| Go Fashion (India) Limited | ||||||
| Ratings upgraded to 'CRISIL A- / Stable / CRISIL A2+ ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded the ratings on the bank facilities of Go Fashion (India) Limited (GFIL; previously known as Go Fashion (India) Private Limited) to 'CRISIL A-/Stable/CRISIL A2+' from 'CRISIL BBB+/Stable/CRISIL A2'.
The rating upgrade reflects CRISIL Ratings’ belief that GFIL’s business performance will continue to remain strong over the medium term. Revenues are expected to steadily in fiscal 2022 and over the medium term after a decline in fiscal 2021; the decline was primarily due to lockdowns and restrictions to curb the spread of Covid-19. The company has reported revenues of around Rs.285 crore for the 9 month ended December 2021 against Rs.282 crore for entire fiscal 2021; while operating profitability for the same period has improved to around 30 percent from 18 percent. Growth would be aided by strong demand and 120 exclusive business outlets (EBOs) to be added across geographies
Robust business performance continues to support a strong financial risk profile. The net worth has been strengthened by proceeds from the Initial public offer (IPO) of the company; which concluded on 30th November 2021. The company raised Rs.125 crore from the IPO that shall be largely deployed for the addition of EBOs and to meet incremental working capital requirements. Healthy networth coupled with negligible debt levels and absence of debt funded capital expenditure shall continue to aid a healthy capital structure and robust debt protection metrics over the medium term.
The ratings continue to reflect GFIPL's strong market position in the women’s bottom wear segment and strong financial risk profile. These strengths are partially offset by exposure to intense competition and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths Strong market position: The company enjoys a strong market position and healthy brand recall in the women bottom wear segment across the country. As on September 30, 2021, the company has presence across 459 EBO’s and 1270 large format stores (LFS’s). While the revenues declined to Rs.282 crore in fiscal 2021 from over Rs.400 crore in 2020 due to lockdowns imposed to curb the spread of Covid-19, the strong brand recall has aided the company to report revenues of around Rs.285 crore for the 9 month ended December 2021. The revenue is expected to improve steadily over the medium term with addition of EBO’s and geographical expansion of its revenue profile.
Healthy financial risk profile: The healthy financial risk profile is indicated by gearing of 0.81 time as on March 31, 2021. The capital structure shall be strengthened by the infusion of funds of Rs.125 crore through the IPO. Interest coverage was comfortable at around 3 times for fiscal 2021. The capital structure and debt protection metrics are expected to remain strong with absence of debt funded capital expenditure and steady accretion to reserves.
Weaknesses: Exposure to intense competition: GFIL faces intense competition from unorganised and regional players in the women's ethnic bottom wear sector. Increasing market penetration of various ethnic players with presence in both top and bottom wear and presence of various private label brands in LFS leads to increased competitive pressure.
Large working capital requirement: Gross current assets (GCAs) were 263 days as on March 31, 2021, driven by sizeable inventory and receivables of 135 and 64 days, respectively. Nevertheless, the company has funded the working capital requirements majorly through internal accruals. Owing to a large number of stock keeping units (SKU’s) across its outlets, working capital requirements are expected to remain at similar levels over the medium term. |
Liquidity: Strong Cash accrual is expected to be in the range of Rs.90-100 crore over the medium term; however the company does not have any repayment obligations. The fund based bank limits have been utilised sparsely over the last 12 month ended December 2021. The liquidity is further supported by ample unencumbered cash and cash equivalents of more than Rs.100 crore and absence of debt funded capital expenditure over the medium term. |
Outlook Stable CRISIL Ratings believes GFIL will maintain its business performance over the medium term, supported by its operational efficiency and strong brand recall. |
Rating Sensitivity factors Upward factors:
Downward factors
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About the Company Incorporated in 2010, GFIL sells ethnic bottom wear products for women through its retail stores, distributors, and large fashion outlets under the ‘Go Colors’ brand. Mr Gautam Saraogi and Mr Rahul Saraogi are the promoters. The company was listed on the national stock exchange on 30th November 2021. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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This Annexure has been updated on 25-Feb-2022 in line with the lender-wise facility details as on 06-Dec-2021 received from the rated entity.
Criteria Details
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