Detailed Rationale

CRISIL Rating’s ratings on the bank facilities of Go Fashion (India) Limited (GFIL) continues to 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.

CRISIL Ratings had upgraded the ratings on the bank facilities of GFIL to 'CRISIL A/Stable/CRISIL A1' from 'CRISIL A-/Stable/CRISIL A2+' on January 06, 2023.

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.  While the revenue is around Rs 400 crore in FY 2022 and Rs.331 Crore till H2FY23. 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 is 0.57 times as on March 31, 2022. The capital structure has strengthened by IPO proceeds and healthy accruals. Interest coverage was comfortable at around 5.86 times for fiscal 2022.  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 large format store leads to increased competitive pressure.

Large working capital requirement: Gross current assets (GCAs) were 328 days as on March 31, 2022, driven by sizeable inventory and receivables of 210 and 54 days, respectively and also driven by considerable cash and bank balances and marketable securities. 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.

Key Financial Indicators

Annexure - Details of Instrument(s)

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