Bumper Listing | Go Fashion surges 94% on debut. What should investors do now? (2024)

Experts largely advised holding Go Fashion for long-term investors, while short-term investors can prefer profit-booking given the bumper listing.

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Investors cheered the listing ofGo Fashion, the operator of women’s bottom-wear brand Go Colors, as the stock surged 94.3 percent intraday to a record high of Rs 1,341 on debut on November 30.

The stellarIPOsubscription, strong growth potential in women’s bottom-wear brand, strong management, likely increase in working women along with evolving fashion trends, lifted sentiment, though there was volatility in revenues, experts feel.

The stock opened at Rs 1,316 with a massive 90.7 percent premium over the issue price of Rs 690 per share, which was way beyondanalysts’ expectations as well as grey market premium (65-75 percent).

It was trading at Rs 1,243.75 with 80.25 percent gains on the BSE, and up 80 percent at Rs 1,242.30 on the NSE at 1.09pm. In terms of volumes, it traded with 8.46 equity shares on the BSE and 1.44 crore shares on the NSE.

Experts advised holding the stock for long-term investors, while short-term investors can prefer profit-booking, given the bumper listing.

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“Go Colors has a sturdy brand value with fluctuating revenues, while the company moved into losses in FY21. As the number of working women is increasing along with the evolving fashion trends, it is expected that the company can have a strong growth momentum. The company has a strong management team with a mixed bag of financials and it is expected that it may perform well,” said Santosh Meena, Head of Research at Swastika Investmart.

Aggressive investors, who got the allotment, can put a stop loss of Rs 1,000 and hold the stock with a long-term view, while safe investors can book the profit and wait for new buying opportunities at lower levels, he said.

Prashanth Tapse, Vice-President (Research) at Mehta Equities, also advised allotted investors to hold on to the stock considering long-term play as the market always rewards a player who has the high growth potential.

“We believe Go Fashion is well-placed to tap the fastest-growing organised women’s bottom-wear industry, which is expected to record a CAGR of 24.3 percent for next 2-3 years,” he said.

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In FY20, Go Colors had a market share of approximately 8 percent. The women’s apparel market is estimated to be 36 percent of the apparel market pie, while the women’s bottom-wear market contributed 8.3 percent of women’s apparel market in FY20.

The share of the organised retailing within women’s apparel is expected to increase from 27 percent in FY20 to 42 percent by FY25. “This rapid growth is attributable to a growing female population, increasing number of working women, evolving fashion trends, and rising spending power of consumers,” a company statement said.

Astha Jain, Senior Research Analyst at Hem Securities, recommended to book some profit if the stock lists at more than 75 percent premium to issue price and hold some for the long term as the company has well-diversified product portfolio with multi-channel pan-India distribution network and focus on exclusive brand outlets (EBO), enhancing brand visibility.

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“We like the efficient operating model of company with strong unit economics and extensive procurement base with highly efficient and technology-driven supply chain management,” said Astha Jain.

Go Fashion serves customers primarily through extensive network of 459 EBOs that are spread across 23 states and Union Territories in India as of September 2021. In addition, its distribution channels include large format stores (LFSs), and it also sell products through its own website and online marketplaces and through multi-brand outlets (MBOs).

“Although the business model looks good with strengths like efficient product portfolio and a good supply chain, this company is still vulnerable to factors like changing consumer spending patterns, unable to adjust to changing preferences and a possible slowdown due to the new variant of COVID which has caused the markets to correct themselves,” said Gaurav Garg, Head of Research at CapitalVia Global Research.

Garg said he would advise investors to book profits on the listing gain if they do not have a long-term view. “Investors must wait for decent correction to acquire it from the secondary market. Looking at the market conditions, now it is advisable for investors who want to buy on secondary market to wait till the price comes down to Rs 700-750.”

Go Fashion posted a loss of Rs 3.54 crore in FY21 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.

The company has garnered Rs 1,014 crore through its public issue that was comprised a fresh issue of Rs 125 crore and an offer-for-sale of Rs 888.61 crore by selling shareholders.

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.

Sunil Shankar Matkar

first published: Nov 30, 2021 02:05 pm

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