Everything you need to know about the GO FASHION company and the IPO GMP!
About Go Fashion India (Go Colors IPO) Ltd–
KEY POINTS OF GO Fashion/Colors LTD. IPO
– An Indian women’s bottom-wear brand
– FY20 Market share of ~8% in branded women’s bottom-wear
– Women’s apparel market = 36% of the total apparel market
– Women’s bottom-wear market = 8.3% of women’s apparel market FY20
– As of Q2FY22 – sold bottom-wear in 50+ styles in 120+ colors.
Price range –
– ₹225 to ₹1,599
Average selling price (ASP) –
– FY21 – ₹584.02
– Q1FY22 – ₹619.05
– Exclusive brand outlets (EBO) include franchise stores, large format stores (LFS), multi-brand outlets (MBO), and online channels such as online retailers and their own websites.
– Majority of Sales is from EBOs
– Q1FY22 – Operated 459 EBOs (including franchise stores)
– Image 1 and 2 talk about stores, Capex, area, sales, cities, regions, etc
– They periodically close EBOs which are non-profit-making (Img 3)
As of Q1FY22 –
– 2855 employees (10 in design, 2517 front-end staff at EBOs+ LFS)
– Attrition – 4.27%
– Sourced RMs from 73 suppliers, finished products from 5 suppliers
– They do not own any manufacturing facilities – Job workers engaged in making everything (outsourcing)
Promoters & Directors (Src – Axis Direct) –
GO INDIA IPO Issue Details –
– Total market cap of Rs 3727 cr post listing
– Fresh issue – Rs 125 cr
– OFS – Rs 889 cr
Objects of GO FASHION INDIA IPO Issue –
– Rs 33.7 Cr – 120 new exclusive brand outlets (EBOs) to be opened
– Rs 61.3 cr being used to fund working capital requirements
– General corporate purposes
Risks of Go India Ipo –
– PEs invested in 2018. With CCPS conversion, their price is 170 or less. 3 yrs later IPO at 690 rs. 4x increase in 3 yrs with business making loss now. Why/How the 4x then?
– All PEs selling 50% of the stake except Dynamic India which is selling fully.
– Even 2 Promoter family trusts selling 50% of their stake
– Products cater to only female customers and are in a niche category i.e., only limited to bottom-wear Single warehouses located in Southern India.
– Inventory as % of current assets was 45.35% in Q1FY22
– Inventory turnover days – 118 in FY21
– Go Color competes with local retailers, non-branded products, economy brands, and products of other established brands
– Also competes with in-house brands launched by LFSs including those through which they retail their products
Promoters VKS Family Trust and PKS Family Trust have pledged 16.56% of total shares for a Rs 40 cr Loan
Pledges are really scary as the stock can take heavy beatings (as we have seen in the past few years with some pledged shares)
Financials Of Go India Ipo –
– Comfortable Debt to Equity figure
– Flat revenue
– Flat EBITDA
– Net loss in FY21
– P&L took a hit due to COVID
– CFO and FCF is good, gradually improving (Majority IPO size OFS anyways)
Valuation Of Go Colours India IPO –
– 3727 cr Mcap post issue
– As per FY21 Sales – 13.2x Price to Sales(P/S)
– As per FY20 sales – 9.4x P/S
The business prides itself on being the go-to brand for women’s bottom wear with the highest range of products and being one of the largest players according to market shares
But we all know what happens when you pay frothy valuations for a business, you can end up with time correction/price correction
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price like Mr. Buffet Says.
Questions to think about Before Applying Go Colours India IPO –
– What is the moat?
– What is the growth prospect ahead?
– What multiple should be paid for a traditional apparel-making company?
– What happens when biggies enter the same market who can outspend and outreach them?
About the Fashion Market –
– Women’s bottom-wear market = 8.3% of women’s apparel market that was Rs 13547 Cr in FY20
– Expected to grow at a CAGR of 12.4% by FY25
– Share of bottom-wear in women’s apparel is expected to go to 9.6% by FY25 from 8.3% in FY20
The branded Indian womenswear segment is dominated by large national/regional Players like TCNS, BIBA, Global Desi, Go Colors, AND, H&M, Zara, M&S and Fabindia, Soch, etc
GO Fashion / Colors IPO Gray Market Premium
GO Colors IPO GMP Today 17-11-2021: 560/580
GO Fashion IPO GMP Today 18-11-2021: 575/580
GO Fashions IPO GMP Today Price 19-11-2021: 460/480