The agency has also upgraded the company's short term rating to ‘[ICRA] A1+' from '[ICRA] A1'.

ICRA said that the ratings upgrade factors in the sustained healthy growth in the top line of Go Fashion (India) (GFIL) while maintaining healthy margins. ICRA expects the company to maintain a healthy growth in the top line in the near term, while maintaining the margins.

The growth has been supported by its strong market position in the domestic women's bottom wear segment as well as its continuous focus on widening its market presence through continuous store additions. GFIL has a healthy financial profile, characterised by its strong capitalisation levels and liquidity position, in the absence of any external debt on books.

ICRA expects GFIL's revenue to witness a steady growth of 10-15% over the medium term, driven by the large untapped and large unorganised market, and continued diversification measures with around 120-130 exclusive brand outlets (EBOs) proposed to be added every year in the coming fiscals.

Further, backed by its operating efficiency, better economies of scale and improving revenue contribution from the higher margin EBO channel, the operating margins have improved in last two fiscals and are likely to remain at similar strong levels in the coming fiscals. GFIL's financial profile remains comfortable, backed by its steady earnings from operations, which have been utilised for meeting working capital requirements with low dependence on external debt.

Further, given the healthy cash accruals envisaged, GFIL's credit metrics and liquidity position are expected to remain strong despite the funding requirements towards capital expenditure and incremental working capital requirements (on the back of proposed store additions).

The ratings also positively factor in GFIL's healthy operational profile, characterised by its established market position with its brand, Go Colors, enjoying a pan-India multi-channel distribution network and a diversified product portfolio within the women's bottom wear segment.

The ratings consider GFIL's presence in an intensely competitive segment (which limits the pricing flexibility to an extent and exposes its earnings to fluctuations in raw material prices), and high working capital requirements inherent in the retail segment.

The 'stable' outlook reflects ICRA's opinion that GFIL's performance in the coming quarters will continue to benefit from its established market position with a healthy operating efficiency, proposed diversification initiatives and strong capitalisation level.

Go Fashion (India) is involved in the retailing of women's bottom-wear products under its brand, Go Colors. The products are sold in the domestic market through its extensive pan India retail channel comprising 630 EBOs and around 1,750 large format stores.

The scrip rose 0.13% to currently trade at Rs 1171.85 on the BSE.