Go Fashion An Aesthetic IPO Is Value Investing?
Fashion as a part of society, while applying to all possible demographics, has a higher tendency to be depicted more competently by women, in a contrast to what would be seen among Males. With a larger variety of options available in terms of designs, colors and styles, female fashion certainly increases average appearance. From a financial point of view, the fashion industry is constantly growing and trend changes are its major driving force. Go Fashion, a company with women’s apparel that its prime arsenal brings its IPO to the masses. Let‘s see if they will be trends.
Industry Overview
The business operates in the apparel retail industry of the country. In terms of the industry, in fiscal 2020 the retail market in India was worth 796 billion, with a CAGR of 6.23 percent predicted to reach 1,077 billion by Fiscal 2025.
In FY20, the women’s clothing market was expected to account for over 36% of the total apparel market, the women’s bottomwear market accounts for 8.3% of the women’s apparel market.
The clothing and accessories market share is expected to grow by 9% in FY2025, with a CAGR of 8.8% from FY2020 to FY2025. After Pharmacy & Wellness, which increases with a CAGR of 9.4%, this is the fastest-growing category.
While China and the USA are the largest markets, India is the world’s third largest clothing market, on par with Japan and Germany in terms of values.
However, compared to Japan and Germany, India’s unit consumption should be four times higher, which shows that the Indian market is dominated by value fashion.
Now we can go ahead with this information and know more about this fashion company.
Company Overview
The company operates in women apparel brands. It was founded in 2010. It operates primarily under the brand name Go colours. The company has 450 exclusive brand stores spread across 23 states and territories in India as of May 31, 2021.
Key details of the IPO
| IPO Details | |
| IPO Opening date | Nov 17, 2021 |
| IPO Closing date | Nov 22, 2021 |
| Issue Type | Book Built issue IPO |
| Face Value | Rs. 10 per equity share |
| IPO Price band | ₹655- ₹690 |
| Market Lot | 21 shares |
| Listing At | BSE, NSE |
| Issue size | Rs. 1013.6 Cr |
The offering includes a new issuance of Rs 125 crore as well as an offer for sale. With a total issue size of 1013.6 Cr., this is a large issue. What does the company intend to do?
Purpose of the IPO
The corporation intends to invest in the expansion of its retail shops. With this money, it plans to open roughly 120 new Go Colors stores across India.
Working capital requirements will be another way in which the company will use the funds raised.
Apart from these major purposes for using IPO funds, the company intends to benefit from the company’s listing on stock exchanges, which will increase the brand’s visibility among potential and existing customers while also providing a public platform for freely trading the company’s shares by investors.
Financials of the company
Because the company does not have any long-term borrowings on its balance sheet, the debt to equity ratio is 0.04, which is a respectable level.
When it comes to sales data, Owing to the COVID-19 pandemic, revenue from operations declined by 36.06 percent from 3,920.14 million in Fiscal 2020 to 2,506.68 million in Fiscal 2021, mostly due to a decrease in retail sales and other operating revenue, such as trash sale.
In Fiscal 2021, the company recorded a loss before tax of 31.35 million, compared to a profit of 682.86 million in Fiscal 2020; the profit after tax data is shown below.
The loss in customer is the primary cause of this decline.
Strengths
The market’s leading player
One of the company’s main advantages is that it is the market leader in women’s bottom wear. Other participants in the market do not offer the same level of diversity that Go Fashion does.
Women of different ages and shapes make up the clientele.
Bottom-wear was available in more than 50 styles and 120 colours. The clothes are made to appeal to women of all ages and girls, with fits that are suitable for a wide range of body types and physiques.
Retail presence across several channels
Apart from that, the firm has a multi-channel retail presence, indicating that it is not overly reliant on the supply chain. This retail presence will also aid the company’s growth.
Weaknesses
The chances of failing with just one brand are slim to none.
The firm only has one brand, thus if it is unable to adequately advertise that brand, it will have a negative impact on the company’s operations.
Intellectual property is under threat.
The trademark “go colours” is currently under threat, and if the company is unable to maintain its property rights, it will have an impact on the company’s activities.
In the virtual world, it’s important to have a physical presence in retail stores.
Given that everything is moving to internet platforms, particularly for shopping, the company is having difficulty developing and increasing its retail presence.
Conclusion
Go Fashion appears to have tamed the beast. They should have no issue settling down in the future as long as they can keep the business side of their clothes firm under control.
With a deficit in the previous financial year and plans for future expansion, the company may struggle to get back on track, but if past data are to be believed, the loss appears to be an aberration as a result of the ongoing pandemic, and growth is merely a normal step in the life of a corporation.
So, what are your thoughts? Will these stocks be a part of your portfolio, or will you keep them hidden for a while? Let us know in the comments area and tell your friends about it.
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