IPO Analysis: Go Fashion India Ltd (GoColors)

IPO Rating: Invest for long-term 

About the issue: 

GoColors is a popular fashion brand among women as the company primarily designs, manufactures and sells women bottom wear in India. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises a fresh issue of Rs 125 crore and the sale of shares worth Rs 888.6 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 655 to Rs 690 per equity share. The IPO opening date is November 17, 2021, while it will be closing on November 22, 2021. The issue will be listed on the exchange on November 30, 2021. The IPO market lot size is 21 shares. A retail-individual investor can apply up to a maximum of 13 lots (273 shares or Rs 1,88,370). The net proceeds generated from the IPO will be utilized for funding roll out of 120 new EBOs (Exclusive Brand Outlets), funding working capital requirements, and for general corporate purposes. 

GoColors IPO Details: 

About the company: 

Incorporated in 2010, Go Fashion (India) Limited is one of the largest women's bottom-wear brands in India. The company is engaged in the development, design, sourcing, marketing, and retailing of a range of women's bottom-wear products under the brand, 'Go Colors'. The company offers one of the widest portfolios of bottom-wear products among women's apparel retailers in terms of colours and styles. As of May 31, 2021, Go Colors sold bottom-wear in over 50 styles in more than 120 colours. 

As of May 31, 2021, the company has 450 exclusive brand outlets (EBOs) that are spread across 23 states and union territories in India. 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. The company's LFSs have grown from 925 LFSs in 2019 to 1,332 LFSs in May 2021. The company also sells its products through its website, online marketplaces, and multi-brand outlets (MBOs). 

Competitive strengths: 

One of the largest women's bottom-wear brands in India 

Wide, well-diversified, product portfolio and first-mover advantage 

Multi-channel retail presence across India 

Strong unit economics with an efficient operating model 

Extensive procurement base and automated procurement & supply chain 

In-house expertise in developing and designing products 

Strong financial performance record 

Company Financials: 

Majority of company revenues are generated through its own brand outlets and through large format stores like Reliance Retail, Central, Unlimited, etc. And hence, the covid led pandemic had a greater impact on the financials. The company does have online presence, but it was not enough to offset the impact. 

Recommendation: 

The women’s clothing market in India has evolved in the past decade from the traditional one-piece apparel, like the saree, to two-piece and mix-and-match apparel, with bottom-wear becoming an essential category that caters to the basic and functional needs of consumers. 

According to Technopak report, the share of organized retailing within women’s apparel has increased from 19 per cent in Fiscal 2015 to 27 per cent in Fiscal 2020 and is expected to reach 42 per cent by Fiscal 2025. This rapid growth is attributable to a growing female population, increasing number of working women, evolving fashion trends, and rising spending power of consumers. In particular, women’s bottom-wear is the fastest growing category in the women’s apparel segment market and contributes 8.3 per cent of women’s apparel market. While there are numerous competitors in the women fashion apparel segment, the focus of the company on women bottom wear gives it a competitive advantage in that particular segment. The company has kept debt-to-equity ratio low at just 0.04.  

The company’s EBO model is standardized and scalable. According to Technopak report, it had one of the highest sales per square feet among key women’s apparel companies and in particular among EBOs in India in Fiscal 2021. Considering all such factors, we recommend to invest in the IPO for long term.