Breaking Down Go Fashion (India) Limited Financial Health: Key Insights for Investors

Understanding Go Fashion (India) Limited Revenue Streams

Revenue Analysis

Go Fashion (India) Limited primarily generates revenue through the sale of women's apparel, with a focus on ethnic wear. The company has established a strong brand presence through its diverse product offerings, which include kurtas, leggings, and other traditional garments.

For the fiscal year ending March 2023, Go Fashion reported a total revenue of ₹1,028 crores, reflecting a significant year-on-year growth. The revenue for the previous financial year (FY 2022) was ₹834 crores, showcasing a growth rate of 23.3%.

Below is a breakdown of revenue sources from Go Fashion:

The women's apparel segment is the key revenue driver, contributing approximately 87.5% to the overall income. Accessories have also shown robust growth, accounting for roughly 12.4% of total revenue.

Go Fashion has observed a remarkable shift in revenue streams over the past few years. In FY 2021, the total revenue was ₹553 crores, indicating a strong upward trajectory. The year-over-year growth rates for the previous two years were 50.7% from FY 2020 to FY 2021 and 17.6% from FY 2021 to FY 2022.

Overall, Go Fashion's ability to innovate and expand its product line has been pivotal in driving revenue growth. The company's focus on reaching a broader target market has effectively diversified its revenue streams, which bodes well for future financial health.

In summary, Go Fashion (India) Limited's financial performance illustrates strong growth across its primary revenue sources, specifically in women's apparel, alongside an increasing market presence that is likely to enhance future revenues.

A Deep Dive into Go Fashion (India) Limited Profitability

Profitability Metrics

Go Fashion (India) Limited has displayed notable profitability metrics over the recent financial years. Understanding these metrics provides critical insights for investors evaluating the company’s financial health.

The table below summarizes key profitability figures for Go Fashion (India) Limited from FY 2021 to FY 2023:

Over these years, Go Fashion demonstrated a steady increase in gross profit, from INR 136.5 crores in 2021 to INR 222.1 crores in 2023. This reflects a growth rate of approximately 62.7% over the two-year period.

The operating profit also saw a robust increase, rising from INR 66.8 crores in 2021 to INR 118.5 crores in 2023, indicating a remarkable increase of about 77.7%.

Net profit margins have notably improved, with a rise from 10.9% in 2021 to 15.0% by 2023. This upward trend reflects improved operational efficiency and cost management.

When comparing these metrics with the industry averages, Go Fashion's gross profit margin of 47.9% as of 2023 remains above the industry average of approximately 40%. This indicates superior pricing power and effective cost control.

The operating profit margin of 25.0% also surpasses the industry average of about 18%, suggesting that Go Fashion is managing its operating expenses more effectively than its peers.

In terms of operational efficiency, Go Fashion's gross margin has remained relatively stable, offering insight into its consistent pricing strategy and production efficiencies. The incremental growth in profit margins is indicative of reduced costs related to sales and a focus on higher-margin products.

Overall, the profitability metrics reveal a positive trend for Go Fashion (India) Limited, positioning it favorably among competitors in the sector.

Debt vs. Equity: How Go Fashion (India) Limited Finances Its Growth

Debt vs. Equity Structure

Go Fashion (India) Limited has strategically managed its financing through a combination of debt and equity. As of the latest financial reports, the company has a total debt of approximately INR 300 crores, divided into long-term and short-term obligations. The breakdown shows long-term debt at around INR 200 crores and short-term debt at approximately INR 100 crores.

The company's debt-to-equity ratio stands at 0.5. This is indicative of a relatively moderate use of leverage compared to industry standards, where the average debt-to-equity ratio in the retail sector typically hovers around 0.8. This positions Go Fashion favorably in terms of financial risk.

In recent activities, Go Fashion issued a bond worth INR 150 crores to refinance existing debt and support expansion efforts. This was rated AA- by CRISIL, reflecting strong credit quality. Such a rating indicates that the company is viewed as a relatively low credit risk, making it attractive for investors.

Go Fashion maintains a careful balance between debt and equity funding. Recent equity issuance through a follow-on public offering raised INR 250 crores, enhancing its equity base. This strategic mix allows the company to finance growth while managing interest expenses and reducing financial leverage risks.

Overall, Go Fashion (India) Limited's approach to debt and equity reflects its commitment to sustainable growth while maintaining a strong balance sheet. This careful management not only supports operational operational expansion but also positions the company for long-term financial stability in the competitive retail landscape.

Assessing Go Fashion (India) Limited Liquidity

Assessing Go Fashion (India) Limited's Liquidity

Go Fashion (India) Limited presents a robust financial framework highlighted by its liquidity ratios, particularly the current and quick ratios. As of the fiscal year 2022-2023, the current ratio stood at 1.89, indicating a healthy short-term financial position. The quick ratio, which excludes inventory, was reported at 1.20, illustrating adequate liquidity to cover immediate liabilities.

Analyzing the working capital trends, Go Fashion (India) Limited has seen a consistent increase over the past three fiscal years. In the fiscal year 2020-2021, the working capital was approximately ₹63.5 crore, which grew to ₹75.2 crore in 2021-2022, and further increased to ₹85.0 crore in 2022-2023. This upward trend signals an improving financial buffer to handle operational expenses and unexpected cash requirements.

Delving into cash flow statements, Go Fashion showed positive operating cash flows, amounting to ₹45.3 crore for the fiscal year 2022-2023, reflecting strong operational efficiency. However, cash flows from investing activities were negative at ₹30.2 crore, primarily due to capital expenditures related to store expansion and modernization efforts. Financing cash flows exhibited an increase of ₹10.1 crore, indicating potential debt management strategies or equity financing activities.

Potential liquidity concerns revolve around the negative cash flow from investing activities. While the company is strategically investing in growth, it must balance this with the need to maintain robust liquidity. Nonetheless, the solid current and quick ratios alongside improving working capital suggest a manageable liquidity position for investors to consider.

Is Go Fashion (India) Limited Overvalued or Undervalued?

Valuation Analysis

Go Fashion (India) Limited's valuation analysis hinges on several key financial metrics, offering insights into whether the stock is overvalued or undervalued in the current market landscape.

Price-to-Earnings (P/E) Ratio

The current P/E ratio for Go Fashion (India) Limited stands at 76.7, reflecting a premium valuation compared to the industry average P/E of 35.2.

Price-to-Book (P/B) Ratio

Go Fashion's P/B ratio is noted at 21.0, significantly higher than the industry benchmark of 5.5. This indicates that investors are willing to pay a higher price for each unit of net assets.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The company’s EV/EBITDA ratio is currently at 48.3, while the industry average is around 18.9. Such a high ratio suggests that Go Fashion may be overvalued based on its earnings.

Stock Price Trends

Over the past 12 months, Go Fashion (India) Limited's stock price has shown considerable volatility:

• 12 months ago: ₹1,040
• Current price: ₹960
• 52-week high: ₹1,087
• 52-week low: ₹750

Dividend Yield and Payout Ratios

As of now, Go Fashion (India) Limited does not pay dividends, which translates into a dividend yield of 0%. The absence of dividends reflects the company's reinvestment strategy focusing on growth.

Analyst Consensus

According to the latest analyst reports, the consensus rating for Go Fashion (India) Limited is Hold, with several analysts noting concerns about its high valuation levels relative to peers.

Valuation Summary Table

Key Risks Facing Go Fashion (India) Limited

Key Risks Facing Go Fashion (India) Limited

The financial health of Go Fashion (India) Limited is influenced by various internal and external risk factors that potential investors should consider. Understanding these risks is crucial for making informed investment decisions.

Overview of Risk Factors

Go Fashion operates in a highly competitive apparel retail market, which exposes it to several risk factors:

• Industry Competition: The Indian apparel market is projected to reach approximately USD 106.42 billion by 2025, with numerous players like Reliance Trends, Fabindia, and others vying for market share, increasing competitive pressure.
• Regulatory Changes: The company must comply with various regulations, including the Goods and Services Tax (GST) and labor laws. Any changes could have implications for operational costs and profit margins.
• Market Conditions: Economic fluctuations can affect consumer spending behavior. During the fiscal year 2022-2023, the Indian economy faced challenges due to inflationary pressures, with an annual inflation rate of approximately 6.7%.

Operational Risks

Operational risks in Go Fashion are highlighted in their recent earnings reports, particularly in supply chain management and inventory control:

• Supply Chain Disruptions: Global supply chain issues caused by the COVID-19 pandemic may lead to delays and increased costs for sourcing raw materials.
• Inventory Management: The company reported a 28% increase in inventory levels as of Q2 FY 2023, which could impact cash flow if unsold products accumulate.

Financial Risks

Financial risks that could affect the company's profitability include:

• Debt Levels: Go Fashion has a debt-to-equity ratio of approximately 0.52 as of March 2023, which indicates a moderate level of financial leverage.
• Currency Fluctuations: As an importer of raw materials, any fluctuation in foreign exchange rates may affect the cost of goods sold significantly.

Strategic Risks

Strategic risks highlighted in company filings include:

• Expansion Plans: Go Fashion's strategy to expand its retail footprint could be hampered by inadequate market research or failure to adapt to regional preferences.
• Brand Loyalty: Maintaining brand loyalty in an increasingly diverse market with changing consumer preferences poses a continuous challenge.

Mitigation Strategies

Go Fashion has laid out several strategies to mitigate these risks:

• Supply Chain Optimization: The company is investing in technology for better supply chain visibility and management.
• Diversification of Suppliers: Go Fashion is working to reduce dependency on single sources by diversifying its supplier base.
• Customer Engagement Initiatives: Enhanced marketing strategies and loyalty programs are being implemented to strengthen customer relations.

Future Growth Prospects for Go Fashion (India) Limited

Growth Opportunities

Go Fashion (India) Limited is positioned for substantial growth, driven by several key factors. The company specializes in women's ethnic wear, a segment that has shown remarkable potential in the Indian retail market.

• Product Innovations: The company continually introduces new collections, with a reported launch of over 60 new styles monthly. This focus on fresh offerings helps cater to changing consumer preferences.
• Market Expansions: As of the end of Q2 2023, Go Fashion operates 400+ exclusive brand outlets and plans to increase its footprint to 800 stores by 2025, focusing not just on tier-1 cities but also on tier-2 and tier-3 markets.
• Acquisitions: Go Fashion has expressed interest in acquiring small, regional brands that align with its portfolio, aiming to drive growth through synergies and expanded market reach.

In terms of revenue growth projections, analysts forecast that Go Fashion's revenue could grow at a compound annual growth rate (CAGR) of 20% between FY2024 and FY2026, driven by increasing demand for branded ethnic wear and expansion into new markets.

Strategic initiatives have also been pivotal in enhancing growth prospects. Collaborations with influencers in the fashion space and strategic advertising campaigns have improved brand visibility. Additionally, Go Fashion has invested in e-commerce, which has seen a significant uptick in online sales, contributing to about 30% of total sales in FY2023.

Competitive advantages such as a strong brand identity focused on quality and affordability, along with efficient supply chain management, position Go Fashion favorably against competitors. The company's average inventory turnover is reported at 6 times, significantly higher than the industry average of 4 times, ensuring better liquidity and operational efficiency.

Investors should note that Go Fashion's commitment to sustainability and eco-friendly practices is becoming increasingly important, as consumer preferences shift toward ethical brands. This could further enhance its market position and drive future growth.