Go Fashion IPO opens: Grey market premium strong, analysts bullish; should you subscribe?

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November 17, 2021 10:55 AM

Ahead of the public issue, Go Fashion has managed to raise Rs 456 crore from 33 marquee anchor investors.

Go fashion IPOGo Fashion (India) IPO opened for subscription today.

Go Fashion (India) IPO opened for subscription today as the company looks to raise Rs 1,014 crore from the primary market. Apparel brand Go Fashion’s public issue is a mix of a fresh issue of equity shares and an offer for sale (OFS) by existing shareholders of the company. The issue is offered to investors in a fixed price band of Rs 655-690 per share from today. On the day of the opening of the IPO, trends in the grey market suggest strong interest in the company with a heavy premium of Rs 555 apiece, or 80%, above the issue price.

Ahead of the public issue, Go Fashion has managed to raise Rs 456 crore from 33 marquee anchor investors, including the Government of Singapore, Monetary Authority of Singapore, Nomura, Abu Dhabi Investment Authority, Fidelity, SBI Mutual Fund, among others. From the Rs 1,014 crore that Go Fashions is looking to raise, Rs 125 crore will be raised as a fresh issue of equity shares while the remaining Rs 888 crore will be an OFS, which will see promoter shareholding drop to 52.79% from the current 57.47%. Meanwhile public shareholding will increase to 47% post IPO from 42.53%.

Should you subscribe?

Choice Broking – Subscribe for Long Term

Analysts at Choice Broking have a bullish long-term view on Go Fashion. Although the brokerage firm said that the issue is priced at EV/Sales multiple of 13.8x, which is at premium to peer average of 10.9x, analysts believe there is potential for Go Fashion to expand market share. “We feel that it has the potential to expand the business and also almost fully recover the lost profitability due to the pandemic. Thus, we assign a “Subscribe for Long Term” rating for the issue,” they said.

Also Read: Paytm listing day strategy: Grey market premium falls after IPO shares allotment; should you sell, buy, hold?

Angel One – Subscribe

Although Go Fashion’s valuations are at a premium to peers, Angel One said that the company has a better track record of revenue growth. The brokerage firm said that the post-issue FY20 EV/EBITDA works out -30.2x to (at the upper end of the issue price band), which is almost in similar range compared to its peers TCNS Clothing (FY20 EV/EBITDA -29.3x). “Further, Go Fashion India has better track record of revenue growth, higher operating margin & high Return on equity compared to TCNS Clothing Co. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue.” Angel One added.

Marwadi Financial Services – Subscribe

The brokerage firm highlighted that the company has a strong product portfolio and a multi-channel pan-India distribution network. Analysts said that considering TTM (June-2021) sales of Rs 271.4 crore on post issue basis, the company is going to list at Market cap/sales of 13.73 with the market cap of Rs 3,726 crore, while its peers namely Page industries and Trent are trading at market cap/sales of 13.21 and 11.89 respectively.

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