Go Fashion to make D-Street debut today. Will the listing premium match the investor interest?

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Go Fashion IPO

Women’s bottom-wear brand Go Colors operator Go Fashion is likely to debut with a 65-70 percent premium on the bourses on November 30, given the IPO subscription and demand in grey market.

The company held an 8 percent share in the organised women’s bottom-wear market in FY20. It has a healthy, asset-light business model and had operating cash flows despite volatility in profit in the last three fiscals.

Go Fashion mopped up Rs 1,014 crore from the public issue that was subscribed 135.46 times during November 17-22. Non-institutional investors had put in bids 262.08 times the portion set aside for them and qualified institutional investors’ reserved portion was subscribed 100.73 times. Retail investors bought shares 49.70 times the portion reserved for them.

The company’s shares are available at a massive premium of 65-75 percent (Rs 450-520) in the grey market, translating into a trading price of Rs 1,140-1,210 per share in the grey market against an issue price of Rs 690 per share, as per IPO Central and IPO Watch.

The grey market is an unofficial platform. IPO shares start trading in the grey market with the announcement of the price band and continues till the listing of shares on the bourses.

“We expect the listing at Rs 1,170, which gives a gain of around 70 percent,” said Gaurav Garg, Head of Research at CapitalVia Global Research. He pointed out that the company has not been profitable since FY19 but has had healthy operating cash flows.

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In FY21, the company posted a loss of Rs 3.54 crore as against a profit of Rs 52.63 crore in previous year, on a revenue of Rs 250.66 crore, down from Rs 392 crore.

It reported a loss of Rs 18.99 crore in the quarter ended June 2021 as against a loss of Rs 8.59 crore a year ago, although revenue increased sharply to Rs 30.99 crore from Rs 10.3 crore.

Go Colors gained around 8 percent share of the market pie in FY20 through its 459 exclusive brand outlets.

“Looking at the strong HNI and QIB subscription demand for largest women’s bottom-wear brands in India, we can expect a strong listing gain with 65-70 percent premium on upper end of the IPO price Rs 690,” says Prashanth Tapse, Vice-President (Research) at Mehta Equities.

“Strong listing gains seem to be justified as Go Fashion was reasonably priced, leaving money on the table for new investors. The company has a healthy, asset-light business model, and is backed by the growth-focused IPO proceeds,” he said.

The offer was composed of a fresh issue of Rs 125 crore and an offer-for sale of Rs 888.61 crore by promoters and investors. The company will utilise the net proceeds from fresh issue for rolling out 120 exclusive brand outlets, and meeting working capital requirements.

Astha Jain, Senior Research Analyst at Hem Securities, expects Go Colors to list at more than 50 percent premium to the issue price.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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