Go Fashion, the owner of women's bottom-wear brand Go Colors, was trading at a 75 percent premium in the grey market, ahead of its listing on the bourses scheduled for November 30.
The public issue of the company had seen tremendous response from investors, subscribed 135.46 times during November 17-22. The portion set aside for non-institutional investors was subscribed 262.08 times, and that of qualified institutional investors was subscribed 100.73 times, while retail investors had put in bids 49.70 times the portion reserved for them.
Strong subscription numbers, good topline growth, healthy return on equity and operating margin, and strong growth potential seem to be supporting the grey market premium, experts said.
Go Fashion's shares are available at Rs 1,140-1,210 per share in the grey market, trading with a premium of Rs 450-520 or 65-75 percent over the issue price of Rs 690, as per IPO Watch and IPO Central. The grey market is an unofficial platform, where IPO shares trade from the announcement of the price band till the listing of shares on the bourses.
Go Fashion is a well-established women's bottomwear brand in India with multi-channel distribution and a market share of 8 percent in the branded women's bottomwear market as of FY20. It raised Rs 1,014 crore at a valuation of Rs 3,726.6 crore.
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"Its price to sales ratio of 13.73 is comparable to its peer's Page Industries and Trent. It has been delivering a good track record of revenue growth, returns on equity, and operating margin, making it attractive," said Sonam Srivastava, Founder of Wright Research.
The women's bottom wear industry is expected to grow to Rs 24,300 crore by FY25 from Rs 13,500 crore in FY20. "The company has tremendous opportunity due to its strong brand presence. While the valuation is justified with peers as per the listing price, over 50 percent premium should make it very expensive compared to its peers when Adity Birla Retail and Reliance Fashion trade at a significantly lower valuation," said Srivastava.
The public issue of Go Fashion comprised a fresh issue of Rs 125 crore, and an offer for sale of Rs 888.61 crore by PKS Family Trust, VKS Family Trust, Sequoia Capital India Investments IV, India Advantage Fund S4 I, and Dynamic India Fund S4 US I.
Net proceeds from the fresh issue will be utilised to roll out 120 new EBOs (exclusive brand outlets), and for working capital requirements.
Go Fashion sells its products through an extensive network of 459 EBOs that are spread across 23 states and union territories in India, as of September. Its distribution channels also have large format stores (LFS) including Reliance Retail, Central, Unlimited, Globus Stores and Spencer's Retail among others. The company also sells products through its own website and online marketplaces and through multi-brand outlets (MBOs).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.