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Go Fashion India IPO opens; should you subscribe?

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The IPO of women's bottom-wear company Go Fashion -- the operator of Go Colors outlets -- will close on November 22. Investors can bid for Go Fashion shares in the price band of Rs 655-690, in multiples of 21.

Go Fashion India IPO opens; should you subscribe?
Go Fashion India's initial public offer (IPO) to raise Rs 1,013 crore opened for subscription on Wednesday. The initial share sale of the Chennai-based women's bottom-wear company is a combination of fresh issuance of shares worth Rs 125 crore and an offer for sale (OFS) of equity worth Rs 888 crore by promoters and existing shareholders. The subscription window will close on Monday, November 22.
Investors can bid for Go Fashion shares in the price band of Rs 655-690 in multiples of 21 under the IPO. One lot is valued at Rs 14,490 at the upper end of the price band.
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Go Fashion shares will be listed on stock exchanges BSE and NSE.
The company aims to use the proceeds from the share sale to fund the rollout of 120 additional exclusive brand outlets, to meet working capital requirements and for general corporate purposes.
Here's what analysts say about the Go Fashion IPO:
Angel One
The brokerage has a 'subscribe' rating on the IPO.
Amarjeet Maurya, AVP-Mid Caps at Angel One, said the valuation is at reasonable levels. "In terms of valuation, the post-issue FY20 EV/EBITDA ratio works out to be 30.2 times at the upper end of the price band, which is almost in a similar range compared to its peer TCNS Clothing Co (29.3x). Go Fashion India has a better track record of revenue growth, high operating margin and high return on equity compared to TCNS Clothing Com," said Maurya.
Swastika Investmart
The brokerage recommends subscribing to the Go Fashion IPO for listing gains as well as for the long term.
The company has a mixed set of financials over the last three years, though the fall in revenue in FY21, following growth in the previous year, was on account of the pandemic, Swastika said in a note.
Go Colors has a strong brand value but fluctuating revenues, however, it is expected to have strong growth momentum with increasing number of working women along with the evolving fashion trend, it added.
The brokerage believes the IPO is attractively priced for investors. The IPO is arriving at a price to BV ratio of 13.65 based on the NAV of Rs  50.56, as of the first quarter of FY22, according to Swastika.
Choice Broking
The brokerage has a 'subscribe' rating on the IPO with a long-term view.
The Go Fashion IPO is fully priced, demanding an EV/sales multiple of 13.8 times at the upper end of the price band, which is at a premium to the peer average of 10.9 times, Choice said in a report. "Given the target market potential and market share in the niche category coupled with the largest network of exclusive brand outlets, we feel that it has the potential to expand the business and also almost fully recover the lost profitability due to the pandemic," it added.
HEM Securities
The brokerage has a 'subscribe' rating on the issue.
CapitalVia
The brokerage has an 'avoid' call on the issue. "Despite the company's inherent strengths, such as a well-diversified product portfolio, an efficient technology-driven supply chain, and in-house design and development capabilities, it is exposed to any slowdown in consumer spending, inability to adapt to rapidly changing consumer preferences, competition from other players, and the buildup of inefficiencies in expanding and managing its retail network," said Likhita Chepa, Senior Research Analyst at CapitalVia Global Research.
The IPO appears to be significantly overpriced, Chepa added.
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