before tax of Rs 68.3 crore in FY2020.
Tax expenses declined by97.4%to Rs 0.4 crore. Net loss stood at 3.5 crore as
against net profit of Rs 52.6crore.
At
the higher price band of Rs 690, the offer is made at around 14.43 times
post-IPO EV/TTM Sales (till June 21). Listed industry peers of the company are
Trent, Aditya Birla Fashion Retail Limited, TCNS clothing, Lux Industries and
Page Industries.
In comparison Page Industries trades at EV/S
of 14.55 times TTM (till June 21), Trent trades at EV/S of 13.96 times TTM
(till June 21), Aditya Birla Fashion trades at EV/S of 5.43 times TTM (till
June 21), TCNS trades at EV/S of 7.48 times TTM (till June 21) and Lux Industries
trades at EV/S of 6.03 times TTM (till June 21). Among the profit-making
companies, Page Industries trades at P/E of 114.6 times TTM (till June 21) and
Lux Industries trades at P/E of 35.7 times TTM (till June 21). All listed peers are much larger in size and
stature compared to Go Fashion. Asking for valuation at which Page Industries
and Trent are trading is just too much for Go Fashion.
Go
Fashion (India): Issue Highlights
|
Fresh issue (in Rs crore)
|
125
|
Offer for sale (in Rs crore)
|
888.61
|
Offer for sale (in number of shares)
|
|
- in Upper price band
|
1,28,78,389
|
- in Lower price band
|
1,28,78,389
|
|
|
Price Band (Rs)
|
655-690
|
For Fresh Issue Offer size (in no of shares)
|
|
- in Upper price band
|
18,11,594
|
- in Lower price band
|
19,08,397
|
Pre issued capital (Rs crore)
|
|
Post issue capital (Rs crore)
|
|
- in Upper price band
|
54.01
|
- in Lower price band
|
54.11
|
Pre issue promoter and Promoter Group shareholding
(%)
|
57.47%
|
Post issue Promoter and Promoter Group shareholding
|
|
-On higher price band (%)
|
52.79%
|
-On lower price band (%)
|
52.79%
|
Bid Size (in No. of shares)
|
21
|
Issue open date
|
Nov 17,2021
|
Issue closed date
|
Nov 22,2021
|
Listing
|
BSE, NSE
|
Rating
|
40/100
|
Go Fashion (India) :
Standalone Financial
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
2006(3)
|
2106(3)
|
Sales
|
285.2
|
392.0
|
250.7
|
10.3
|
31.0
|
OPM (%)
|
28.0
|
32.27
|
18.49
|
-147.579
|
-19.093
|
OP
|
80.0
|
126.5
|
46.3
|
-15.2
|
-5.9
|
Other inc.
|
5.7
|
4.8
|
31.6
|
10.4
|
9.3
|
PBIDT
|
85.7
|
131.3
|
77.9
|
-4.8
|
3.4
|
Interest
|
11.4
|
16.5
|
20.6
|
5.2
|
5.7
|
PBDT
|
74.3
|
114.9
|
57.4
|
-9.9
|
-2.3
|
Dep.
|
32.1
|
46.6
|
60.5
|
14.6
|
16.0
|
PBT Before EO
|
42.2
|
68.3
|
-3.1
|
-24.5
|
-18.4
|
Exceptional items
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
PBT After EO
|
42.2
|
68.3
|
-3.1
|
-24.5
|
-18.4
|
Total Tax
|
11.3
|
15.7
|
0.4
|
-15.9
|
0.6
|
Net Profit
|
30.9
|
52.6
|
-3.5
|
-8.6
|
-19.0
|
EPS (Rs)*
|
5.7
|
9.7
|
-0.7
|
#
|
#
|
*EPS is calculated based on post issue share capital of Rs 54.01 cr at
upper price band, Face Value Rs 10.
|
# Not annualised due to seasonality of business
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|