Go Fashion India Ltd (GOFASH)

Price Band: | 655-690 UNRATED

November 16, 2021

Market leader in women’s bottom-wear space…

About the Company: The company is a one stop shop for women’s bottom-wear
under the brand ‘Go Colors’. It is among the few apparel players in India to have
identified the market opportunity in women’s bottom-wear and acted as a ‘category

IPO Review
creator’ for the same.
IPO Details
 Widespread distribution network consisting of 459 exclusive branded Issue Details
outlets (70% of revenue) and available in 1200+ LFS’ (22% of revenue) Issue Opens November 17, 2021

 Strong operating metrics with one of the industry’s highest revenue/sq ft Issue Closes November 22, 2021
(~| 17000/sq ft. as on FY20) and healthy operating margins (~21% pre-Ind- Issue Size ~ | 1014 crore
AS 116). Capital efficient business model with RoE of ~18% as on FY20 Issue Type
Fresh Issue/ Offer for
sale
Key triggers/Highlights: Price Band | 655 - | 690
No of shares ~ 1.5 crore
 The company is a one-stop-shop with bottom-wear sold across categories
such as ethnic wear, western wear, fusion wear, athleisure, denims and for Market Lot 21 shares

every occasion. As of September 30, 2021 the company sold bottom-wear Face Value 10.0
in 50 styles and more than 120 colours QIB (%) 75.0
Non-Institutional (%) 15.0
 It generates healthy gross margins (~60%+) as round the year relevance of
product portfolio allows it to typically retail products at full price and with Retail (%) 10.0

discounts offered only in limited circumstances

Shareholding pattern (%)
 The price range caters across all income segments at a range of | 225-1599

ICICI Securities – Retail Equity Research

and ASP at exclusives stores being ~ | 620 Pre-offer Post-offer

 The company follows an asset light business model, with production Promoter 57.5 52.8
outsourced on a job work basis (73 suppliers, 42 job-workers). It manages Public 42.5 47.2
its entire supply chain from its 99100 square foot warehouse in Tirupur,
Tamil Nadu and is capable of handling complex SKU mixes
Objects of the issue
 The branded women’s bottom-wear market is pegged at | 4473 crore (33% | crore
organised penetration) and the company has ~8% market share. The Funding roll out of 120 new
33.7
branded space is expected to grow at a CAGR of 21% by FY25 EBO's
Funding working capital
61.4
requirements
What should investors do? Go Fashions is the first company to launch a brand General corporate purposes -
exclusively dedicated to the women’s bottom-wear category. It is a play on the Fresh issue 125.0
unorganised to the modern retail shift. At the upper end of the price band, it is valued
at 9.4x, 14.6x EV/sales for FY20, FY21, respectively. Offer for sale 888.6

 We assign UNRATED rating to the IPO Research Analyst

Bharat Chhoda
Key risk & concerns bharat.chhoda@icicisecurities.com
 Dependence on single brand and category
Cheragh Sidhwa
 High store network concentration in southern and western India cheragh.sidhwa@icicisecurities.com

 Dependence on single warehouse for pan-India distribution

Key Financial Summary

| crore FY19 FY20 FY21 Q1FY22
Net Sales 285.2 392.0 250.7 31.0
EBITDA 80.0 126.5 46.3 -5.9
PAT 30.9 52.6 -3.5 -19.0
Diluted EPS 5.7 9.7 -0.7 -3.5
P/E (x) 120.4 70.8 -
EV/EBITDA (x) 45.9 29.2 78.8
Mcap/Sales (x) 13.1 9.5 14.9
RoCE (%) 22.6 29.3 5.9
RoE (%) 13.6 18.4 -1.3

Source: RHP, ICICI Direct Research

 IPO Review | Go Fashion Ltd ICICI Direct Research

Company Background
Incorporated in 2010, Go Fashions is engaged in the development, design, sourcing,
marketing and retailing a range of women’s bottom-wear products under the brand,
‘Go Colors’. It is among the few apparel companies in India to have identified the
market opportunity in women’s bottom-wear and acted as a ‘category creator’ for
bottom-wear. It is the first company to launch a brand exclusively dedicated to the
women’s bottom-wear category and has leveraged this advantage to create a direct-
to-consumer brand with a diversified and differentiated product portfolio of
premium quality products at competitive prices.

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. It caters to women across
all age groups and girls & physiques covering the entire spectrum of women’s
bottom-wear requirements, including daily wear, casual and work wear, festive and
occasion wear and loungewear.

The company offers customers the ability to ‘mix and match’ their top-wear with an
assortment of bottom-wear styles in multiple colours allowing to plan an outfit
according to the needs. The price range offered (| 225-1599) caters across all income
segments, which allows it to tap customers in tier II and tier III cities as well.

It has a multi-channel pan-India distribution network with enhanced focus on EBOs.

It operates 459 exclusive stores across 118 cities in 23 states and union territories
across India. Further, as of September 30, 2021, the company also retailed products
through 1270 large format stores such as Reliance Retail Central, Unlimited, Globus
Stores Pvt Ltd and Spencer's Retail. It also retails its products through multi branded
outlets and online marketplaces.

Exhibit 1: Revenue mix channel wise

5% 4%

EBO
22%
LFS
Online
69% MBO

Source: RHP, ICICI Direct Research

Exhibit 2: Number of touchpoints across formats as on Q1FY22

1600
1400
1200
No. of touchpoints

1000
800
1353
600
400
200 446
48 10
0
Q1FY22

EBO LFS MBO Online

Source: RHP, ICICI Direct Research

ICICI Securities | Retail Research 2

 IPO Review | Go Fashion Ltd ICICI Direct Research

Exhibit 3: Product portfolio

Product-Type Product Portfolio Price Range (|)
Ethnic Wear Churidar, Patiala, kurti-pants, salwar, Silk Pant and dhoti 549-1049
Leggings, Cropped Jegging, Jeans, Cargo Pants, Trousers,
Western Wear 499-1499
Ponte Pants, Track Pants
Fusion Wear Jeggings, Palazzos, Pants and Harem Pants 699-1299
Athleisure Leggings, Track Pants and Joggers 549-999
Jeggings, Joggers, Jeans, Denim Palazzos, Pants, Denim
Denims 1049-1499
Culottes and Capris
Lounge Pants, Lounge Knit Pants, Lounge Capris and Lounge
Lounge Wear 449-749
Shorts.
Go Plus Churidars, Leggings, Jeggings, Pants and Palazzos 599-1599

Girl’s wear Leggings, Jeggings, Palazzos, Pants, Shorts and Harem Pants 225-999
Source: RHP, ICICI Direct Research

The company has strong store unit economics, which has allowed it to expand its
EBO network across regions including new EBOs in tier-III/IV cities, resulting in
frequency of store openings, being one every 12 days over the last three fiscals.
Ability to identify and determine the optimum location and size of a store and
marketing leverage of EBOs is critical in ensuring visibility among target customers.
This resulted in the company having one of the highest sales per square feet among
key women’s apparel companies.
Exhibit 4: Store operating metrics

Source: RHP, ICICI Direct Research

Exhibit 5: Stores spread across metro-tier IV cities

Source: RHP, ICICI Direct Research

ICICI Securities | Retail Research 3

 IPO Review | Go Fashion Ltd ICICI Direct Research

Industry Overview
The women’s apparel market is estimated to be ~36% of the total apparel market
while the women’s bottom-wear market contributed 8.3% of women’s apparel
market (| 13547 crore). The women’s apparel market is expected to grow from
| 163291 crore (US$ 21.0 billion) in FY20 to | 253733 crore (US$33.8 billion) by FY25.
This market is projected to grow due to a) an increase in the number of working
women, b) a shift towards aspiration rather than need based buying c) design
innovation d) shift from purchasing sets to buying separates for mix and match of
clothing.

Exhibit 6: Overall women’s apparel market

300000
253733
250000

200000
163291
| crore

150000
101432
100000

50000

0
FY15 FY20 FY25E
Source: RHP, ICICI Direct Research

Women’s bottom-wear products comprise the ethnic, fusion and western categories.
Clothing today is modular. The concept of mix & match has become an important
part of self-styling for women. There is an increasing preference of women towards
buying contrasting tops and bottom-wear rather than buying full suit sets. With this
shift in consumer preference, the sale of ‘separates’ clothing has increased.

Exhibit 7: Overall women’s bottom-wear market in India

30000
24315
25000

20000
13547
| crore

15000

10000 7723

5000

0
FY15 FY20 FY25E
Source: RHP, ICICI Direct Research

The bottom-wear market has historically been unorganised with limited products,
lack of quality products, low pricing power and scope for expansion. However, with
growing westernisation, increasing disposable incomes and urbanisation,
consumers have become more fashion, brand and quality conscious and demand
quality branded products. The share of branded women’s bottom-wear rose from
19.7% in FY15 to 33% in FY20 at a CAGR of 24.1%. The branded women’s bottom-
wear market is expected to see continued high growth in future as well with its share
rising to 46.8% by FY25. The market for branded women's bottom-wear is
fragmented and comprises more than 40 brands. Go Colors was the first company
to launch a brand exclusively dedicated to the women’s bottom wear category and
has ~8% market share in the branded category.

ICICI Securities | Retail Research 4

 IPO Review | Go Fashion Ltd ICICI Direct Research

Exhibit 8: Branded, unbranded share of women’s bottom-wear industry

30000
25000 11378
Major brands in women space and SKU presence
20000
| crore

15000 4473

10000 1521
12937
5000 9074
6202
0
FY15 FY20 FY25E

Unbranded Branded

Source: RHP, ICICI Direct Research

Exhibit 9: Sales/sq ft for key players

Brand Store Size Range (Sq. ft.) Sales/sq.ft. range (yearly) (|)
Go Colors 150-500 12000-40000
Aurelia 800-1200 6000-9000
Biba 1000-1500 8500-12500
Fabindia 2500-3500 10500-15000
Soch 1200-3000 6500-16500
W 800-1200 7000-10500
Zara 15000-30000 20000-40500
Source: RHP, ICICI Direct Research

Exhibit 10: Revenue break-up across key formats

Revenue Source Revenue Share (% )
Go Colors TCNS FabIndia Soch Zara India
EBO 69.0 44.0 95.0 72.0 85.0
MBO 4.0 4.0 0.0 6.5 0.0
LFS 22.0 42.0 0.0 6.5 0.0
Online 5.0 10.0 5.0 15.0 15.0
Source: RHP, ICICI Direct Research

Exhibit 11: Historical rollout of EBOs

Brand 2015 2018 2021 CAGR % (FY18-21)
Go Colors 70 200 450 31
Aurelia 69 183 213 5
Biba 150 254 346 11
Fabindia 200 275 307 4
H&M NA 39 48 7
Levis 400 410 366 -4
M&S 44 62 92 14
Soch NA 100 131 9
Vero Moda 64 67 49 -10
W 166 281 301 2
Zara 16 20 21 2
Source: RHP, ICICI Direct Research

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 IPO Review | Go Fashion Ltd ICICI Direct Research

Investment Rationale
Continues to expand retail network with focus on EBOs
In the past, the company has expanded stores through a cluster-based expansion
model and intends to continue to expand its presence by setting up EBOs. It intends
to follow the COCO model that will ensure better operational control over the stores.
As part of its growth strategy, the company intends to expand its EBO network in
other regions across India. By having products be reasonably priced and essential, it
intends to increase its footprint and scale of operations across India. Bottom-wear
being a core essential category and having limited print or design is relatively
insulated from changes in fashion trends and is acceptable across the country. Of
the total fresh proceeds worth | 125 crore, ~ | 33 crore would be utilised towards
adding 120 new stores during FY23-24E. Given the cluster based approach of
establishing EBOs primarily in tier I cities, it will focus on establishing additional EBOs
on a similar model across tier II and tier III cities.

In-house expertise in developing, designing products

The company develops products in-house based on demand for such products and
the sale of similar products that it tracks and monitors through its ERP system. It
designs the products keeping in mind trends in fashion, fabric, textiles, stitch and
pricing. Its products are designed for every occasion including for daily wear, office
wear, festive, denim and lounge wear and are available in over 120 colours. It follows
a data-driven approach as part of the design process and has launched products that
focus on comfort and fit focused on its target customer segment and are based on
market research and feedback from the customers. Based on business intelligence
reports on its product-wise sales generated by the ERP system, the company is able
to determine future product launches. In the last three fiscals and in the three months
ended June 30, 2021, the company has launched over 20 products. The company
has a skilled team of in-house designers and merchandisers that focuses on creating
quality products with innovative designs and optimal fit & sizing. As of September
30, 2021, its in-house design team comprised 10 professionals who design the
products. The company also undertakes concept development and trend forecasting
to develop and design new styles and products and regularly participate in fairs or
exhibitions in India or abroad to understand the trends.

Leverage technology to bring cost efficiency, enhance

customer experience
The company intends to further improve operating efficiency and ensure efficient
supply chain management through global best practices. Among measures that it
intends to undertake include investing further in IT infrastructure to improve
productivity, time savings. It will look to expand and upgrade warehouse to optimise
inventory and supply management. It intends to strategically expand warehouse
operations and implement new technologies to further expand & improve customer
deliveries and enhance customer buying experience with faster dispatches.
Furthermore, it will also undertake data analytics that will allow it to better
understand customer preferences, improve sales and help scale up operations.

Enhancing sales through online channel

The company continues to focus on further strengthening its online sales channels
to benefit from evolving customer trends in the market. The company is planning to
make investments in digital channels to build an omni-channel engagement
experience for its customers and have a dedicated team for its e-commerce
operations. The company also intends to leverage its existing capabilities to increase
its online presence by improving and upgrading its own website. The company’s
focus will be to target customer acquisition to drive sales through own website and
online marketplaces. In addition, it intends to invest in content generation to engage
with a younger audience. The company will continue to focus on analytic
technologies to create personalised journeys for customers. Through these
measures, it aims to expand revenue generating channels as well as become a
digitally relevant brand for Indian women in the bottom-wear segment.

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 IPO Review | Go Fashion Ltd ICICI Direct Research

Key Risk
Dependence on single brand, category
All the products of the company are sold under a single brand, ‘Go Colors’ and cater
to only the women’s bottom-wear category. An inability to effectively market its
products and brand, or any deterioration in public perception of its brand, could
affect customer footfall and consequently adversely impact the business, financial
condition, cash flows and results of operations.

High store network concentration in southern, western India

The company has a pan-India network of EBOs across 23 states and union territories
in India as of September 30, 2021 with a significant number of its stores located in
southern and western India. It operated 315 stores in southern and western India,
which comprised 68.63% of its total network of stores. The concentration of its
operations in these states heightens the exposure to adverse developments related
to competition and other changes, which may adversely affect its business
prospects, financial conditions and results of operations. In the event of a regional
slowdown in economic activity in these regions, or any other developments
including political or civil unrest, disruption or sustained economic downturn that
reduce the demand for its products in these regions, could adversely affect its
business, financial condition and results of operations.

Inability to protect its trademarks including brand ‘Go Colors’

The company has six trademarks pertaining to its brand name, all of which are
applied for but are pending registration under the Trade Marks Act, 1999. It has
applied seeking registration of these trademarks. The application for registration of
the trademark ‘GO COLORS’, under class 25, has been opposed by a third-party on
various grounds seeking, among other things, refusal of the application to register
the trademark. In the absence of the trademark registration for the trademarks
pertaining to its brand name, such as, ‘GO COLORS’ the company may be unable to
initiate an infringement action against any third party. In the event such a trademark
is not approved or, if registered in the name of a third-party, it could result in
significant monetary loss or prevent it from selling its products under its brand name.

Dependence on outsourcing in absence of own manufacturing

facilities
The Company does not currently own any manufacturing facilities and engages job
workers for manufacturing all its products. It may be unable to obtain sufficient
quantities or desired quality of products from job workers in a timely manner or at
acceptable prices, which may adversely affect its business, financial condition and
results of operations.

Dependence on single warehouse for pan-India distribution

The company’s warehouse is currently located in southern India. Any significant
disruption due to social, political or economic factors or natural calamities or civil
disruptions, impacting the region may adversely affect operations. Further, its
warehouse may be subject to operating risks, such as performance below expected
levels of efficiency, labour disputes, natural disasters, industrial accidents and
statutory and regulatory restrictions. The company is planning a geographical
expansion across India but in the event that it is unable to make available its products
in a prompt manner and within the requisite timelines or if there is a lapse in
coordination across stores located countrywide, its business, financial condition and
prospects may be adversely affected.

ICICI Securities | Retail Research 7

 IPO Review | Go Fashion Ltd ICICI Direct Research

Financial summary

Exhibit 12: Profit and loss statement | crore Exhibit 13: Cash flow statement | crore
(Year-end March) FY19 FY20 FY21 Q1FY22 (Year-end March) FY19 FY20 FY21 Q1FY22
Net Sales 285.2 392.0 251 31.0 Profit Before Tax 42.2 68.3 -3.1 -18.4
Growth (%) 37.4 (36.1) Add: Depreciation 32.1 46.6 60.5 16.0
Add: Finance Cost 11.4 16.5 20.6 5.7
Total Raw Material Cost 94.5 130.0 92.2 11.1
Others 6.1 -0.7 -51.1 0.7
Gross Margins (%) 66.88 66.85 63.2 64.2
Net (Increase)/decrease in WC -41.8 -53.2 63.1 -29.0
Employee Expenses 42.0 62.0 61.5 15.9
Tax paid -16.7 -20.2 0.0 0.0
% to sales 14.7 15.8 24.5 51.3 CF from operating activities 33.29 57.21 89.85 -24.86
Other Expenses 68.8 73.6 50.7 9.9 (Inc)/dec in Fixed Assets -26.1 -28.1 -9.9 -1.2
% to sales 24.1 18.8 20.2 32.0 Others 20.8 9.6 -37.3 40.4
Total Operating Expenditure 205.3 265.5 204.3 36.9 CF from investing activities -5.30 -18.47 -47.26 39.19
EBITDA 80.0 126.5 46.3 (5.9) Inc / (Dec) in Equity/prefrence share 0.0 0.0 0.0 0.0
EBITDA Margin 28.0 32.3 18.5 (19.1) Inc / (Dec) in Loan 0.0 0.0 0.0 0.0
Interest 11.4 16.5 20.6 5.7 Others -30.9 -49.3 -29.5 -19.2
Depreciation 32.1 46.6 60.5 16.0 CF from financing activities -30.9 -49.3 -29.5 -19.2
Net Cash flow -2.9 -10.5 13.1 -4.9
Other Income 5.7 4.8 31.6 9.3
Opening Cash 13.5 10.6 0.1 13.2
Exceptional Expense - - -
Closing Cash 10.60 0.10 13.20 8.30
PBT 42.2 68.3 (3.1) (18.4)
Source: Company, ICICI Direct Research
Total Tax 11.3 15.7 0.4 0.6
Profit After Tax 30.9 52.6 (3.5) (19.00)
Source: Company, ICICI Direct Research

Exhibit 14: Balance sheet | crore Exhibit 15: Key ratios | crore
(Year-end March) FY19 FY20 FY21 Q1FY22 (Year-end March) FY19 FY20 FY21 Q1FY22
Equity Capital 30.0 30.0 30.0 30.0 Per share data (|)
Preference shares 49.0 49.0 49.0 49.0 Diluted EPS 5.7 9.7 -0.7 -3.5
Reserve and Surplus 149.3 207.3 203.9 184.9 Cash EPS 11.7 18.4 10.5 -0.5
BV 42.3 53.0 52.4 48.9
Total Shareholders funds 228.3 286.3 282.9 263.9
Cash Per Share 12.4 7.7 15.9 7.5
Minority interest
Operating Ratios (% )
Total Debt 8.3 2.8 10.4 0.0
EBITDA margins 28.0 32.3 18.5 -19.1
Non Current Liabilities 146.3 208.2 224.0 231.2 PBT margins 14.8 17.4 -1.3 -59.3
Source of Funds 382.90 497.30 517.38 495.15 Net Profit margins 10.8 13.4 -1.4 -61.3
Inventory days 88.9 98.6 117.9
Net Fixed Assets 47.3 60.3 58.4 57.8 Debtor days 51.3 51.8 68.6
Capital WIP 2.0 8.1 8.6 8.1 Creditor days 17.7 9.7 15.6
Intangible assets 0.5 0.7 0.5 0.4 Return Ratios (% ) .
Right of use assets 137.7 194.7 200.6 205.1 RoE 13.6 18.4 -1.3
Investments & bank balance 56.5 41.3 72.9 32.4 RoCE 22.6 29.3 5.9
Valuation Ratios (x)
Inventory 69.5 105.9 80.9 102.7
P/E 120.4 70.8 -
Cash 10.6 0.1 13.2 8.3
EV / EBITDA 45.9 29.2 78.8
Debtors 40.1 55.6 47.1 38.7
EV / Sales 12.9 9.4 14.6
Loans & Advances & Other CA 18.7 25.3 34.0 44.4
Market Cap / Revenues 13.1 9.5 14.9
Total Current Assets 138.8 186.9 175.3 194.0 Price to Book Value 16.3 13.0 13.2
Creditors 13.8 10.5 10.7 11.8 Solvency Ratios
Provisions & Other CL 7.4 11.4 20.3 23.7 Debt / Equity 0.0 0.0 0.0
Total Current Liabilities 21.2 21.9 31.0 35.5 Debt/EBITDA 0.1 0.0 0.2
Net Current Assets 117.6 165.0 144.3 158.5 Current Ratio 6.5 8.5 5.7
LT L& A, Other Assets 21.3 27.2 32.1 32.8 Quick Ratio 3.3 3.7 3.0
Other Assets 0.0 0.0 0.0 0.0 Source: Company, ICICI Direct Research

Application of Funds 382.91 497.31 517.38 495.15

Source: Company, ICICI Direct Research

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 IPO Review | Go Fashion Ltd ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to
companies that are coming out with their initial public offerings and then categorises them as Subscribe, Subscribe
for the long term and Avoid.

Subscribe: Apply for the IPO

Avoid: Do not apply for the IPO
Subscribe only for long term: Apply for the IPO only from a long term investment perspective (>two years)

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

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 IPO Review | Go Fashion Ltd ICICI Direct Research

ANALYST CERTIFICATION
I/We, Bharat Chhoda, MBA, Cheragh Sidhwa, MBA, Research Analysts authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned
Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

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the research report.

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ICICI Securities Limited has been appointed as one of the Book Running Lead Managers to the initial public offer of Go Fashion (India) Ltd. This report is prepared on the basis of publicly available information

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